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Bakken Crude Trading At $41.75/Bbl Is Continental Resources' Quandary
- Realized wellhead prices for Bakken crude were recently trading at a $16 discount (27%) to WTI.
- The NDIC's latest report showed Bakken November production dropped month-over-month.
- Lower prices, rail transportation costs, new flaring and stabilization regulations are all negatively affecting Bakken producers.
- As a result, it appears much of Continental Resources' (unhedged) production is unprofitable at the current price.
- Should CLR keep growing production, or stop drilling and completions until the price rises?
Continental Resources Cannot Grow At 25% With Oil At $65
- Richard Zeits leaves unanswered his own question of whether Continental can grow 25% with oil at $65.
- Simply presenting company data without doing a cash flow analysis is not enough to prove a thesis.
- If the premise is to maintain current production levels by being cash-flow neutral Continental fails to do so at $65 oil.
- Continental’s current 2015 budget implies 23%-29% year-on-year production growth.
- The company has sufficient drilling inventory that remains economic even at $65 per barrel.
- Assuming no change in the price of oil, credit considerations will likely cause spending reductions throughout the year.
- However, even assuming significant budget cuts, the company’s production will still likely grow in 2015.
- The recent decline in WTI price does not align with global GDP growth, creating an opportunity for investors with a long term view.
- Continental Resources recently closed out futures contracts and realized a profit of $433 million dollars, effectively making a strong bet on a recovery in the price of oil.
- Continental Resources stock has dropped over 30% since June while the company is seeing greater than 25% production growth.
- China, India and the US will continue to increase demand for oil heading into 2015 and beyond.
Continental Resources: More Big Wells And 9 Rigs Running In The Springer Shale
- Continental emphasizes shallow declines observed in its Springer early production data.
- Given high oil yields (70% of current production) and prolific wells, the Springer may beat other formations in the stack in terms of drilling economics.
- Expect quick delineation as the Springer is mapped out and held by production by existing Woodford wells.
Continental Resources' Recent Share Price Dip Creates A Buying Opportunity
- Continental Resources’ share price has fallen due to the company’s announcement of an increase in drilling costs.
- Continental’s unrisked resource potential in the Bakken region is approximately 4.1 billion BOE (barrels of oil equivalent) in addition to the company’s proved developed reserves of 240 million BOE.
- The company has announced a new oil discovery, the Springer Shale, in the heart of the SCOOP region.
- The CEO of Continental Resources bought 72,000 of the company’s shares for a total of more than $4.85 million.
Continental Resources: Why Is The Stock Down After An Impressive Analyst Day?
- Continental’s Analyst Day vividly demonstrated that the company’s opportunity set is vast and growing, even in the context of the stock’s large market capitalization.
- Results of the company’s density pilots and lower Three Forks evaluation bring a sense of reality with regard to what is technically possible.
- Continued density and completion optimization may redefine drilling returns in the Bakken.
Continental Resources: Sell-On-The-News Or Buy-On-The-Dip?
- The shares of Continental Resources slumped last week.
- The company announced an uptake in drilling costs, cut the top end of its production guidance.
- The increase in its core Bakken reserve base was also not that great.
- That said, Continental Resources is not the same E&P company as two years ago.
The Fall On The COO Leaving Has Created A Buying Opportunity For Continental Resources
- CLR's President and COO Rick Bott abruptly decided to leave.
- Oil prices have been going downward for the last month or more.
- With oil prices seemingly stabilizing, now may be a good time to buy CLR, which has been a blue chip in unconventional oil & gas E&Ps.
Continental Natural Resources - Unexpected Cost Increase Triggers Anxiety Among Investors
- Investors in Continental finally witness a meaningful correction following multi-year momentum.
- A recent correction in oil prices, higher well costs and management turnover results in some uncertainty with investors.
- I like the long term prospects, but remain cautious at the moment.
Continental Resources: The Big Promise Of The Anadarko Basin
- Continental substantially increased resource estimates for its Anadarko Basin asset.
- The announcement of the Springer Shale discovery is important, given that the play will add to the “core of the core” drilling inventory.
- The positive read-across is to Newfield, Cimarex, Marathon and Devon.
- The company has been pursuing a disciplined growth strategy aimed at tripling the production and reserves.
- To do so, Continental Resources has been focusing on two leading oil weighted plays: Bakken Field and SCOOP.
- The company has allocated $4 billion of the capital spending budget to carry on with the enhanced completion program.
- The company was also able to increase the proved reserves by approximately 31 percent which signifies the company’s potential to secure higher production for years to come.
Continental Resources Is Set To Take Back Its Crown And To Double Its Reserves
- Continental Resources was recently supplanted as the biggest oil producer in the Bakken by the combination of KOG and WLL.
- CLR is growing faster than the combined companies of KOG and WLL by drilling alone. Plus, it is already the bigger overall producer, including other areas such as the SCOOP.
- In addition, CLR is testing new well density drilling strategies and new well completion techniques that will lead to much more production and proved reserves.
- Read the article for more details. They make CLR look like a huge buy.
Continental Resources' Catalyst: Continued Production Growth
- Shares of CLR have struggled due to declining oil prices globally.
- CLR's 2nd quarter was decent.
- The main catalyst for CLR at this point is continued strong performance.
- However, higher oil prices or a lifting of the export ban could send shares higher quickly.
Continental Resources Has Additional Near-Term Upside
- CLR is up 38% year-to-date, and roughly the same since I recommended them in November 2013.
- Higher WTI looks like the next positive catalyst.
- Shares are getting expensive, but the firm's fair value should grow considerably.
- I'm holding the stock right now, but I'm struggling to find better opportunities.
Continental Resources - Impressive Growth Prospects, Yet Limited Short-Term Appeal After Strong Momentum
- CEO Hamm continues to deliver impressive results.
- Production and reserves are expected to triple in just three years.
- Yet after significant momentum, I will only buy on significant dips.
Continental Resources: Leading Energy Stocks To Replace Biotech This Year
- Continental Resources is the #1 leaseholder in the Bakken region, which is at the forefront of America's domestic oil boom.
- Under the leadership of billionaire oil magnate Harold Hamm, the company is well-positioned for growth.
- Energy stocks are being rewarded by the market in 2014, and are fast becoming last year's biotech sector.
Bakken Producers Like Continental And Whiting Are Finding Profits By Going 'Green'
- Bakken producers have been flaring natural gas for many years. Many are now moving to be "greener".
- Whiting and Continental both say they are committed to zero flaring.
- Both Continental and Whiting are seeing increased profits from the now captured natural gas; and this trend should continue.
Wed, Nov. 5, 5:28 PM
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Tue, Oct. 28, 11:32 AM
- U.S. energy company CEOs remain confident they can still make money in a world of $80 crude oil prices, according to a Bloomberg report.
- The industry is used to price swings, Halliburton (NYSE:HAL) CEO David Lesar tells Bloomberg; if crude floats at $80-$100, "that’s a range that the service industry and our customers can easily live within."
- “We think there’s a lot of economic oil at $75... meaning we earn 15%, 16%, 17% returns,” Occidental (NYSE:OXY) CEO Stephen Chazen said during OXY's earnings conference call last week.
- Harold Hamm of Continental Resources (NYSE:CLR) even says prices could fall to $50/bbl before he would start worrying, and tells CNBC that his company has not yet altered any drilling schedules in response to the drop in crude prices.
- Some of the best operators can profit at low prices because they’re learning how to drill wells more efficiently and getting more production at lower costs; SM Energy (NYSE:SM) is getting 40% more production for a 10% increase in the cost of each well, and Carrizo Oil & Gas (NASDAQ:CRZO) has nearly doubled its cash flow/bbl from two years ago.
Mon, Oct. 27, 7:42 AM
- Continental Resources (NYSE:CLR) agrees to sell 49.9% of its 44K-acre stake, including interests in 37 producing wells, in its Northwest Cana Woodford natural gas assets in Oklahoma to South Korea’s SK E&S for ~$360M as part of a new joint venture.
- CLR receives $90M at closing, and SK agrees to pay an additional $270M to carry 50% of CLR's remaining share of future drilling and completion costs.
- CLR anticipates no change in its 2014 and 2015 capex, its production mix of crude oil and natural gas, or its overall production targets as a result of the deal.
Thu, Oct. 16, 7:05 PM
- U.S. shale companies likely will cut back their capital spending plans as a result of the steep fall in oil prices, but are much better placed to withstand a downturn than they would have been two years ago, Continental Resources (NYSE:CLR) CEO Harold Hamm tells the Financial Times.
- Like many shale producers, CLR is still spending more than its operating cash flow on drilling rigs and other capex, and Hamm thinks many companies will want to bring their spending into line with their income in a down market for oil prices.
- But Hamm does not expect a disaster in the industry, since E&P companies are no longer constrained by “hold by production” leases; in previous years, falling oil price would have forced the companies to choose between drilling uneconomic wells and losing all their assets, but CLR has drilled on ~95% of its Bakken leases and other companies operating elsewhere are in a similar position.
Mon, Oct. 13, 5:57 PM
- Bakken shale oil producers are under pressure to scale back their 2015 drilling plans after Bakken oil fell below $80/bbl for the first time in nearly a year, as worldwide crude prices decline amid ample North American supplies and Persian Gulf producers signaling they’re prepared to keep output high to protect their market shares in Asia.
- The "body language" among producers is that capex next year will be flat or only slightly higher, vs. earlier expectations for 5%-10% increases, says Topeka Capital's Gabriele Sorbara, who adds Bakken drillers need prices of $70-$80/bbl to earn a typical 15%-25% return.
- Bakken wells produced a record 1.047M barrels of crude in July, accounting for 12% of total U.S. output: CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Wed, Sep. 24, 6:42 PM
- Continental Resources (NYSE:CLR) appears to be rewriting history, according to a Reuters report, diminishing the company’s accomplishments under the leadership of CEO and founder Harold Hamm and even changing the dates of key achievements, as part of a legal strategy that is central to Hamm’s chances of minimizing the financial blow from his divorce.
- Attorneys following the nasty divorce say a judgement could award the ex-wife ~$3B, but if Hamm can show that market conditions rather than his management prowess led to CLR's financial success, he would not have to share those gains with his estranged wife.
- One corporate governance specialist quoted in the report said numerous website revisions this year - at least 18 separate items that apparently had been recently deleted, added or revised - raise questions about CLR’s board of directors, chaired by Hamm.
Fri, Sep. 19, 2:49 PM
- Continental Resources (CLR -1.6%) is not enjoying a rebound from yesterday's big losses, even after various analysts come out in defense.
- BofA reiterates its Buy rating, and says the selloff is not justified by any of the updated disclosure provided by management; the firm believes CLR is poised for a multi-year period of appreciation and outperformance vs. large-cap U.S. oil peers, and it likes CLR's new oil play in Oklahoma, a state CLR thinks is poised to surpass California and Alaska in oil production.
- Global Hunter upgrades shares to Buy from Neutral and raises its target to $85 from $77, unmoved by investor concerns pertaining to the quality of the Bakken inventory and rising Bakken well costs (Briefing.com).
Thu, Sep. 18, 3:59 PM
- Continental Resources (CLR -7.7%) nears its lows of the day following late yesterday's disclosure that it plans to spend $500M more this year than initially forecast, mostly due to expensive well techniques in North Dakota's Bakken shale formation and a new project in Oklahoma.
- The new projections, unveiled before today's analyst meeting, show plans to spend $4.55B this year, up from a previous forecast of $4.05B, raising CLR's cost per well to $10M, ~$2.5M/well higher than levels at the end of last year and a stark contrast to the trend across most U.S. shale plays to lower costs.
- For 2015, CLR sees even higher total capex of $5.2B.
Wed, Sep. 17, 6:12 PM
- Continental Resources (NYSE:CLR) appoints Jack Start as President and COO, less than a week after Rick Bott quit the position.
- Stark joined CLR in 1992 and has served as senior VP of exploration since 1998.
- The promotion likely makes Stark the top contender to eventually replace founder and CEO Harold Hamm.
- CLR also issues 2014-15 guidance, projecting Y/Y production growth of 26%-32% over 2014 growth of 27%-30%, and higher drilling and completion capex for H2 2014 for full-year estimates of $4.55B in 2014 and $5.2B in 2015.
Mon, Sep. 15, 2:57 PM
- Canaccord initiates coverage of two top Bakken shale producers, Continental Resources (CLR +1%) and Whiting Petroleum (WLL +0.5%), with Buy ratings and respective price targets of $92 and $108 (I, II).
- CLR is the largest leaseholder in the Williston Basin and is an industry leader in downspace and enhanced completions testing in the play, and additional upside could come from the development of the SCOOP in Oklahoma, where CLR also is the largest leaseholder and producer.
- WLL trades at a discount to peers that Canaccord considers unwarranted; the firm sees substantial upside given WLL's ~845K net acres in the core Williston Basin, which can be further exploited via downspacing and enhanced completion techniques.
Mon, Sep. 15, 11:58 AM
- North Dakota's daily oil production jumped 5% in July to an all-time high 34.4M barrels (~1.1M bbl/day), state regulators say, although the number was lower than expected as producers worked to meet aggressive flaring-reduction targets.
- Natural gas production hit 1.3B cf/day, also an all-time high, but the percentage of natural gas flared in the state fell to 26% in July from 30% in June.
- In an effort to curb flaring, state regulators issued strict goals earlier this year with key benchmarks for flaring percentages each month; for October, for instance, the state's oil producers cannot flare more than 74% of natural gas produced.
- Bakken producers include CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Thu, Sep. 11, 5:01 PM
- Continental Resources (NYSE:CLR) -1.4% AH after announcing the resignation of President and COO Rick Bott to pursue other opportunities.
- Bott was widely seen as the eventual successor to company founder Harold Hamm as CEO.
- In its statement, CLR went on to say it is ahead of its five-year plan to triple production and proved reserves from 2012-17 and maintains its leadership position as the largest oil producer in the Rockies, the Bakken and the SCOOP play.
Mon, Aug. 18, 5:23 PM
Wed, Aug. 6, 10:27 AM
- Continental Resources (CLR -1.5%) opens lower after Q2 earnings fell nearly 68% Y/Y and failed to meet expectations, as higher operating costs masked higher revenues and oil production.
- Q2 net production totaled 15.3M boe, or nearly 168K boe/day, up 10% Q/Q and up 24% Y/Y; 69% of production was oil vs. 31% natural gas.
- CLR's average realized sale price in Q2, excluding the effects of derivative positions, came to $92.31/bbl of oil, or $10.69 below the Nymex daily average for the quarter and above the $87.22 earned in the year-ago period.
- Says it expects oil inventories will increase in H2, which could result in reduced sales volumes in Q3 and Q4 by an aggregate total of ~500K net barrels, but the impact may be partially offset by sales of previously stored production throughout the company's facilities in the Bakken.
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