CLR’s cash flows
In 3Q16, Continental Resources reported cash flow from operations (or CFO) of ~$366 million. This was ~27% lower than its CFO in 3Q15. The drop was primarily due to lower revenues, driven mainly by lower energy prices.
CLR‘s free cash flow trends
Continental Resources’ free cash flow (or FCF), which is its operating cash flow minus its capex, was positive for the first time in the past nine quarters, as the graph above shows. CLR’s FCF was $111 million in 3Q16. CLR expects to remain cash flow positive in 4Q16 and for fiscal 2016 as well.
Earlier in January this year, CLR had guided that for every $5 move in WTI prices, its full-year cash flows would be impacted by $150 million–$200 million.
CLR’s capex in 2016
Continental Resources increased its capex budget for 2016 from the $920 million provided in January 2016 to $1.1 billion in 3Q16, owing to increased well completion activity and an increase in CLR’s average working interest across its plays. This budget is still 56% lower than its 2015 capex of $2.5 billion. Of the $1.1 billion, ~41% will be spent in the Bakken Shale and ~19% will be spent in the SCOOP Play and STACK Play each.
Many upstream companies have reduced their 2016 capex in response to lower energy prices (USO) (UNG). Newfield Exploration (NFX), Concho Resources (CXO), and Sanchez Energy (SN) have lowered their 2016 capexes by ~50%, 35%, and 50%, respectively, compared to 2015.
John Hart, CLR’s chief financial officer, said in the 3Q16 earnings release, “Continental remains on track to be cash flow positive for both the fourth quarter and for the year, inclusive of the increase in our capital expenditures budget.” He added, “We plan to continue reducing long-term debt and improving our leverage metrics through a combination of non-strategic asset sales and strengthened cash flow.”