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Tax change boosts Continental's Q4 profit, but shares plunge


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Tax change boosts Continental's Q4 profit, but shares plunge

Investors were clearly unimpressed by Continental Resources' beating production and profit expectations as its stock skidded sharply Feb. 22 after earnings for the fourth quarter of 2017 were released.

Continental reported adjusted net income of $151 million, or 41 cents per share, for the quarter, beating the S&P Global Market Intelligence consensus normalized estimate by 9 cents. The company also topped projected oil and natural gas production totals for the quarter.

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Continental reported revenue of $1 billion for the fourth quarter of 2017 and EBITDA of $837.9 million to go with a net income of $842 million. The catch: $714 million of the net income total was a result of the recently passed Tax Cuts and Jobs Act.

Continental shares had fallen by about 11% at one point Feb. 22 and closed the day at $48.44, down 7.9%.

Company officials used the earnings call to state that Continental turned a corner in 2017 and was ready to churn out consistent profits with an oil-heavy portfolio.

"Continental's performance in the past 12 months was simply exceptional. We exceeded the production threshold of 300,000 [barrels of oil equivalent] per day, and in the fourth quarter, we averaged 286,985 boe per day, with 59% of that being oil," CEO Harold Hamm said on the Feb. 22 earnings call. He noted that fourth-quarter production was up 35% quarter over quarter and that 2018 is looking like "a breakout year" for Continental as it continues to improve its operations in the Bakken Shale and Oklahoma's SCOOP and STACK plays.

"We're poised to deliver best-in-class production growth and free cash flow of $800 million to $900 million in a $60 [West Texas Intermediate crude price] world. We have clearly entered a new era in Continental's history, and we are strategically positioned to operate at a high level for many years to come," he said.

Continental said it will operate with a capital budget of approximately $2.3 billion, with 60% of it focused on the Bakken in the northern plains and 18% on the SCOOP.