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How Did Continental Resources’ Earnings Fare in 2Q16?

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Continental Resources’ 2Q16 revenue

Continental Resources (CLR) reported its 2Q16 earnings on August 3, 2016. Its 2Q16 revenue was $572 million, as compared to the estimate of $555 million. Its revenue in 2Q15 was ~$797 million, and in 1Q16, it was $450 million.

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2Q16 earnings

Continental Resources reported an adjusted net loss of ~$66 million in 2Q16. Its adjusted net income in 2Q15 was $48.4 million. The company reported adjusted EPS (earnings per share) of -$0.18. The Wall Street analyst consensus estimate for EPS was -$0.16.

As you can see in the graph above, Continental Resources’s 2Q16 loss per share was higher than expected. On the other hand, 2Q16 revenues were slightly better than analyst expectations.

Peer comparisons

Newfield Exploration (NFX) announced 2Q16 earnings of $0.32 per share, while Anadarko Petroleum (APC) reported 2Q16 earnings of about -$0.60 per share. Cimarex Energy (XEC) reported 2Q16 earnings of $0.07 per share.

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Key announcement and management comments

In the 2Q16 earnings release, CLR announced its intentions to sell ~29,500 net acres in the Scoop play, Oklahoma, to an undisclosed buyer for $281 million. The leasehold currently contributes 550 barrels of oil equivalent per day to CLR’s net production.

The above asset sale, combined with the sale of 132,000 net acres in the Washakie Basin in Wyoming for $110 million (announced in May 2016), brings the company’s total proceeds to $391 million.

Jack Stark, CLR’s Chief Operating Officer, said in the news release that “We have additional opportunities to sell non-strategic assets for continued debt reduction.” Referring to capital efficiency, Stark added, “Barrels of oil found per dollar invested have more than doubled, while production expense per Boe and G&A expense per Boe have decreased by a combined 36% since 2014…We believe the majority of these capital efficiencies are structural and sustainable, further strengthening CLR’s performance going forward.”

Now let’s look at revenue and profit margins.

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