While focused in cutting costs, Continental Resources Inc.’s daily oil production surpassed 100,000 barrels a day for the first time in June, the company said July 26.
“We passed the 100,000 barrels of oil equivalent per day milestone in June,” said Harold Hamm, chairman and chief executive officer, in a prepared statement. “We’re hitting on all cylinders, with drilling cycle times continuing to be very favorable.”
On Aug. 8, the Oklahoma City-based company expects to report record total production of 94,852 bpd of oil equivalent per day for the second quarter, which ended June 30, reflecting a 76 percent increase over production of 53,984 bpd of oil equivalent for the second quarter of 2011, and an 11 percent increase over production of 85,526 barrels in the first quarter of this year.
Crude oil represented 68.8 percent of Continental’s second quarter production, the company said.
During the quarter production exceeded sales by 147,000 barrels of oil, as a result of Continental putting almost 150,000 barrels of oil in storage during the second quarter in anticipation of higher prices.
Hamm has said he expects oil to settle at about $100 a barrel.
In the second quarter, the company anticipates reporting an average realized oil price of $80.56 a barrel and an average realized natural gas price of $3.51 per thousand cubic feet, yielding an average realized price of $61.69 per barrel of oil equivalent.
2012 oil price differential expected to be $11-13
Continental’s oil price differential was $12.63 per barrel for the quarter. June’s differential was $9.37 per barrel, versus April’s differential of $18.36 per barrel. The company now expects its 2012 oil differential to be in a range of $11 to $13 per barrel for the year as a whole.
The company’s natural gas price differential for second quarter 2012 was a premium of $1.29 per mcf, reflecting the high liquids content of its natural gas. Guidance for the year is a premium ranging from $1 to $1.50 per mcf.
Focus on cutting transportation, well costs
Continental’s focus, Hamm said, is to cut drilling, completion and transportation costs. Previous cost-cutting efforts have not met the company’s expectations, so it is instituting a more in-depth program, which has included idling its least efficient rigs and completion crews to improve cost performance.
“We’re clearly ahead of plan on production growth,” Hamm said. “Our focus now is on driving down drilling and completion costs and reducing oil transportation costs.”
Proved reserves increase to 610 million boe
Continental said its proved reserves have increased 20 percent, from to 508 million barrels of oil equivalent at year-end 2011, to 610 million boe at the end of second quarter.
“The increase in the first half of 2012 resulted from extensive drilling activity in the Bakken play of North Dakota and Montana and the Anadarko Woodford play in Oklahoma,” the company said.
In terms of Continental-operated wells, the company completed 64 gross (43 net) wells in the Bakken in the second quarter of 2012, with 58 gross (38 net) wells in North Dakota and 6 gross (5 net) wells in Montana.
Continental said it continues to realize strong initial per-well production rates in the Bakken, “in line with expectations.”
Initial one-day test results for the company’s top five wells in North Dakota in second quarter 2012 ranged from 2,521 gross bpd of oil equivalent to 1,402 barrels.
Anadarko Woodford well results
In terms of Continental-operated wells, the company completed 20 gross (17 net) wells in the Woodford play in the second quarter.
Initial production rates for the company’s top five Anadarko Woodford wells in the quarter ranged from 1,228 bpd of oil equivalent (21 percent oil) to 857 bpd of oil equivalent (13 percent oil), “in line with expectations.”
During the second quarter, Continental also completed its second long-lateral Anadarko Woodford well, the Shorty’s Place 1-2XH (75 percent WI) in Blaine County. The well flowed 678 bpd of oil equivalent (62 percent oil) in its initial one day test.
Earnings, capital expenditures
Continental said it expects to report “a $7.1 million realized loss on derivatives and a $479 million unrealized mark-to-market gain on derivatives” for the second quarter.
The company expects to report capital expenditures, excluding acquisitions, of $827 million for the quarter.
Continental said it is evaluating its capital expenditures budget for the second half of the year. Key considerations include improved drilling cycle times, higher oil prices since mid-June, and higher average working interests in operated and non-operated wells, “as a result of acquisitions and accretion of tangential interests.”
Also leading presence in Red River
Continental Resources is a top 10 petroleum liquids producer in the U.S. and the largest leaseholder in the Bakken play of North Dakota and Montana. The company also has a leading presence in the Anadarko Woodford Play of Oklahoma and the Red River units play of North Dakota, South Dakota and Montana.
Founded in 1967, Continental’s growth strategy has focused on crude oil since the 1980s. The company reported total revenues of $1.6 billion for 2011 and said it is ahead of plan to triple production and proved reserves from 2009 to 2014.
—Petroleum News Bakken
