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Continental (CLR) Stock Dips 6.2% Despite Strong Q1 Earnings

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Continental Resources, Inc. CLR shares have declined 6.2% despite reporting strong earnings for the first quarter of 2022. The downward stock movement can be attributed to the company’s aggressive capital spending budget and the year-over-year increase in expenses.

Q1 Results

Continental reported first-quarter 2022 adjusted earnings of $2.65 per share, beating the Zacks Consensus Estimate of $2.41. The bottom line significantly improved from the year-ago quarter’s 77 cents per share.

Total quarterly revenues of $1,816 million missed the Zacks Consensus Estimate of $2,156 million. However, the top line improved from the year-ago quarter’s $1,216 million.

The strong quarterly earnings can be attributed to higher oil-equivalent production volumes and commodity price realizations.

Continental Resources, Inc. Price, Consensus and EPS Surprise

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

Dividend Hike

The company’s board of directors announced a quarterly dividend payment of 28 cents per share, a 21.7% increase from 23 cents paid out in the previous quarter. The amount will be paid out on May 23, 2022, to stockholders of record as of May 9, 2022.

Oil Production

Production from continuing operations averaged 373,810 barrels of oil equivalent per day (Boe/d) for the reported quarter (52.1% oil) versus 307,942 Boe/d in the year-ago period. Production volumes increased primarily due to higher output from the Bakken assets.

Oil production for the reported quarter was 194,767 barrels per day (Bbls/d), up from 151,852 Bbls/d a year ago. Natural gas production increased from 936,540 thousand cubic feet per day (Mcf/d) in first-quarter 2021 to 1,074,255 Mcf/d.

Crude-Equivalent Price Realization

For first-quarter 2022, the crude oil-equivalent price increased to $65.51 per barrel from $43.11 in the prior-year period. Natural gas was sold at $6.34 per Mcf, up from $5.56 in the year-ago quarter. The average realized price for oil was $90.83 a barrel, up from $53.09 in the prior-year quarter.

Total Expenses

In the first quarter, total operating expenses of $950 million increased from $810.1 million in the March-end quarter of 2021. Total production costs increased to $137.3 million from $93.1 million in the year-ago quarter. Exploration expenses for the reported quarter were $13 million compared with $4.6 million in the year-ago period. Also, transportation, gathering, processing and compression costs increased to $74.8 million from the year-ago level of $50.3 million.

Financials

For first-quarter 2022, the total capital expenditure was $525.8 million. It generated a free cash flow of $1,147.1 million in the reported quarter.

As of Mar 31, 2022, the company had total cash and cash equivalents of $4.2 million. It had long-term debt of $6,562.8 million (excluding current maturities). It had a debt-to-capitalization of 44.2%.

Outlook

For 2022, Continental revised its average oil production upward to 200,000-210,000 Bbls/d from 195,000-205,000 Bbls/d mentioned earlier. Natural gas production is expected to be 1,100,000-1,200,000 Mcf/d.

Continental increased its capital spending budget to $2.6-$2.7 billion for the year from $2.3 billion mentioned earlier. The upstream player plans to generate $6.5-$7 billion of cash flow from operations and $4.3-$4.7 billion of free cash flow in 2022.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the energy sector might look at the following companies that turned in strong bottom-line numbers in the first quarter.

Pioneer Natural Resources Company PXD reported first-quarter 2022 earnings of $7.74 per share (excluding one-time items), beating the Zacks Consensus Estimate of $7.32. The strong quarterly earnings were aided by higher oil-equivalent production volumes and commodity price realizations.

For the second quarter, Pioneer Natural announced a dividend payment of $7.38 per share of common stock, which includes a variable dividend of $6.60 per share and a base dividend of 78 cents per share. This suggests a 95.2% increase from the prior dividend of $3.78 per share.

ConocoPhillips COP reported first-quarter 2022 adjusted earnings per share of $3.27, beating the Zacks Consensus Estimate of $3.24. The strong quarterly results have been aided by increased oil-equivalent production volumes and realized commodity prices.

ConocoPhillips hiked its expected 2022 return of capital to shareholders. The new guidance is pegged at $10 billion, reflecting an increase from the aforementioned $8 billion. The incremental returns to stockholders will get distributed through share repurchases and VROC tiers.

Diamondback Energy FANG reported first-quarter 2022 adjusted earnings per share of $5.20, beating the Zacks Consensus Estimate of $4.74. The outperformance can be attributed to the surge in energy prices in the first quarter, which led to higher oil, natural gas and natural gas liquid sales.

In good news for investors, Diamondback raised its regular quarterly payout by almost 17% to 70 cents a share and declared a variable dividend of $2.35, bringing the total distribution to $3.05. The payout will be made on May 23. FANG also executed $6.7 million of share repurchases in the first quarter of 2022 at $117.34 apiece.


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