More Budget Cuts for Continental Resources

Hamm slashes budget
Hamm slashes budget

For the second time in as many months, Continental Resources announces huge adjustments to its 2015 budget in response to plummeting oil prices.

In a press release before Christmas, the energy giant announced the details including plans to slash their 2015 capital expenditures to $2.7 billion. Additional cuts will come as they decrease the number of operated rigs, which they predict to drop from 50 to approximately 31 operated rigs by the end of 2015.

In an interview with Forbes, CEO Harold Hamm explained that the company is taking the necessary precautions to weather this storm and protect bondholders. Seemingly unfazed in his comments, Hamm credits his confidence to his past experience with these types of scenarios.

Harold Hamm tells Forbes that “It’s all part of our plan. If prices go down, we are going to cut back to save our wealth — which is oil in the ground.” Hamm goes on to say that, “I’ve seen this six or seven times. We have ample liquidity, our total revolver available, no near-term debt, a lean organization with just 1,100 people, production of 200,000 barrels per day, and a low-cost, high-margin operation. We’re going to navigate right through it.

Wood Mackenzie Forecasts $15 Billion on Bakken Drilling and Completions - 2014

Wood Mackenzie Bakken and Three Forks Map
Wood Mackenzie Bakken and Three Forks Map

According to the oil and gas research and consulting firm Wood Mackenzie, $15 billion will be spent on drilling and completion in the Bakken in 2014, second only to the Eagle Ford Shale. This year, oil production is expected to reach the 1 million b/d mark, and grow markedly beyond that figure over the next 5 - 6 years.

Read more: Bakken Production Sets Another Record - More Than 10,000 ND Wells Producing

We expect Bakken/Three Forks oil production to average 1.1 million barrels a day (b/d) in 2014, growing to 1.7 million b/d in 2020,” says Jonathan Garrett, upstream research analyst for Wood Mackenzie.

The firm's analysis shows the Bakken and Three Forks plays hold close to $118 billion in value. Despite infrastructure concerns, estimates indicate operators will recover more than 20 billion bbls of oil reserves throughout the life of the play.

Continental Remains Top Bakken Operator

In 2014, Continental Resources remains the top Bakken operator, with more than 1.2 million acres according to Wood Mackenzie. The value of the company's proved reserves in the Bakken are ~ $14.5 billion.

Read more: Continentals Proved Reserves in the Bakken Valued at $14.5 Billion

In 2013, Continental conducted multiple tests of the Three Forks . Wood Mackenzie indicates the company has the most advanced delineation program in the deeper Three Forks benches.

Wood Mackenzie Analysis of Bakken Three Forks Sub-Plays

Current figures show the highest initial production rates are on the Nesson Anticline sub-play, with 30-day IP rates of 1000 boe/d. Estimated ultimate recovery (EUR) rates are the highest in the Fort Berthold sub-play at nearly 700,000 barrels of oil equivalent (boe).

In the Southern fringe sub-play, wells targeting the Three Forks formation outperformed Bakken wells. Similar results for Three Forks wells were also found in the North Williston and Williams Perimeter sub-plays.

Wood Mackenzie also indicates in their report that infrastructure constraints will not impact the pace of the play's development. Currently, 73% of crude leaves the Williston Basin by rail.

Read more at woodmac.com

EOG Resources Nearly Doubling Bakken Activity in 2014

EOG Bakken Acreage Map
EOG Bakken Acreage Map

EOG Resources sees the Bakken as a high rate of return growth play, and plans on drilling 80-net wells in 2014.

That's nearly double the number of net-wells drilled in 2013, which was 54. At that rate, the company has a drilling inventory in the Bakken of ~8 years.

Read more: EOG Will Utilize Self Sourced Sand in Bakken Completions

EOG Resources Bakken Development in 2014

EOG Resource's focus area will be in its Bakken core acreage (~90,000 net acres) and the Antelope Extension area.

Based on successful drilling results in the Three Forks formation in the Antelope Extension in 2013, EOG plans on testing additional benches during 2014.

Completion and cost improvements in the play have resulted in EOG deciding to direct more of its capital budget to the Bakken.

EOG is directing a larger percentage of its 2014 capital budget to the Eagle Ford and Bakken where we have tremendous drilling opportunity with excellent rates of return,” said CEO, William Thomas. “By increasing activity in these plays, we expect the momentum and operational efficiencies we’ve created to continue.

In 2013, EOG ramped up its drilling plan from one to four wells per section, while increasing the average recoverable resource per well. More downspacing is expected in 2014.

EOG Resources Bakken Well Highlights

Wayzetta 30-3230H and 31-3230H (Mountrail County)

  • Initial production (IP) of 2,510 b/d and 2,540 b/d crude oil respectively

Wayzetta 35-1920H (Mountrail County)

  • Initial production (IP) of 2,240 b/d crude oil
  • Initial production (IP) of 1.2 mmcf/d natural gas

Hawkeye 2-2501H (McKenzie County)

  • Initial production (IP) of 2,075 b/d crude oil
  • Initial production (IP) of 3.8 mmcf/d natural gas

 

Kodiak Increasing Bakken Spending & Production Guidance

Kodiak Bakken Acreage Map
Kodiak Bakken Acreage Map

Kodiak provided a second quarter operations update, along with plans to spend more and produce more from the Bakken in the second half of the year. The increase comes as no surprise. Kodiak acquired Liberty Resources' Bakken acreage earlier in July 2013 for $660 million.

Kodiak's production at the time of the announcement was 34,000 boe/d. 28,500 boe/d from legacy assets and 5,500 boe/d from the recently acquired Liberty assets.

The update included the following 2013 guidance changes:

  • Production guidance increases from 29,000-31,000 boe/d to 30,000-34,000 boe/d
  • Capital spending will increase from a planned $775 million to $950 million to $1 billion
  • The budget includes the completion of ~100 net wells

Kodiak's Second Quarter Bakken Activity

[ic-l]Kodiak participated in the completion of 48 gross (24 net) wells in the second quarter. Kodiak brought on a second full-time completion crew in May and plans to use a third crew temporary on its newly acquired lands. Third quarter activity is expected to include completing 30 gross (25 net) operated wells plus additional non-operated wells.

Kodiak was operating seven rigs in the area, dropped one in June, and then added a rig back through the recent acquisition. The company is running three rigs in the Polar area, two in the Smokey project, one at the Koala project, and one in Dunn County.

Wells on two 12-well units are nearing completion and one pad has eight wells already producing. Kodiak is testing 12 wells within a single 1,280 acre unit in both the Polar (Williams County) and Smokey (McKenzie County) areas. We should hear more in the third quarter.