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Shale oil surprise, cold winter hurts

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snow_2 February 27, 2014 (Chinavestor) Investors got nervous right when quarterly earnings came out from two prominent shale oil plays this morning. Daily range increased for both Continental Resources (NYSE:CLR) and Whiting Petroleum (NYSE:WLL) as investors were digesting mixed results.

Believing that earnings drive stock prices for the long term, we created a revenue and earnings growth chart, combined with the stock price development for the requisite period.Continental Resources (NYSE:CLR) reported net income of $132.8 million or $.72/share for 2013 Q4, down from $220.5 million or $1.19 a share. But revenues increased to $820.3 million in the fourth quarter as the company produced more oil.

CLR_2013Q4_revearn

Going forward, Continental Resources (NYSE:CLR) has to demonstrate additional growth and sufficient cost control. The first quarter of 2014 is going to be hard because the winter is just out of this world in the plains. The chart estimate numbers are consensus estimates and are subject to change. Taking those estimates out, the picture is not all that rosy. Revenue grew in 2013 Q4 from a year earlier, but net income significantly fell.

Another shale oil play reported after the bell yesterday. Whiting Petroleum (NYSE:WLL) production increased but net income fell hard. The company provided investors with a non-GAAP earnings number of $.88/share when GAAP numbers were $-.50/share! It is actually a net loss of $59.265 million compared to a net income of $81.434 million in 2012 Q4. As far as all of 2013 is concerned, Whiting Petroleum (NYSE:WLL) reported net income of $365.5 million vs $413.11 million in 2012. This is the bad news.

WLL_2013Q4_revearnGAAP

Good news is that most of the losses for the quarter are attributed to exploration and impariment, not necessarily a cash charge. This is why Whiting (NYSE:WLL) argues that investors should look at non-GAAP net income and EPS. That came out to $.55 a share.

WLL_2013Q4_revearn

Again, the cold winter is expected to take a toll on upcoming quarter. This is partially reflected in concensus estimate numbers.

 



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