Bakken pioneer Continental Resources Inc. saw its year-end 2012 proved reserves across all of its properties jump 54 percent to 785 million barrels of oil equivalent. Likewise, total annual production rocketed 58 percent from 2011 levels to 35.7 million boe.
However, of the 785 million boe in total year-end proved reserves, nearly three-quarters or 564 million boe are situated in the Bakken petroleum system. And that’s almost double the proved reserves in the play at the end of 2011, the company reported.
“We continue to increase our concentration in high-value, high-growth, crude oil assets, especially in the Bakken,” said Harold Hamm, Continental’s chairman and chief executive officer.
Oklahoma-based Continental is the largest producer and leaseholder in the Bakken petroleum system of North Dakota and Montana, with roughly 1.1 million net acres.
With the 2012 increase in proved reserves, Continental has now grown its overall proved reserves at a staggering compound annual growth rate of 45 percent since year-end 2009.
Reserves valued at $13.3 billion
The company said its 2012 proved reserves had a net present value of $13.3 billion, a 45 percent increase over $9.2 billion for proved reserves at year-end 2011. Its Bakken proved reserves alone were valued at $9.9 billion at year-end 2012.
Last year’s growth in proved reserves was primarily reflected by the strong production growth in the Bakken, which Continental believes is the nation’s premier oil play.
“We are growing the value of our Bakken assets through strategic acquisitions, exploration, and the expanded use of pad drilling, which should improve efficiencies and translate into even better rates of return,” Hamm said.
Quarterly output up 42 percent
Continental’s estimated fourth-quarter 2012 production was 9.8 million boe, or 106,831 boe per day, a 42 percent increase over fourth-quarter production for 2011. The Bakken represented over 60 percent of Continental’s production at the end of last year’s third quarter, according to the company’s website. A more current breakdown was not available.
Based on continued production growth, as well as an acquisition and a divestiture announced last December, Continental’s current production is about 116,000 boe per day, the company said.
Continental noted that it also has accelerated production growth in its South Central Oklahoma Oil Province, SCOOP, an oil-and liquids-rich play in Oklahoma, with 2012 proved reserves of 63 million boe valued at $955 million. Meanwhile, proved reserves at the company’s Red River Units, valued at $2 billion, increased in the past year to 78 million boe.
PDP make up 39 percent of reserves
Overall, 39 percent of Continental’s total 2012 proved reserves, or 309 million boe, were proved developed producing, PDP, compared with 40 percent of year-end 2011 proved reserves.
Crude oil reserves represented 72 percent of 2012 total proved reserves, a significant increase over year-end 2011, when crude oil accounted for 64 percent of the company’s 508 million boe in proved reserves. The higher percentage of crude oil proved reserves in 2012 was accomplished despite two crude-oil concentrated divestitures, the company said.
Continental said it currently operates 85 percent of its total proved reserves, compared with 86 percent at year-end 2011.
Through acquisitions and leasing, Continental said it increased its Bakken leasehold by 24 percent in the past year, from 915,863 net acres at year-end 2011 to 1,139,799 net acres at year-end 2012.
The company said it also is leveraging the increased demand for high-quality Bakken crude oil at U.S. refineries.
“We have more than adequate pipe and rail capacity out of the basin at this time, so we can move our production to the most advantageous markets,” Hamm said. “Realizing the Bakken’s full potential is essential to our five-year plan to triple production and proved reserves by year-end 2017, while increasing operating margins.”
The company said it deferred some fourth-quarter well completions to stay within its capital expenditure budget for 2012. Fourth quarter 2012 was the 19th consecutive quarter in which Continental has increased production compared with the immediately previous quarter.
The primary growth drivers
Exploration and development activity was the primary driver in the company’s 2012 proved reserves growth, adding 234 million boe of proved reserves during the year, of which 27 percent were PDP and the remainder PUDs, proved undeveloped reserves.
Also notable was the fact that Continental, for the first time, booked proved reserves in lower benches of the Three Forks, with the recognition of three PDPs and 11 PUDs in 2012. The company has now completed two wells in the Three Forks second bench and one well in the third bench. Traditionally operators in the play targeted the Middle Bakken zone above the Three Forks and only the first bench of the Three Forks zone.
Continental has two major exploration-appraisal programs planned for 2013. It’s testing productivity of the lower Three Forks benches with a 14-well program at locations across the play. In addition, the company has initiated the first of four increased density pilot programs that will involve multiple wells in the Middle Bakken and the first three benches of the Three Forks zone, to test the appropriate density for full development. Successful results from these programs would prove commercial productivity and could significantly impact future reserve bookings, the company said.
Reporting lower-bench output
Continental said it expects to begin reporting results from new lower-bench productivity tests quarterly over the next 12-to-18 months.
“(Last year) was a good year for Continental. We completed the move of our headquarters to Oklahoma City, and we increased our focus by selling mature properties and redeploying capital to higher growth-rate assets,” said Rick Bott, Continental’s president and chief operating officer.
“We have expanded our land position, increased production, increased proved reserves, embarked on an ambitious exploration-appraisal program, retooled our marketing efforts, secured capital to fund our ongoing growth, and continued to build our leadership and technical staff.”
He added: “As we begin 2013, we see multiple catalysts and opportunities to enhance the value of our operations, particularly with these lower Three Forks programs and further delineation of our SCOOP acreage.”
