Continental Resources, Inc.

Transcription

1 Continental Resources, Inc. 4Q11 Production Guidance In Line with Our Expectations Improving results from the Anadarko Woodford. Continental s recent wells have shown strong initial production rates and increased liquids content. It is nice to see the liquids content increase given low natural gas prices, though we believe returns in the Williston remain superior at this time and could even improve as pad drilling increases. Williston operations remain active. Continental has completed 46 gross wells thus far in 4Q11, of which 24 had initial production rates above 1,000 boe/day. Also, the first test into the lower bench of the Three Forks reported last month actually saw a higher initial production rate (1,396 boe/day) due to infrastructure improvements. Overall the Williston continues to be a strong growth driver for Continental as it continually hits is production growth goals. 4Q11 production on track to hit our forecasts. Continental s updated 4Q11 guidance of 73,000+ boe/day is in line with our 73,400 boe/day estimate and we maintain our 4Q11 and 2012 production forecasts capital expenditures increase again. The company is now guiding to $2.15 billion in CAPEX, up from $2 billion, due to previously announced acreage acquisitions. This increase causes us to raise our debt forecasts and interest expense for Continental going forward. Maintaining our Reduce rating as production hits our estimates but spending and the premium for Continental shares trend higher. While operations continue to generate production growth, we feel the 37% premium multiple to peers in terms of 2012E cash flows is excessive and increasing CAPEX eats into cash flows/adds debt. We would prefer to be in other oil focused names that show similar production growth, have strong balance sheets and trade at lower multiples. FYE Dec. 2011E 2012E 2013 EPS Current Previous Current Previous Current 1Q $0.53A $0.75E $0.74E NA NA 2Q $0.60A $0.76E $0.75E NA NA 3Q $0.68A $0.79E $0.78E NA NA 4Q $0.70E $0.82E $0.81E NA NA Year $2.51E $3.12E $3.08E NA NA P/E 25.9x 21.1x NA Mean EPS Estimate $2.51 $3.16 NA CFPS Current Previous Current Previous Current 1Q $0.51A $1.84E $1.83E NA NA 2Q $1.90A $1.89E $1.87E NA NA 3Q $2.74A $1.95E $1.94E NA NA 4Q $1.76E $2.01E $1.99E NA NA Year $6.96E $7.69E $7.63E NA NA P/CFPS 9.3x 8.5x NA Mean CFPS $6.48 $8.16 NA EV/EBITDA 10.0x 7.9x NA December 20, 2011 CLR Price (Dec. 20, 2011) $65.01 Mkt. Cap. (mil.) $11,734.3 Energy Exploration & Production Rating: Previous: Estimate Bias: Previous: Price Target: Previous: Risk Rank: Previous: Sector Rating: Reduce Reduce Down Down NA NA Moderate Moderate Market Weight Jason Wangler jason_wangler@rhco.com Neal Dingmann neal_dingmann@rhco.com Market Data: 52 Week Range $73.48 $42.43 Shares Out. (mil.) Float (mil.) 53.2 Avg. Daily Vol. (000) 1,193 Dividend/Yield $0.00/0.0% Financial Highlights: Long Term Debt (mil.) $896.2 Debt/Cap. 7.4% Debt/EBITDA 0.6x Shareholders' Equity (mil.) $2,418.6 Proven Reserves (Bcfe) 2,188.0 Reserve Mix (% Gas) 38% Reserve Life (Years) 15 NAV ($/Share) $60.00 Convertible Key Indices No EPS Est. Changes /03/11 $2.51 NA 10/06/11 $2.47 $ /05/11 $2.64 $3.39 PLEASE SEE IMPORTANT DISCLOSURES STARTING ON PAGE 8

2 Comments PROJECTIONS AND VALUATION THESIS Our current earnings per share estimates for Continental are $2.51 for 2011 and $3.08 for 2012 and our cash flow per share (CFPS) estimates are $6.96 for 2011 and $7.63 for We project a free cash flow deficit of about $850 million to be funded by cash on hand and the undrawn credit facility. We value the E&P space based on a multiple of the company s forecasted cash flow generation that is determined by analyzing companies operating in the same regions as Continental. Based on this analysis we then take the averaged group multiple and apply it to Continental, though we do also adjust the multiple higher or lower based on certain key factors specific to the company s business. Key factors include, but are not limited to, higher/lower than peer average production growth, higher/lower than peer average reserve growth, historical cash flow multiples, resource potential, cost structure and financial position. Continental is currently trading at an 8.2x multiple based on our $7.63 per share 2012 cash flow estimate, a 37% premium to its peer group (trading at 5.2x) on a price to 2012 cash flow per share basis. Historically Continental has traded at a premium to its peers in terms of cash flows but is currently trading at an excess premium in our opinion in terms of 2012E cash flows. While we agree with a 10 20% premium due to strong historical and forecasted growth, we believe the current valuation is too high and as such maintain our Reduce rating as we feel there are others in the Williston Basin that can provide similar growth and value characteristics at lower trading multiples. If Continental is able to see even better than expected results, higher oil prices, or able to ramp its activity in the Williston Basin and/or Woodford play our figures could be conservative. Currently our net asset value (NAV) calculation on Continental is $60.00 per share, which is also below the current share price. We believe our NAV could increase substantially as the company is able to better define its emerging plays. RISK FACTORS A decline in oil and/or natural gas prices may adversely affect the business, financial condition, or results of operations and the ability to meet capital expenditure obligations and financial commitments. Reserve and production estimates depend on many assumptions that may turn out to be inaccurate. Any change in these figures could materially alter our estimates. The inability for Continental to obtain financing for its planned activity could cause a slowdown in meeting targets. Continental s management and strategy are a key component to our forecasts for the company; if one or more members of the management team were to leave the firm it could have an adverse affect on Continental. 2

3 FIGURE 1: CONTINENTAL NET ASSET VALUATION Continental Resources, Inc. (CLR) NET ASSET VALUATION Risk Adjusted Value Per Unit (In 000's except per share amount) Reserves Risk Factor Reserves In The Ground* Value Value/Share Proven Reserves - 12/31/2010 Natural Gas (MMcf) Proven Developed Red River Unit - Cedar Hills 20,398 98% 19,990 $1.50 $29,985 $0.17 Red River Unit - Other % 428 $1.50 $642 $0.00 Montana Bakken 16,651 98% 16,318 $1.50 $24,477 $0.13 North Dakota Bakken 46,801 98% 45,865 $1.50 $68,797 $0.38 Other North 6,418 98% 6,290 $1.50 $9,434 $0.05 Anadarko Woodford 24,302 98% 23,816 $1.50 $35,724 $0.20 Arkoma Woodford 75,304 98% 73,798 $1.50 $110,697 $0.61 Other South 42,709 98% 41,855 $1.50 $62,782 $0.35 East 1,679 98% 1,645 $1.50 $2,468 $0.01 Proven Undeveloped Montana Bakken 21,088 90% 18,979 $1.50 $28,469 $0.16 North Dakota Bakken 124,693 90% 112,224 $1.50 $168,336 $0.93 Other North % 810 $1.50 $1,215 $0.01 Anadarko Woodford 162,379 90% 146,141 $1.50 $219,212 $1.21 Arkoma Woodford 295,809 90% 266,228 $1.50 $399,342 $2.20 Oil and NGLs (Mbbls) Proven Developed Red River Unit - Cedar Hills 31,752 98% 31,117 $9.00 $280,053 $1.54 Red River Unit - Other 12,840 98% 12,583 $9.00 $113,249 $0.62 Montana Bakken 15,405 98% 15,097 $9.00 $135,872 $0.75 North Dakota Bakken 33,233 98% 32,568 $9.00 $293,115 $1.61 Other North 2,226 98% 2,181 $9.00 $19,633 $0.11 Anadarko Woodford % 537 $9.00 $4,833 $0.03 Arkoma Woodford % 100 $9.00 $900 $0.00 Other South 1,377 98% 1,349 $9.00 $12,145 $0.07 East 3,789 98% 3,713 $9.00 $33,419 $0.18 Proven Undeveloped Red River Unit - Cedar Hills 3,493 90% 3,144 $9.00 $28,293 $0.16 Red River Unit - Other 2,536 90% 2,282 $9.00 $20,542 $0.11 Montana Bakken 18,337 90% 16,503 $9.00 $148,530 $0.82 North Dakota Bakken 96,227 90% 86,604 $9.00 $779,439 $4.29 Other North 20 90% 18 $9.00 $162 $0.00 Anadarko Woodford 2,438 90% 2,194 $9.00 $19,748 $0.11 Arkoma Woodford % 354 $9.00 $3,183 $0.02 East 68 90% 61 $9.00 $551 $0.00 Total Proven Reserves (Mboe) - 62% Oil and 39% Developed 364,712 Potentially Recoverable Resources Under Leases (Mboe) ND Middle Bakken- 610 Net Unbooked Locations at 518 Mboe EUR 262,000 60% 157,200 $9.00 $1,414,800 $7.79 ND Three Forks- 417 Net Unbooked Locations at 518 Mboe EUR 180,000 60% 108,000 $9.00 $972,000 $5.35 MT Bakken- 278 Net Unbooked Locations at 430 Mboe EUR 97,000 55% 53,350 $9.00 $480,150 $2.64 Downspacing Potential in the Bakken and Three Forks 404,250 30% 121,275 $9.00 $1,091,475 $6.01 Niobrara- 228 Net Unbooked Locations at 286 Mboe EUR 53,000 20% 10,600 $9.00 $95,400 $0.53 Anadarko Woodford - 1,574 Net Unbooked Locations at 7.1 Bcfe EUR 1,513,000 30% 460,406 $9.00 $4,143,653 $22.81 Arkoma Woodford Net Unbooked Locations at 3 Bcfe EUR 175,000 25% 43,750 $9.00 $393,750 $2.17 Balance Sheet Working Capital $27,097 $0.15 Other Assets $120,802 $0.67 $300 Million 8.25% Senior Notes due 2019 ($297,833) ($1.64) $200 Million 7.375% Senior Notes due 2020 ($198,387) ($1.09) $400 Million 7.125% Senior Notes due 2021 ($400,000) ($2.20) $750 Million Credit Facility due July 2015 $0 $0.00 Estimated Net Asset Value $10,898,154 Preferred Stock $0 Net Asset Value To Common $10,898,154 Total Shares Outstanding (Fully Diluted) 181,647 Estimated Net Asset Value Per Share $60.00 *Value assigned to each unit is the value in the ground, before any expenses are incurred to extract or produce the unit. This method is used to determine a potential selling price in the market for the oil and gas today based on historical transactions. Source: Company reports and SunTrust Robinson Humphrey estimates 3

4 FIGURE 2: COMPARABLE COMPANY ANALYSIS COMPARABLE ANALYSIS USING FIRSTCALL ESTIMATES Bakken Focused E&Ps Last Price EPS EPS EPS EBITDA EBITDA EBITDA CFPS CFPS CFPS Ticker 12/19/11 EV E 2012E E 2012E E 2012E EOG Resources EOG $95.57 $29,550 $1.08 $3.48 $4.54 $3,106 $4,815 $5,540 $11.37 $16.59 $18.75 Kodiak Oil & Gas KOG $8.61 $1,870 $0.03 $0.25 $0.95 $12 $93 $462 $0.12 $0.44 $1.61 Northern Oil & Gas NOG $21.67 $1,370 $0.34 $0.63 $1.35 $43 $119 $234 $0.78 $1.81 $3.62 Oasis Petroleum OAS $27.24 $2,630 ($0.15) $0.85 $1.89 $81 $230 $472 $0.92 $2.32 $4.61 Whiting Petroleum WLL $43.93 $6,350 $5.52 $3.76 $4.22 $1,031 $1,323 $1,486 $8.17 $10.46 $11.68 Mean Median Min Max Continental Resources CLR $62.81 $12,130 $1.70 $2.51 $3.08 $765 $1,209 $1,543 $3.68 $6.96 $7.63 COMPARABLE ANALYSIS USING FIRSTCALL ESTIMATES Bakken Focused E&Ps Last Price P/E P/E P/E P/E EV/EBITDA EV/EBITDA EV/EBITDA P/CF P/CF P/CF Ticker 12/19/11 EV E 2012E 2013E E 2012E E 2012E EOG Resources EOG $95.57 $29, x 27.4x 21.1x 14.2x 9.5x 6.1x 5.3x 8.4x 5.8x 5.1x Kodiak Oil & Gas KOG $8.61 $1,870 NM 34.6x 9.1x 5.8x 155.8x 20.0x 4.0x 71.8x 19.7x 5.3x Northern Oil & Gas NOG $21.67 $1, x 34.5x 16.0x 10.4x 31.9x 11.5x 5.9x NM 12.0x 6.0x Oasis Petroleum OAS $27.24 $2,630 NM 32.1x 14.4x 8.2x 32.5x 11.4x 5.6x NM 11.7x 5.9x Whiting Petroleum WLL $43.93 $6, x 11.7x 10.4x 8.2x 6.2x 4.8x 4.3x 5.4x 4.2x 3.8x Mean 53.4x 28.1x 14.2x 9.3x 47.2x 10.8x 5.0x 28.5x 10.7x 5.2x Median 63.7x 32.1x 14.4x 8.2x 31.9x 11.4x 5.3x 8.4x 11.7x 5.3x Min 8.0x 11.7x 9.1x 5.8x 6.2x 4.8x 4.0x 5.4x 4.2x 3.8x Max 88.5x 34.6x 21.1x 14.2x 155.8x 20.0x 5.9x 71.8x 19.7x 6.0x Continental Resources CLR $62.81 $12, x 25.1x 20.4x 17.5x 15.9x 10.0x 7.9x 17.1x 9.0x 8.2x Mean Comp. Mean Comp. Mean Comp. EBITDA EV/EBITDA EV Price EPS P/E Price CFPS P/CF Price Upside Upside Upside CLR vs. Peers $1, $7,741 $ % $ $ % $ $ % Source: Company reports, FirstCall estimates and SunTrust Robinson Humphrey estimates 4

5 FIGURE 3: CONTINENTAL HISTORICAL AND PROJECTED INCOME STATEMENT Continental Resources, Inc. (CLR) Historical and Forecasted Income Statement 2011 Quarterly Results/Est. (000s as appropriate) Mar Jun Sep Dec-E E 2012-E Oil Prod. (Mbbls) 3, , , , , , ,681.8 Price ($/bbl) $85.34 $95.88 $84.02 $79.25 $70.99 $85.51 $83.92 Gas Prod. (Mmcf) 7, , , , , , ,343.1 Price ($/mcf) $5.09 $5.47 $5.50 $5.19 $4.59 $5.32 $5.23 Average Realized Price $71.32 $79.99 $69.60 $66.35 $60.11 $71.33 $69.64 Total Production (Mboe) 4, , , , , , ,405.7 Total Production Per Day (Mboe) % Oil 74.4% 74.8% 71.7% 73.2% 75.0% 73.5% 72.8% Sequential Growth 3.4% 5.7% 24.1% 10.7% 16.6% 41.1% 26.7% Commodity Estimates $76.71 $83.28 $71.13 $63.40 $66.04 $73.63 $65.28 Gas (Henry Hub Spot); $/mcf $4.20 $4.38 $4.06 $3.76 $4.41 $4.10 $4.24 Oil (WTI Cushing Spot); $/bbl $94.42 $ $89.57 $78.35 $79.30 $91.20 $80.15 Days in Period Income Statement Theoretical Revenues 331, , , , ,546 1,597,150 1,978,139 Oil & Gas Sales 326, , , , ,073 1,587,221 1,978,139 Oil & Gas Sales to Affiliates , Gain (Loss) on Mark-to-Market Derivatives (5,216) (26,878) 1, ,021 (30,981) 0 Oil and Natural Gas Service Operations 6,626 9,655 7,790 7,829 21,303 31,900 31,709 Other Revenue Total Revenues $327,877 $371,561 $432,762 $455,940 $1,001,848 $1,588,140 $2,009,848 Production Expense 29,270 32,361 36,459 40,521 87, , ,434 Production Expense to Affiliates , Production Taxes 27,562 33,491 39,262 38,538 76, , ,120 Oil and Gas Service Operations 5,451 8,064 6,198 6,655 18,065 26,368 26,953 Depletion of Oil and Gas Properties 75,650 83, , , , , ,896 Exploration Expense 6,812 5,034 9,814 10,130 12,763 31,790 42,609 Property Impairments Stock Based Compensation 3,642 3,855 4,245 5,065 11,691 16,807 21,304 General & Administrative 12,705 13,354 13,895 18,572 37,399 58,526 78,116 Operating Income $166,785 $191,901 $217,804 $221,649 $508,467 $798,139 $1,017,417 Interest, net (18,971) (18,785) (18,981) (18,821) (53,147) (75,558) (117,177) Gain (Loss) on Sale of Assets (188) 0 (1,336) Other Income, net 509 1, ,293 2,525 0 Net Income Before Taxes $148,323 $174,456 $199,629 $202,829 $455,277 $725,237 $900,239 Taxes (56,389) (66,503) (76,092) (77,075) (165,973) (276,059) (342,091) Net Earnings Excl. Special Items $91,934 $107,953 $123,537 $125,754 $289,304 $449,178 $558,148 Unrealized Gain (Loss) on Hedges (225,670) 143, ,835 0 (80,875) 249,313 0 Impairment of Oil and Natural Gas Properties (12,922) (11,907) (16,229) 0 (38,521) (41,058) 0 Tax Impact of Special Items Other Special Items, net of tax 9, (1,653) 9,457 0 Reported Earnings ($137,201) $239,194 $439,143 $125,754 $168,255 $666,890 $558,148 EBITDA $249,247 $280,436 $332,703 $346,590 $764,831 $1,208,976 $1,542,922 Basic Operating EPS $0.53 $0.60 $0.68 $0.70 $1.71 $2.51 $3.08 Basic Reported EPS ($0.79) $1.32 $2.43 $0.70 $1.00 $3.66 $3.08 Diluted Operating EPS $0.53 $0.60 $0.68 $0.70 $1.70 $2.51 $3.08 Diluted Reported EPS ($0.79) $1.32 $2.43 $0.70 $0.99 $3.66 $3.08 Basic Shares Outstanding 173, , , , , , ,167 Diluted Shares Outstanding 173, , , , , , ,167 Margin Analysis Gross Margin 91% 92% 91% 91% 90.5% 91.3% 91.4% Operating Margin 51% 52% 50% 49% 50.8% 50.4% 50.6% Net Margin 28% 29% 29% 28% 28.8% 28.3% 27.8% EBITDA Margin 76% 75% 77% 76% 76.3% 76.1% 76.8% Cash Flow From Operations Operating Net Income $91,934 $107,953 $123,537 $125,754 $289,304 $449,178 $558,148 Depletion of Oil and Gas Properties 75,650 83, , , , , ,896 Non-Cash Exploration Expense 1,504 1, ,039 3,024 6,797 12,783 Deferred Taxes (84,154) 146, ,117 69,367 77, , ,882 Property Impairments Stock Based Compensation 3,642 3,855 4,245 5,065 11,691 16,807 21,304 Cash Flow From Operations $88,576 $343,566 $495,372 $318,035 $624,979 $1,245,550 $1,383,013 Cash Flow/Share $0.51 $1.90 $2.74 $1.76 $3.68 $6.96 $7.63 Capex $377,454 $448,797 $459,657 $864,092 $1,076,063 $2,150,000 $1,750,000 Asset Sales $22,131 $653 ($15) $10,000 $43,985 $32,769 $40,000 Free Cash Flow ($266,747) ($104,578) $35,700 ($536,057) ($407,099) ($871,681) ($326,987) Source: Company reports and SunTrust Robinson Humphrey estimates 5

6 FIGURE 4: CONTINENTAL HISTORICAL AND PROJECTED BALANCE SHEET Continental Resources, Inc. (CLR) Historical and Forecasted Balance Sheet (000s as appropriate) Dec-09 Dec-10 Mar-11 Jun-11 Sept-11 Dec-11E Dec-12E Cash & Equivalents 14,222 7, , ,408 42,275 15,838 11,348 Accounts Receivable of Oil and Gas Sales, net 119, , , , , , ,284 Accounts Receivable Affiliated Parties, net 7,823 20,156 17,038 22,562 27,329 21,711 24,979 Accounts Receivable of Joint Interest and Other, net 58, , , , , , ,514 Inventory 26,711 38,362 52,248 50,840 61,690 45,594 52,457 Derivative Assets 0 21,365 17,360 13, ,323 91,458 37,461 Deferred and Prepaid Taxes 4,575 22,672 84,004 44,199 1,997 1,897 1,545 Prepaid Expenses 4,944 9,173 9,724 8,815 27,074 27,615 29,892 Total Current Assets $236,028 $582,326 $1,201,245 $991,501 $907,824 $823,038 $823,480 Oil and Gas Properties 2,068,055 2,981,991 3,285,824 3,635,046 4,046,235 4,775,387 5,959,882 Deferred Loan Fees 10,844 27,468 26,342 25,535 24,716 22,244 14,595 Noncurrent Derivatives Receivable , , ,195 Total Assets $2,314,927 $3,591,785 $4,513,460 $4,652,371 $5,099,577 $5,739,055 $6,907,152 Short-Term Debt Accounts Payable 91, , , , , , ,592 Accounts Payable to Affiliated Parties 9,612 4,438 4,263 6,632 8,109 4,502 4,912 Dividends Payable Accrued Liabilites 49,601 94, , , , , ,435 Revenues and Royalties Payable 66, , , , , , ,582 Current Portion of Asset Retirement Obligation 2,460 2,241 2,270 2,464 2,640 2,376 1,559 Unrealized Derivative Losses 0 76, , , Other Liabilities Total Current Liabilities $219,710 $702,222 $946,206 $858,556 $880,727 $863,651 $937,080 Long Term Debt 523, , , , ,220 1,351,220 1,481,220 Asset Retirement Obligation 47,707 54,079 55,141 56,228 56,930 59,777 72,659 Deferred Income Tax Liability 489, , , , , ,833 1,125,299 Other Noncurrent Liabilities 4, , , ,240 3,750 3,788 3,941 Total Liabilities $1,284,648 $2,383,630 $2,779,767 $2,676,683 $2,680,959 $3,174,268 $3,620,199 Common Stock 1,700 1,704 1,805 1,805 1,805 1,805 1,805 Additional Paid-In Capital 430, ,900 1,102,538 1,105,339 1,109,126 1,109,126 1,109,126 Accumulated Other Comprehensive Income , ,433 Retained Earnings 598, , , ,544 1,307,687 1,433,441 1,991,589 Stockholders' Equity $1,030,279 $1,208,155 $1,733,693 $1,975,688 $2,418,618 $2,564,787 $3,286,953 Total Liabilities and Equity $2,314,927 $3,591,785 $4,513,460 $4,652,371 $5,099,577 $5,739,055 $6,907,152 Source: Company reports and SunTrust Robinson Humphrey estimates 6

7 FIGURE 5: CONTINENTAL HISTORICAL AND PROJECTED STATEMENT OF CASH FLOWS Continental Resources, Inc. (CLR) Historical and Forecasted Cashflow Statement (000s as appropriate) Dec-09 Dec-10 Mar-11 Jun-11 Sept-11 Dec-11E Dec-12E Cash Flow from Operations Net Income 71, ,255 (137,201) 101, , , ,148 Depletion of Oil and Gas Properties 208, ,748 76, , , , ,896 Non-Cash Exploration Expense 6,477 3,024 1,504 3,370 3,758 6,797 12,783 Property Impairments 83,694 64,951 20,848 40,090 66,315 80, ,000 Deferred Income Taxes 36,119 77,359 (84,154) 62, , , ,882 Stock Based Compensation 11,408 11,691 3,642 7,497 11,742 16,807 21,304 Change in Net Working Capital (46,050) (50,666) (35,525) (66,385) (127,714) (86,441) 68,496 Other 3, , , ,980 (416,058) (416,058) 24,000 Cash Flow from Operations $375,858 $653,167 $195,635 $428,966 $669,814 $1,042,808 $1,575,510 Cash Flow from Investing Capital Expenditures, net (505,753) (1,076,063) (377,454) (826,251) (1,285,908) (2,150,000) (1,750,000) Asset Sales 7,148 43,985 22,131 22,784 22,769 32,769 40,000 Acquisitions (1,217) (7,338) Other (149) Cash Flow from Investing ($499,822) ($1,039,416) ($355,323) ($803,616) ($1,263,139) ($2,117,231) ($1,710,000) Cash Flow from Financing Long-Term Borrowings (Net) 147, ,210 (30,000) (30,000) (30,000) 425, ,000 Equity Issuance (Net) , , , ,736 0 Exercise of Stock Options Repurchase of Common Stock (4,299) (7,561) (207) (1,198) (1,656) (2,000) 0 Dividends to Shareholders (41) (2) Deferred Offering Costs (10,028) (9,191) (320) (405) (405) (405) 0 Other 0 5, Cash Flow from Financing $132,957 $379,943 $629,212 $628,142 $627,684 $1,082,346 $130,000 Effect of Exchange Rate Net Increase in Cash & Equivalents 8,993 (6,306) 469, ,492 34,359 7,923 (4,490) Beginning Cash 5,229 14,222 7,916 7,916 7,916 7,916 15,838 Ending Cash $14,222 $7,916 $477,440 $261,408 $42,275 $15,838 $11,348 Source: Company reports and SunTrust Robinson Humphrey estimates 7

8 Company Description Continental Resources is a crude oil concentrated, independent oil and natural gas exploration and production company with operations primarily in the Rocky Mountain and Mid Continent regions of the United States. The company focuses its operations in large new and developing plays where horizontal drilling, advanced fracture stimulation and enhanced recovery technologies provide the means to economically develop and produce oil and natural gas reserves from unconventional formations. Continental Resources, Inc. was founded in 1967 and is based in Enid, Oklahoma. Analyst Certification By issuing this research report, each SunTrust Robinson Humphrey analyst named in this report hereby certifies that the recommendations and opinions expressed accurately reflect the research analyst's personal views about any and all of the subject securities or companies discussed herein and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Important Disclosures Analyst compensation is based upon quality of analysis, communication skills, stock price performance and the overall revenue and profitability of the firm, including investment banking revenue. As a matter of policy and practice, the firm prohibits the offering of favorable research or a specific research rating as consideration or inducement for the receipt of business or compensation. In addition, analysts and associated persons preparing research reports are prohibited from owning securities in the subject companies. Rating And Price Target History (CLR) Date Rating Target Closing 01/05/2011 Buy $69.00 $ /28/2011 $80.00 $ /09/2011 $72.00 $ /05/2011 Neutral $ /06/2011 Reduce $49.89 Definition of Ratings SunTrust Robinson Humphrey assigns one of three ratings to stocks covered by our Research Department: Buy, Neutral, or Reduce. In addition, we assign a risk rank to each stock based on a combination of fundamental and stock volatility factors: Low = Low stock price volatility reflected by high predictability of financial results. 8

9 Moderate = Moderate stock price volatility reflected by medium predictability of financial results. High = High stock price volatility reflected by inconsistent predictability of financial results. Speculative = Greatest stock price volatility reflected by low predictability of financial results. Venture = Recommended only for maximum risk oriented and well diversified portfolios. Our ratings are a function of the risk ranking (higher return expectations for higher risk) and the absolute expected total return (price appreciation plus dividends) that result in our estimated 12 month price target. Please refer to the grid below for additional detail. Performance Definition Scale Total return (capital gain/loss + dividends) expected over the next 12 months Rating Low Risk Moderate Risk High Risk Speculative Buy Over 10% Over 15% Over 20% Over 25% Neutral 5% to 10% 5% to 15% 10% to 20% 10% to 25% Reduce 5% or Worse 5% or Worse 10% or Worse 10% or Worse SunTrust Robinson Humphrey assigns one of three ratings to industries/sectors covered by our Research Department: Overweight, Market Weight or Underweight. These terms are relative to the appropriate S&P 500 industries/sectors. Deviations from expected price targets due to price movement and/or volatility will be reviewed by the analyst and research management on a timely basis. Price targets are only required on Buy rated stocks; the analyst may choose to have price targets on Neutral or Reduce rated stocks, but it is not required. Action taken by an investor should be based upon their personal investment objectives and risk tolerance compared to a stock s expected performance and risk ranking. Estimate Bias: While current annual estimates are our best judgment at this time, we assign an "Up" or "Down" bias based on our expectation for fundamental changes over the next 12 months. SunTrust Robinson Humphrey ratings distribution as of 12/20/2011: Coverage Universe Investment Banking Clients Past 12 months Rating Count Percent Rating Count Percent* Buy Buy 30 9 Hold/Neutral Hold/Neutral 31 9 Sell/Reduce 4 1 Sell/Reduce 0 0 *Percentage of Investment Banking clients in Coverage Universe by rating Financial Definitions Average Daily Volume = The cumulative number of shares traded over 200 days number of trading sessions in that period Debt/Cap. = Debt shareholders equity + debt Debt/EBITDA = Long term debt earnings before interest, tax, depreciation, and amortization Dividend/Yield = Annual dividend per share share price EV/EBIDTA = (Preferred stock + common stock + long term debt cash) earnings before interest, tax, depreciation, and amortization Float = Number of shares outstanding available for public trading NAV = Going concern value based on historical transactions Long Term Debt = Loans and financial obligations extending beyond one year Mean CFPS = Thomson/Reuters mean cash flow per share estimate P/CFPS = price cash flow per share before working capital Proven Reserves = An estimated quantity of all hydrocarbons, which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions Reserve Life = Proven reserves divided by production Reserve Mix = % of proven reserves comprised of natural gas Shareholders Equity = Share capital + retained earnings treasury shares 9

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