Despite a lower oil pricing environment, Continental Resources (CLR, Financial) released impressive results in the recently released fourth quarter, also ending fiscal 2014 on a good note. With 28% growth in production in the recently reported quarter, Continental is striving for better financial performance in the future. But the lower oil pricing environment can be a hurdle in its smooth flow. The company is well aware of this fact, and it is undertaking many strategies to maintain its market presence. However, many analysts are also expecting oil pricing to recover slightly in the coming quarters, and Continental with its good growth in production is expecting to benefit from this recovery. Let us have a deeper insight.
Strong prospects
Looking closely to Continental’s prospects in 2015, the company is focusing on budgeting in such a way to neutralize its cash flows in the second half of 2015. Further, the recent strong results by the company indicate strong operational excellence of the company which, with a solid quality asset portfolio of the company, will surely help Continental achieve better growth with value creation in the current environment. Continental has seen good growth in production in the recently reported quarter and expects this trend to continue; it is expecting a solid 16% to 20% growth in 2015 which will drive the attention of many investors, analysts and consultants.
Continental is focusing on protecting its balance sheet while maintaining its financial strength. The company is undertaking solid financial planning which is mainly focused on achieving near-term growth targets. The company is not worrying much as it is already in a good financial position with good flexibility. This will help Continental adapt to the market changes. The company is already in an upbeat position in terms of production and further continuous drop in the rig count across the industry will accelerate strong demands and will give room for improvement in the oil prices in the future. Continental therefore has many bright opportunities for growth in the future.
Moving on, there have been many efforts in the past to lift the 1970s press control era ban on crude oil exports from the U.S. Continental Resources thinks that present lower oil price market must support those efforts. Considering this, the company is optimistic that the ban on exports will get removed which will give many other companies including Continental solid growth opportunities in future. In addition, an impressive performance and growth in SCOOP is also a key driver which can attract many investors, helping the company to gain further market share in future.
Oil price outlook for 2015
The recent analysis of the oil market has revealed an outlook for slight improvement in oil prices in the future. According to one of the news stories, the average oil price predicted in 2015 is $82.50/barrel, which is a good 60% growth as compared to current levels. However this is just a short bump. On the other hand, in the long term, oil prices are likely to be in the $50-60/barrel range. Thus Continental has some good opportunities to grow in the near term.
Moving on to the fundamentals, the stock with a trailing P/E of 15.64 is cheap while the forward P/E of 33.85 shows robust growth in earnings in the near term. The stock is further expected to attract investors with an attractive profit margin of 23.04%. All these facts and statistics are positive, and I suggest investors pick Continental Resources as it is a good returning stock as of now.
