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A month has gone by since the last earnings report for Continental Resources (CLR). Shares have lost about 1.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Continental Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Continental Resources Misses on Q3 Earnings Estimates
Continental Resources reported third-quarter 2021 adjusted earnings of $1.20 per share, missing the Zacks Consensus Estimate of $1.24. The bottom line turned around from a loss of 16 cents per share in the year-ago quarter.
Total quarterly revenues of $1,341 million lagged the Zacks Consensus Estimate of $1,403 million. The top line, however, improved from the year-ago figure of $692 million.
The lower-than-expected quarterly results can be attributed to decreased oil production volumes and higher operating expenses. Also, higher commodity prices backed the year-over-year improvement in results.
The company’s board of directors announced a quarterly dividend payment of 20 cents per share, which increased from 15 cents per share in the previous quarter. The amount will be paid out on Nov 26, 2021, to stockholders of record as of Nov 15, 2021.
Continental resumed its existing stock-repurchase program. The company already executed $65 million of share repurchases in the September quarter, while $618 million of the share-repurchase capacity remains available.
Production from continuing operations averaged 331,407 barrels of oil equivalent per day (Boe/d) for the reported quarter (47.4% oil) versus 297,001 Boe/d in the year-ago period. Production volumes increased owing to higher output from Bakken assets.
Oil production for the reported quarter was 157,153 barrels per day (Bbls/d), down from 169,265 Bbls/d a year ago. Natural gas production increased from 766,416 thousand cubic feet per day (Mcf/d) in third-quarter 2020 to 1,045,521 Mcf/d.
Crude Equivalent Price Realization Rises
For third-quarter 2021, crude oil equivalent price increased to $46.07 per barrel from $23.23 in the prior-year period. Natural gas was sold at $4.62 per Mcf, up from 98 cents in the year-ago quarter. The average realized price for oil was $66.48 a barrel, up from $35.93 in the prior-year quarter.
Total Expenses Surge
Total operating expenses of $795.7 million for the third quarter increased from $724.3 million in the September-end quarter of 2020. Total production costs increased to $103.2 million from $88.7 million in the year-ago quarter. Exploration costs for the reported quarter were $2.5 million compared with $1 million in the year-ago period. Transportation costs, however, declined to almost $54 million from the year-ago level of $55.3 million.
For third-quarter 2021, the total capital expenditure was $389.8 million. It generated a free cash flow of $669 million in the reported quarter.
As of Sep 30, 2021, the company had total cash and cash equivalents of $693.7 million. It had long-term debt of $4,741.7 million (excluding current maturities). It had a debt-to-capitalization of 39.7%.
For 2021, the company maintains its average oil production guidance at 160,000-165,000 Bbls/d. It reaffirmed its natural gas production guidance at 900,000-1,000,000 Mcf/d. The upstream player revised its capital budget for 2021 to $1.5-$1.6 billion from the prior projection of $1.4 billion.
The company plans to generate $3.9 billion of cash flow from operations and $2.6 billion of free cash flow for 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, Continental Resources has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Continental Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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