Continental Resources expects production growth of 19% to 23% in 2015
Continental Resources, one of America’s largest independent oil and gas producers, is slashing its 2015 budget to “better align spending with cash flow” as oil prices hover in the mid-$40s range.
Continental Resources, Inc. (NYSE: CLR) announced Tuesday that it plans to defer well completion activity, except where it has contractual considerations or it accomplishes “specific strategic objectives,” the company said in a press release.
Continental Resources is also reducing its operated rig count in the Bakken from 10 to eight rigs by the end of the month.
“While we do not believe today’s low commodity prices are sustainable long term, we are committed to living within cash flow until they recover,” said CEO Harold Hamm.
“We are reducing capital expenditures to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve.”
Hamm says 2015 guidance remains unchanged.
Continental Resources continues to expect production growth of 19 per cent to 23 per cent for the year, compared with 2014, but now expects to exit the year with production in a range of approximately 200,000 to 215,000 barrels of oil equivalent (Boe) per day.
The bottom end of the range is 10,000 Boe per day below its previously stated outlook, reflecting an increase of inventory from the previously expected 100 gross operated wells that are drilled but not yet completed at year-end 2015 to the current estimate of 160 gross wells drilled but not yet completed at year-end 2015.
Maintenance capital to maintain 2016 production at the 2015 exit rate is now projected to be $1.6 to $2 billion, according to the release.
In its Aug. 5 earnings press release and on its Aug. 6 earnings conference call, Continental Resources noted actual capital spending was trending below its $2.7 billion non-acquisition capital expenditures budget and indicated that if weak oil prices persisted management would take additional measures to balance capital expenditures with reduced cash flow.
“We continue to focus on achieving cash flow neutrality in the current environment,” said CFO John Hart.
“We believe it is in the interest of shareholders to defer new production growth until we see stronger commodity prices. We can achieve this objective due to our focus on costs, operating efficiencies and having a large portion of our high-potential leasehold already held by production.”
Hart says that production expense per boe and general and administrative expense per boe are also trending positively toward the low end of guidance and noted that lower capex spending and excellent operating performance should position Continental Resources to be cash flow neutral for the remainder of 2015 in an environment of approximately $50 per barrel for West Texas Intermediate.
In a $40 per barrel WTI environment, updated spending outlook would result in capital expenditures being approximately $150 million over cash flow, according to Hart.
Continental Resources continues to have ample liquidity with approximately $1.3 billion available under its credit facility, basically in line with the June 30 balance.
“We are pleased with our results year-to-date, and operating performance versus guidance remains strong, especially in terms of production growth and cost controls. Annual production growth is expected to be toward the top end of our guidance range, even with deferred completions,” said Hart.
“Obviously we are in a dynamic environment, and our outlook could change. We will continue reviewing our spending plans and update our outlook as appropriate.”
Oklahoma City-based Continental Resources (NYSE: CLR) is a top independent oil producer in the lower 48 United States and the largest leaseholder and one of the largest producers in the nation’s premier oil field, the Bakken play of North Dakota and Montana.Continental Resources also has significant positions in Oklahoma, including the SCOOP Woodford and SCOOP Springer discoveries and the STACK and Northwest Cana plays.