Continental Resources in the CLR

UPDATE: Although the numbers were solid, CLR sold off today and is down to around $55 a share which is less than expected 10x 2009 earnings. Beware as when BEXP and EOG report in the next day that even a good report may result in a selloff.

Continental Resources beat expectations by reporting a second-quarter profit of $127.3 million, or 75 cents a share this morning as revenue more than doubled to $303.4 million from $145.3 million. Production rose 11% to 31,623 barrels of oil a day with June topping 33000 barrels of oil a day which indicates acceleration in growth. Continental indicates it will deploy more drilling rigs in the second half. During the second quarter, Continental continued to expand its undeveloped acreage positions in the Bakken, Anadarko Woodford, Atoka, Rhinestreet, Marcellus, Huron and Haynesville shale plays. The Company has added approximately 325,000 net acres to its lease holdings since the beginning of 2008, increasing its acreage position to almost one million acres in U.S. shale resource plays.

In terms of Bakken production, average seven-day initial production rates continued to improve in the second quarter of 2008, with wells averaging 513 boepd, an increase of 13 percent over initial daily production for wells completed in the first quarter this year. Recent data in the North Dakota Bakken are shown below with average seven-day initial gross production rates with the Dodge and Mathistad wells performing quite nicely.

— Mathistad 1-35H (40% WI) in McKenzie Co. — 1,260 boepd;
— Dodge 1-17H (20% WI) McKenzie Co. — 989 boepd;
— Whitman 11-34H (32% WI) in Dunn Co. — 765 boepd;
— Bice 1-29H (44% WI) in Dunn Co. — 693 boepd;
— Cleo 1-12H (26% WI) McKenzie Co. — 654 boepd;
— Carson Peak 44-2H (33% WI) in Dunn Co. — 601 boepd;
— Kermit 1-32H (45% WI) McKenzie Co. — 596 boepd;
— Bridger 44-14H (45% WI) in Dunn Co. — 383 boepd;
— Bonneville 31-23H (45% WI) in Dunn Co. — 362 boepd;
— Mountain Gap 31-10H (44% WI) in Dunn Co. — 331 boepd.

The release indicates that CLR is on track for stellar growth for the next 12-18 months fueled by its Bakken plays. If oil stays above $120 per barrel, CLR is on track to post earnings over $4 in 2009 which would give the stock a forward PE of less than 16 at current prices. CLR may give back a little today amidst choppy trading, but long term the story is intact and this is a good entry point for a high powered growth stock.

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