Dale Seweryn
Trader – FX, Equities & Indices.
Continental Resources Inc – Time to buy?
A brief overview
Continental Resources, Inc. is a crude oil and natural gas company with properties in the North, South and East regions of the United States. The North region consists of properties north of Kansas and west of the Mississippi River and includes North Dakota Bakken, Montana Bakken and the Red River units. The South region includes properties south of Nebraska and west of the Mississippi River including various plays in the South-Central Oklahoma Oil Province (SCOOP), Sooner Trend Anadarko Canadian Kingfisher (STACK), and Arkoma Woodford areas of Oklahoma. The East region consists of undeveloped leasehold acreage east of the Mississippi River with no drilling or production operations. As of December 31, 2016, it’s estimated proved reserves were 1,275 million barrels of oil equivalent (MMBoe), with estimated proved developed reserves of 519 MMBoe. As of December 31, 2016, its average daily production from South region properties was 91,088 barrels of oil equivalent (Boe) per day.
Technicals
Continental Resources Inc has rejected the $40 mark (previous resistance turned support). After the sell off in September 2014, the company continued to decline until February 2016. Since this date, the price action has begun to create higher highs & lows. Continental Resources has been rallying from oversold areas using the RSI & Stochastics, with the most recent from the $40 area. The $160 region will be a far cry away from the target area of $55 - $60, which would equate to a 35-50% increase in the share price.
Source IG
Fundamentals
The more interesting part of the story lays within the fundamentals of the stock. 11 brokers rating the stock as a strong buy, 20 buy ratings and only 6 hold ratings. Annual growth in earnings is expected to grow at 16.8% according to analysts, exceeding the US market (14.2%) and specifically it’s direct competition in the oil and gas industry (11.3%). The average stock price predicted by analysts is $58.11.
Source: IG
What provides extra meat to the bones of this story is the purchase of shares by Harold Hamm – The CEO of the company. He has purchased 883,977 shares at $44.57 per share, totalling $39,324,909. The intrinsic value based on future cash flows is $91.99, whilst I believe this to be an overshoot and can not see the price reaching these levels, this helps build a strong argument for upside potential.
Source: Simplywallst
The debt story can be viewed in two lights. Firstly, the net worth of the company has overtaken debt for the first time in 6 years. Debt has been decreasing, albeit at a slow pace for 3 years. On the other hand, debts levels are still high, equating to around 90% of the company’s net worth.
Source: Simplywallst
Has Harold Hamm purchased 883,977 shares at a discounted rate or will the company’s debt dictate the direction of the share price?
Thank you for taking the time to read this article, I look forward to providing further content in the future.
