Harold Hamm Gains More Bakken Acreage

Harold Hamm Continental Resources
Harold Hamm Continental Resources

Continental Resources strengthened its position in North Dakota by winning the right to drill on an additional 160 acres located near the Fort Berthold Indian Reservation.

Continental’s Harold Hamm spent  2.3 million for the privilege at a state land auction last Friday, beating out the competition in the last 30 seconds of bidding. The funds from this sale are earmarked for educational uses around the state.

Low oil prices have caused companies to reduce spending for 2015 and order to wait out the pricing situation including EOGOccidental Petroleum  and ConocoPhillips.

Even as Continental announced it would slash its budget by 48%, CEO Harold Hamm remained publicly optimistic about his company's ability to navigate the rough waters.

Hamm commented that “We concluded 2014 with a strong fourth quarter performance, capping off another year of exceptional production and proved reserves growth (...) We believe that our momentum coming out of 2014 will allow us to grow our production 16% to 20% this year.

The Bakken continues to be the backbone of Continental’s operations. The company is the largest acreage holder in the Bakken and the second largest oil producer in the region. In February, Continental announced that Bakken production was up 30% over last year and overall output was expected to jump 20% for 2015.

Anti-Fracking Movement Blamed on Russia

Hamm Claims Russia Financed Anti-Frack Movement
Hamm Claims Russia Financed Anti-Frack Movement

Continental Resources’ Harold Hamm accused Russia of trying to destroy the U.S. shale oil industry.

During an interview at a recent Forbes event, Hamm claims that Russians have worked with environmental groups and financed the anti-fracking movement in hopes of producing panic in the United States.

Hamm of course has a vested interest in the anti-fracking movement. He was a pioneer in the use of horizontal drilling and hydraulic fracturing to extract soil from shale. and has been instrumental in the development of the Bakken shale formation which has sparked a hge oil boom. It is expected that the Bakken will produce more than 1.3 million barrels of oil this year, according to the U.S. Energy Information Agency.

Related: U.S. Leads World-Wide Oil Production

This isn’t the first time such accusations against Russia have been made. In June of 2014, NATO chief, Anders Fogh Rasmussen, said Russia was mounting a sophisticated campaign to undermine the development of alternative energy sources such as shale oil. According to Rasmussen, Russia wants to secure Europe's dependence on energy imports from Moscow.

Rasmussen stated, “I have met allies who can report that Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organisations - environmental organisations working against shale gas - to maintain European dependence on imported Russian gas. That is my interpretation.

Kinder Morgan Acquires Hiland

Hamm sells Hiland
Hamm sells Hiland

Kinder Morgan announced last week that it finalized the acquisition of Hiland Partners, a midstream firm founded by Harold Hamm, CEO of Continental Resources. The deal, reported at $3 billion, includes assuming almost $1 billion in debt.

Hiland primarily serves production from the Bakken Formation in North Dakota and Montana and by operating crude oil gathering/transportation pipelines and gas gathering/processing systems including roughly 1,225 miles of pipeline. Company officials anticipate retaining nearly all of Hiland’s approximately 430 employees.

We are delighted to establish a substantial midstream footprint in one of the most prolific oil producing basins in the United States,” said KMI Chairman and CEO Richard D. Kinder. “Hiland’s systems serve some of the Bakken’s largest and most successful producers, including Continental. We look forward to continuing to provide high quality midstream services to these producers and pursuing incremental growth opportunities in the basin.

Harold Hamm began contemplating the sale due to financial worries stemming from plummeting oil prices and a very public, and expensive divorce. Hamm reportedly sold the interest in order to gain the necessary cash for a $1 billion divorce settlement, one of the largest divorce tabs ever recorded. This acquisition is on the heels of a personal loan in December at the same time the company slashed its 2015 capex for the second time.

Related: More Budget Cuts for Continental Resources

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.

How the Keystone XL Pipeline Would Impact the Bakken

Pipeline Photo
Pipeline Photo

The Senate will vote today on a bill to approve the Keystone XL Pipeline, after the House voted to approve it last Friday. The controversial pipeline would carry heavy oil sands crude from Canada and lighter Bakken crude to the Gulf Coast refining market.

In 2013, the Congressional Research Service released a report that stated 12% of the Keystone XL Pipeline's 830,000 b/d ultimate capacity has been set aside for the transport of Bakken Crude. The report further said the Keystone XL pipeline project would include a lateral pipeline, called the Bakken Marketlink, to carry oil from Baker, MT, to the hub in Cushing, OK.

Although the Keystone XL Pipeline would play a role in the Bakken, its significance in the region has diminished slightly over time. Despite a still lacking midstream infrastructure in the Bakken, several pipeline projects have advanced as the political thunderstorm has ensued surrounding the Keystone XL Pipeline.

In September of 2013, Harold Hamm, CEO of Continental Resources, the Bakken's second largest producer, said the Keystone XL pipeline was no longer critical in an interview with Amy Harder from the National Journal. For full disclosure, at the time of the interview, Hamm's Hiland Partners was pushing its Double H Pipeline, a 460-mile pipeline project from Dore, ND, to Guernsey, WY., which is slated to be online by January of 2015.

Read more:No Need for Keystone XL - Continental's CEO Harold Hamm

Political Sway for the Keystone XL Pipeline

Senator John Hoeven (R-ND) is the Senate bill's chief sponsor. Hoeven has pushed for the pipeline for several years, and touts its benefits (i.e. an increase in jobs, energy security and a decrease in crude by rail transport).

The Keystone XL pipeline is about energy, jobs, helping to grow our economy and increasing national security by increasing energy security,” Hoeven said in a prepared statement.

Keystone Pipeline Could Alleviate Rail Congestion from Bakken Crude

Currently, just under 70% of all the oil produced in North Dakota, where much of the Bakken's development is concentrated, is transported out of the state by rail, ultimately making its way for now to refining markets, primarily on the East and West Coasts. The Keystone XL Pipeline could alleviate some of the rail congestion being caused by the transport of oil, which would free up the rail service in North Dakota and across the midwest for the transport of other goods, primarily agricultural.