Will Continental Resources Make It or Break It This Earnings Season?

Continental Resources [stock_market_widget type="inline" template="generic" color="default" assets="CLR" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is all set to release its first-quarter results on April 29, and investors will be expecting some good news for the company so that the momentum it has witnessed so far this year continues. Continental Resources stock has shot up more than 24% in 2019 and it seems well placed to build upon that nice start after its upcoming results.

Let’s see why.

The Headline Numbers

Continental Resources’ revenue is expected to decline just over 7% in the first quarter of 2019 to $1.06 billion. Its earnings per share are expected to decline from $0.68 per share a year ago to $0.47 this time.

But it won’t be surprising to see Continental Resources coming out on top and beating these estimates when it delivers results. That’s because the company expects to deliver an increase in its average oil production this year.

Continental Resources forecasts full-year average oil production of 190,000 to 200,000 barrels per day. For comparison, the company clocked average daily production of 168,177 barrels per day in 2018. The mid-point of Continental’s oil production guidance suggests that its production could rise around 16% in 2019.

The average WTI crude oil spot price at the end of March stood at almost $64 per barrel. That’s better than the average realized price of just under $59 a barrel that Continental had recorded in the year-ago period. As such, there’s a great chance that Continental’s results will be above expectations, and if that happens, investors can expect the stock to get a shot in the arm and rise higher.

The Way Ahead Looks Bright

Continental is on track to increase its production in an efficient manner in 2019, which should allow it to boost the cash flow in light of an improving oil price scenario.

We have already seen that Continental Resources expects an impressive increase in its production this year, though that’s not the only positive that investors should be looking at. The company has set aside a capital expenditure budget of $2.6 billion for the year, down from last year’s outlay of $2.8 billion.

As such, Continental is on track to increase its production in an efficient manner in 2019, which should allow it to boost the cash flow in light of an improving oil price scenario.

Continental Resources is looking at an average annual free cash flow of $500 million a year at an oil price of $60 a barrel. Now that WTI oil is trading well above that level, Continental Resources should be able to achieve its target going forward.

Also, the oil price rally looks all set to continue given the tight supply conditions globally, as well as improving oil demand in key markets such as China. As it turns out, China’s crude oil imports are expected to rise this year on the back of economic stimulus and demand from teapot refiners.

So it won’t be surprising to see Continental Resources eventually beat analysts’ estimates this year, who are originally anticipating a decline in both revenue and earnings. This will be good news for Continental Resources investors as they can expect the stock to keep rising because of its improving financial performance.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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