Continental Resources overcame weather delays to establish both reserve and production records in 2013, while staying firmly on course to fulfill a longer-term goal of tripling output over five years.
It was a year highlighted by technical, far-reaching achievements, including delineation of the lower Three Forks benches of the Bakken petroleum system and southern portions of another prolific shale play, the so-called South Central Oklahoma Oil Province, or SCOOP.
Continental said it also took a big step in improving efficiencies, while managing to reduce drilling and completion costs.
“In spite of abnormal winter weather … that delayed some completions and deliveries, we achieved our 2013 targets,” Harold Hamm, Continental’s chairman and chief executive officer, said in a statement.
Moreover, the company’s annual guidance remains intact for strong growth in 2014, with production expected to increase in a range of 26-to 32 percent, he said.
Output tops 49 million boe in 2013
Estimated total production was 49.6 million barrels of oil equivalent, or 135,890 boe per day, for full-year 2013, a whopping 39 percent increase compared to 2012, the company reported. Crude oil accounted for 71 percent of total production, or 35 million barrels, in 2013. Estimated natural gas production for the year was 87.7 billion cubic feet.
Production totaled 13.3 million boe in the fourth quarter of 2013, for an average of 144,250 boe per day, representing just a 2 percent increase over the previous quarter due to delays, but a hefty 35 percent increase over the same period in 2012.
However, Continental had reached a new production milestone of 150,000 boe per day during November, prior to experiencing the winter weather delays. But the company said it recently regained the 150,000 boe per day level.
“Weather affected the fourth quarter, but the timing of production gains also reflects our continued shift to large, multi-well drilling pads,” said W.F. “Rick” Bott, Continental’s president and chief operating officer. This is a key driver of future efficiency gains and production growth.”
“Such strong execution continues to underpin our confidence in achieving Continental’s five-year plan to triple production and proved reserves,” he added.
Proved reserves jump 38 percent
Continental also had huge gains in proved reserves during 2013, reflecting the significant production growth in the Bakken play of North Dakota and Montana. The company reported proved reserves of 1.08 billion boe at Dec. 31, an increase of 299 million boe or 38 percent compared with year-end 2012. Year-end 2013 proved reserves were 87 percent operated by the company, 37 percent proved developed producing, PDP, and 68 percent crude oil. The company noted that it has grown its proved reserves at a compound annual growth rate of 47 percent since year-end 2008.
In 2013, Continental’s PDP reserves for the first time exceeded 400 million boe, increasing 31 percent from year-end 2012 to 405 million at Dec. 31. The company had 2,330 gross (1,302 net) proved undeveloped, PUD, locations at the end of 2013. The Bakken accounted for 84 percent of PUD locations at year-end, the company said.
Continental’s year-end 2013 proved reserves had a net present value discounted at 10 percent (PV-10) of $20.2 billion, a 52 percent increase over the PV-10 of $13.3 billion for year-end 2012 proved reserves.
Bakken contributes 741 million boe
The Bakken petroleum system, which includes the Three Forks formation, accounted for 741 million boe or about 70 percent of 2013 proved reserves, with a PV-10 value of $14.5 billion. Continental pioneered development of the upper Three Forks in 2008, and during the past year played a leading role with down-space testing of wells across the Williston Basin. Last October the company successfully completed the first of four pilot density projects it had under way. The Hawkinson project became industry’s first such program in the Williston Basin to include all of the lower benches of the Three Forks. Results from the Tangsrud, Rollefstad and Wahpeton density projects are expected during the first half of 2014.
Continental’s 2013 proved reserves were also augmented by accelerated production in the SCOOP, an unconventional oil- and liquids-rich play in Oklahoma. SCOOP accounted for 215 million boe of 2013 proved reserves, a 241 percent increase over proved reserves of 63 million boe at year-end 2012. The PV-10 value of the company’s SCOOP proved reserves was $3.3 billion as of Dec. 31.
“We ramped up our SCOOP rig count early in 2013 and delivered strong results in a capital-efficient manner within our budget for the year,” Bott said.
Continental holds the dominant leasehold positions in the Bakken and SCOOP, with 1.2 million net acres in the Bakken and 403,000 net acres in SCOOP at year-end. The company also said it has the industry’s most active drilling program in each play.
Capex just under $3.6 billion
Capital expenditures excluding acquisitions for 2013 were just under the budget of $3.6 billion, which included $3.1 billion for drilling and completion operations. Acquisitions last year amounted to $270 million.
Continental said it began 2014 with an inventory of more than 100 gross wells that have been drilled, but are not yet producing, almost all of which are associated with multi-well pads. In November, the company expected to complete about 282 (761 gross) wells in the Bakken in 2013, including both operated and non-operated wells. Continental also estimated its operated rig activity would average 20 rigs through the balance of 2013, down from 22 rigs as earlier expected due to “realized efficiencies.”
More details are expected when Continental releases its fourth quarter and full-year 2013 earnings report on Feb. 26.
Fourth-quarter 2013 oil price differential (discount to WTI crude and inclusive of all transportation) is expected to be about $13 per barrel, about twice as high as the average for the first nine months of the year. Full-year 2013 differential is expected to be roughly $8.25 per barrel, compared with annual guidance range of $6 o $8 per barrel.
Lower volumes due to winter weather delays and the company’s mix of wells in the fourth quarter also affected production expense per boe and depreciation, depletion and amortization per boe, the company said.
