Continental Resources Prices $1.7B Note Offering - Analyst Blog

Leading Bakken oil producer, Continental Resources, Inc. CLR announced the pricing of its private placement of $1.7 billion of senior unsecured notes. Of this, $1.0 billion of notes with a coupon rate of 3.8% are due in 2024 and the remaining $700.0 million of notes with a coupon rate of 4.9% are due in 2044.

The 2024 notes were sold at 99.6% of par, resulting in a yield to maturity of 3.843%.  The 2044 notes were sold at 99.7% of par, resulting in a yield to maturity of 4.918%. The offering is expected to close on May 19. Continental intends to use the net proceeds from this offering to repay the outstanding amount under its revolving credit facility, finance the redemption of its senior notes due 2019 and for general corporate purposes.

Oklahoma City-based Continental is an independent exploration and production company focused on the Bakken, Cana and Niobrara shale plays. It has leases on nearly 1.1 million acres in the Bakken Shale region.

The company operates in the North, South and Eastern regions of the U.S. Its North region – north of Kansas and west of the Mississippi river – comprises North Dakota Bakken, Montana Bakken, the Red River units and the Niobrara play in Colorado and Wyoming. The first two hold the maximum promise for Continental Resources.

The Southern region includes Kansas and all properties south of Kansas and west of the Mississippi river, and comprises the Anadarko Woodford and Arkoma Woodford plays in Oklahoma.

Continental Resources expects to increase total crude oil and natural gas production in the range of 26% to 32% in 2014. The company also expects average daily production of 170,000–180,000 barrels of oil equivalent (Boe) per day, with an exit rate of approximately 200,000 Boe per day for Dec 2014. Of the total production, 70% is expected to be crude oil.

Continental Resources' organic capital expenditure for 2014 is estimated at $4 billion. The budget takes into account the ongoing trend of reduced well costs. The company has set a new goal to slash average operated Bakken completed well costs by 3% to 5% by the end of 2014.

Continental Resources currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Investors interested in the oil and gas sector could consider stocks like Athlon Energy Inc. ATHL, Callon Petroleum Co. CPE and Pembina Pipeline Corp. PBA. All these carry a Zacks Rank #1 (Strong Buy).