Continental Resources’ stock performance
Since January 2017, Continental Resources has fallen 37%, while the Energy Select Sector SPDR ETF (XLE) has fallen ~14%. This decline has been brought about by weakness in energy prices. Crude oil prices (DBO) have dropped ~7.5% since the start of the year. Natural gas prices have dropped ~12% in the same period.
As we can see in the above graph, crude oil prices have driven movements in Continental Resources’ stock. In comparison, the broader market S&P 500 ETF (SPY) has outperformed the energy sector, rising ~10% since the beginning of the year. The energy sector accounts for ~7% of SPY.
CLR’s cash flow expectations
Continental plans to spend $2.0 billion in 2017 and is focused on spending within cash flow. The company expects its 2017 capital to be cash flow neutral in 2017 at $50 to $55 per barrel WTI (West Texas Intermediate) crude oil prices. The company also noted that a $5 move in WTI prices would affect its full-year cash flow by ~$200 million.
The company’s management noted in the 1Q17 earnings conference that it has “numerous areas” where it could “flex the budget up or down” to remain cash neutral. The company added, “However, we will not change the budget based on short-term price moves that we feel are non-sustainable. We will continue to monitor the relative balance of cash flows and expenditures as we progress throughout the year.”