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Why Is Continental Resources (CLR) Down 17.6% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Continental Resources (CLR). Shares have lost about 17.6% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Continental Resources Beats Q1 Earnings & Sales Estimates

Continental Resources delivered first-quarter 2019 adjusted earnings of 58 cents per share, which beat the Zacks Consensus Estimate of 47 cents. Nevertheless, the bottom line fell from the year-ago quarter earnings of 68 cents.

Revenues of $1,124 million beat the Zacks Consensus Estimate of $1,062 million. The figure declined from $1,141 million in the year-ago quarter.

The quarterly results were supported by higher production from the North Dakota Bakken as well as SCOOP and STACK regions. This was partially offset by lower oil equivalent price realizations and higher operating expenses.

Exploration and Production

Production from continuing operations averaged 332,236 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 287,410 BOE/D in the year-ago quarter. Oil production in the quarter came in at 193,921 barrels per day (Bbls/d), up from 163,837 Bbls/d in the year-ago quarter.

Natural gas production jumped from 741,442 thousand cubic feet per day (Mcf/d) in first-quarter 2018 to 829,891 Mcf/d in the first quarter of 2019.

Price Realization

Average realized price for oil was $50.05 a barrel, down from $58.98 in the prior-year quarter. Natural gas was sold at $2.56 per Mcf, down from $2.98 in the year-ago quarter. Crude oil equivalent price in the quarter fell to $35.56 per barrel from $41.26 in the prior-year quarter.

Total Expenses

Total operating expenses of $819.3 million in the first quarter rose from $760.3 million in the January-to-March quarter of 2018. Total production cost rose to $107 million from $93 million in the year-ago quarter. Exploration costs in the quarter were $1.8 million compared with $1.7 million in the year-ago quarter.

Production expense per barrel of oil equivalent in the first quarter of 2019 was $3.59, lower than the year-ago quarter’s figure of $3.60.

Capital Expenditure

In the first quarter of 2019, total capital expenditure (excluding acquisitions) came in at around $750.2 million, more than 80% of which was used in exploration and development drilling.

Balance Sheet

As of Mar 31, 2019, the company had total cash and cash equivalents of $264.4 million as well as debt of $5.8 billion (excluding current maturities), with a debt-to-capitalization ratio of 46.5%.

Guidance

Continental Resources’ 2019 capital spending (excluding acquisitions) is expected at $2.6 billion. For 2019, oil production is expected in the range of 190,000-200,000 barrels per day, while natural gas is expected in the band of 790,000-810,000 thousand cubic feet per day.

The company expects production expense for 2019 in the range of $3.75-$4.25 per BOE.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 11.41% due to these changes.

VGM Scores

Currently, Continental Resources has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

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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