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Continental (CLR) Q3 Earnings Beat on Bakken Shale Strength

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Continental Resources, Inc. (CLR - Free Report) reported third-quarter 2019 adjusted earnings of 54 cents per share, which beat the Zacks Consensus Estimate of 44 cents. However, the bottom line fell from the year-ago quarter earnings of 90 cents per share.

Revenues of $1,104.2 million beat the Zacks Consensus Estimate of $1,092 million. However, the figure declined from $1,282.2 million in the year-ago quarter.

The better-than-expected quarterly results can be attributed to higher year-over-year oil and gas production. This was partially offset by lower commodity price realizations and higher total operating expenses.

Continental Resources, Inc. Price, Consensus and EPS Surprise

Continental Resources, Inc. Price, Consensus and EPS Surprise

Continental Resources, Inc. price-consensus-eps-surprise-chart | Continental Resources, Inc. Quote

Production Surges

Production from continuing operations averaged 332,315 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 296,904 BOE/D in the year-ago period. This was supported by output growth at the company’s SCOOP SpringBoard and Bakken assets.

Oil production in the quarter came in at 198,074 barrels per day (Bbls/d), up from 164,605 Bbls/d a year ago. Natural gas production jumped from 793,793 thousand cubic feet per day (Mcf/d) in third-quarter 2018 to 805,446 Mcf/d in the third quarter of 2019.

Price Realization Plunges

Average realized price for oil was $51.28 a barrel, down from $65.78 in the prior-year quarter. Natural gas was sold at $1.12 per Mcf, down from $3.12 in the year-ago quarter. Crude oil equivalent price in the quarter fell to $33.30 per barrel from $44.85 in the prior-year period.

Total Expenses Jump

Total operating expenses of $825.5 million in the third quarter rose from $790.8 million in the July-to-September quarter of 2018. Total production cost rose to $114.1 million from $103 million in the year-ago quarter. Exploration costs in the quarter were $2.5 million compared with $2.3 million in the year-ago period.

However, production expense per barrel of oil equivalent in third-quarter 2019 was $3.73, marginally lower than the year-ago figure of $3.77.

Increasing Value for Investors

The company authorized a share buyback program valued at $1 billion, effective second-quarter 2019. Till Oct 29, the company bought back 5.5 million shares valued at $187 million. The share repurchase program is expected to run through 2020.

Capital Expenditure

In third-quarter 2019, total capital expenditure (excluding acquisitions) was around $681.5 million, of which nearly 84.8% was used in exploration and development drilling.

Balance Sheet

As of Sep 30, 2019, the company had total cash and cash equivalents of $35.3 million, as well as debt of $5,568.4 million (excluding current maturities), with a debt-to-capitalization ratio of 44.6%.

Guidance

It reiterated its full-year 2019 guidance. Continental’s 2019 capital spending is expected to be $2.6 billion. For 2019, production of oil is expected in the range of 195,000-200,000 barrels per day (Bbl/D) and that of natural gas is projected in the band of 820,000-840,000 Mcf/d. The company expects production expense for 2019 in the range of $3.50-$4.00 per BOE.

Zacks Rank and Stocks to Consider

Currently, Continental has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Pembina Pipeline Corp. (PBA - Free Report) , Matrix Service Company (MTRX - Free Report) and Exterran Corporation (EXTN - Free Report) . While Pembina sports a Zacks Rank #1 (Strong Buy), Matrix Service and Exterran hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Exterran’s top line for the current year is expected to rise around 5% year over year.

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