CLR’s net debt to EBITDA
Continental Resources’ (CLR) net debt to adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was mostly under 2x between 3Q14 and 2Q15. Since 3Q15, however, its net-debt-to-EBITDA multiple has been increasing. CLR’s net debt had been on the rise since 3Q14. It stabilized and was stagnant between 3Q15 and 2Q16 before finally declining in 3Q16, as the chart below shows.
Although CLR’s net debt stabilized beginning in 3Q15, continued drops in EBITDA levels continued to push its net-debt-to-EBITDA multiple higher.
Continental Resources’ 3Q16 net-debt-to-adjusted-EBITDA multiple was ~5x. In the above graph, we can see that CLR’s net debt rose sharply between 3Q14 and 1Q15, but higher EBITDA levels in those periods kept its net-debt-to-EBITDA multiple well under 2x. So, the rising trend in its net-debt-to-EBITDA multiple has less to do with rising net debt and more to do with lower EBITDA levels, which in turn are tied to lower crude oil prices.
Continental Resources’ 3Q16 net debt was ~$6.8 billion versus ~$7.1 billion in 3Q15. Its trailing-12-month adjusted EBITDA for 3Q16 was ~$1.4 billion compared to the 3Q15 trailing-12-month EBITDA of ~$2.6 billion. So, despite the drop in its debt levels since 3Q15, the more significant decline in its EBITDA levels caused its 3Q16 net-debt-to-EBITDA multiple to rise, albeit not to the same degree as it had in the past.
In comparison, CLR’s peers Oasis Petroleum (OAS), Newfield Exploration (NFX), and Bill Barrett (BBG) had net-debt-to-adjusted-EBITDA ratios of 6.5x, 2.9x, and 6.3x, respectively. CLR, OAS, and NFX make up 6% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
Liquidity and financial position
Continental Resources (CLR) had $19.5 million in cash and cash equivalents as of September 30, 2016. It also has $2.5 billion available in borrowing capacity under its revolving credit facility as of October 31, 2016.