Two oil and gas companies released fourth-quarter earnings on Monday.
Continental Resources Inc. (CLR, Financial) posted non-GAAP earnings of 54 cents per share and GAAP earnings of 53 cents per share for the final quarter of 2018, missing expectations for both by 7 cents.
Revenue grew 9.5% from the prior-year quarter to $1.15 billion, but missed expectations by $30 million.
For full fiscal 2018, Continental Resources recorded a 51% increase in total revenue to $4.71 billion, a 457% boost in adjusted net profit to $1.07 billion and 66.2% growth in operating cash flow to $3.46 billion. Non-GAAP earnings were $2.84 per share in full fiscal 2018 compared to 51 cents in 2017.
The company also recorded a 53.3% increase in earnings before interest, taxes, depreciation and amortization and exploration expenses to $3.62 billion. Thus, the EV-to-EBITDA now stands at approximately 6.5, versus an industry median of 7.99. The EBITDA margin of 76.9% for the year is also above the industry median of 50.4%.
In addition, the return on capital employed averaged 14% in 2018.
Over the course of the year, Continental Resources trimmed its total debt by $585 million to $5.77 billion and increased liquidity available via cash on hand and short-term investments by $239 million to approximately $283 million, bringing the net debt to $5.49 billion. In 2017, the net debt was about $6.31 billion.
Regarding production for the year, the Oklahoma-based company delivered an average of 298,190 barrels of oil equivalent per day, up 23% from the previous year.Ă‚ Oil production increased 21% to a daily average volume of 168,177 barrels. The production of gas accounted for 780.1 million cubic feet per day.
“In 2019, we will continue to deliver strong corporate returns coupled with growth that can adjust to various market conditions,” Chairman and CEO Harold Hamm said.Â
For 2019, the company forecasts crude oil production will grow 13% to 19% to 190,000 to 200,000 barrels per day and natural gas output to increase between 1% and 4% to 790 million to 810 million cubic feet per day. The capital spending is expected to be $2.6 billion, down from $2.8 billion in 2018 as a result of lower rig count.
As of Dec. 31, Continental's estimated proven reserves were 1.52 billion barrels of crude oil equivalent. Proven reserves of oil equivalent increased 14% from Dec. 31, 2017 and proven oil reserves rose 18%.
Shares of Continental Resources were trading around $46.93 at close on Friday for a market capitalization of $17.65 billion. The share price declined 14% for the 52 weeks through Feb. 15 and is now below the 200- and 100-day simple moving average lines, but almost on par with the 50-day line. The closing price on Friday was 32% off the 52-week low of $35.54 and 53.3% below the 52-week high of $71.95.
The 14-day relative strength index is 55.48, suggesting the stock is neither oversold nor overbought.
Wall Street expects Continental Resources to outperform the industry or the overall market within the next 52 weeks. The average target price is $59.64 per share.
Transocean Ltd. (RIG, Financial) reported a non-GAAP loss of 34 cents per share and a GAAP loss of 48 cents per share for the fourth quarter of 2018, missing consensus by 10 cents on non-GAAP earnings and by 22 cents on GAAP earnings.
Revenue grew 32.2% to $748 million, beating consensus estimates by $6.67 million.
For full fiscal 2018, the Swiss offshore drilling contractor recorded a 1.5% increase in total revenue to $3.02 billion, a 1,437.5% increase in adjusted net profit to $369 million and a 52.3% decline in operating cash flow to $558 million. The non-GAAP loss was 79 cents per share for the year, compared to a loss of 6 cents per share in 2017.
The company also recorded a loss of $278 million for full year EBITDA. Therefore, the EBITDA margin was -9.2%.
“2018 will be remembered as a transformative year in Transocean’s long and storied history,” President and CEO Jeremy Thigpen said.
Investments have enabled the company to add 21 rigs to a fleet of 48 mobile offshore drilling units.
Thigpen also forecasted an increase in offshore contract drilling services in 2019 despite volatile oil prices.
The company closed 2018 with $2.16 billion in cash on hand and short-term securities, with $25.81 billion in property and equipment and almost $10 billion in total debt. Total equity is worth $13.1 billion as of Dec. 31. Thus, the total debt-to-equity ratio stands at 76.3% compared to an industry median of about 45%.
Shares of Transocean were trading at $8.93 at close on Friday for a market capitalization of $5.44 billion. The stock fell 2% over the past year through Feb. 15 and is now below the 200 and 100-day simple moving average lines, but slightly above the 50-day line. The closing price on Friday was 44.3% above the 52-week low of $6.19 and 62% below the 52-week high of $14.47.
The 14-day relative strength index is 59.38, suggesting the stock is neither oversold nor overbought.
Wall Street has issued an overweight recommendation rating for Transocean. This means the stock is expected to outperform either the industry or the overall market within the next 52 weeks. The average target price is $12.10 per share.
Disclosure: I have no positions in any securities mentioned.
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