Why KeyBanc Is Turning Bullish On Continental Resources

Continental Resources, Inc. CLR is well-positioned to benefit from improved leverage next year; has exposure to potentially higher oil prices; and could deliver robust free cash flow, according to KeyBanc Capital Markets.

The Continental Resources Analyst: Leo Mariani upgraded Continental Resources from Sector Weight to Overweight with an unchanged $20 price target. 

The Continental Resources Thesis: The company may receive more than $500 million from the sale of its water infrastructure assets, which it could use to pay down “a nice chunk of its debt,” Mariani said in an upgrade note.

“We expect CLR will be able to stem oil production declines in 2021, as we expect it to add Bakken activity in 2021, and we expect CLR to transition its Oklahoma activity from gas producing areas back to oil in 1H21,” the analyst said. 

“Additionally, we expect both CLR's 2021 total production and 2021 oil production to come in 3% above consensus. We also expect CLR's oil production to show modest sequential declines in 1H21, before resuming modest growth in 2H21.”

Benchmark expects Continental Resources to reinstate its dividend in 2021.

CLR Price Action: Shares of Continental Resources were up 1.35% at $16.48 at last check Tuesday.