Don’t hedge your bets
While production jumped from the year-ago quarter, Continental experienced an even stronger increase in average oil sales price. While most companies locked in sales prices as oil markets grew beyond expectations earlier in the year, Continental executives chose not to secure hedge contracts, allowing the company to benefit from prices that continued to rise throughout the first half of the year.
“That’s part of the vision here that Mr. Hamm and the team has had a very constructive view on oil prices in the near term,” Rory Sabino, vice president of investor relations, said in an interview Tuesday. “Being unhedged on the oil side has served us well, being able to capture the price recovery.”
Continental received an average price of $63.35 per barrel of oil and $2.65 per thousand cubic feet of natural gas in the second quarter, up from $41.91 for oil and $2.63 for natural gas in the year-ago period.
The company’s quarterly profit of $243 million translates to 65 cents a share and is up from a loss of $63.6 million, or 17 cents a share, in the second quarter of 2017.
Adjusted for one-time items, Continental had a profit of $273 million, or 73 cents a share, up from an adjusted loss of $1.8 million, or less than a penny a share, one year ago.
Earnings before interest, taxes, depreciation, amortization and drilling expenses was $897 million, up from $479 million in the year-ago quarter.