Drilling / Well Results | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Drilling Activity | Drilling Program-Rig Count

Continental Reduces Rig Count, Bulk in STACK/SCOOP; Oil Production Up

Email    |    Print    |    Bookmark

You Need to login first

   |    Wednesday,November 06,2019

Continental Resources Inc. reported its Q3 2019 results. Below are the highlights from its report and call.

• Oil production in the South is up 62% year-over-year, driven by the quality of our wells and Project SpringBoard and the two new oil units we brought online in the STACK. 

• Staying within budget : 4Q capex should be $550 million

• Reduced Rig Count from 18, (6 in bakken, 12 in STACK/SCOOP, which formerly had 19 rigs running)

• Key Wells : 4,92 Boe/d Initial Rates from STACK overpressured.

Current Rig Count

 Continental will continue to be capital-disciplined and we are committed to our CapEx target for the year. We're down now to 18 rigs with six rigs in the Bakken and 12 here in Oklahoma delivering the same well counts bested for 2019 with 10% pure rigs on average.

Bakken Asset : 806,000 net acres, 3800 locations

And during the quarter, we added approximately 10,000 net acres through strategic leasing bolt-on acquisitions and trade.

Well Performance (30-Day Ips increasing)

In our Northern region, we completed 57 gross operated Bakken wells with an average IP of 2,313 BOE per day. These results should sound familiar. And today, I want to highlight, the consistent well performance we're getting from our Bakken assets.

Oklahoma Asset

• Wells  online : We turned a total of 80 gross operated wells to production. 63 of the wells were at SCOOP and 17 were in STACK.

• Production  : Production averaged a record 133,266 BOE per day, up 11% year-over-year. Oil production was up an impressive 62% year-over-year. One of the key drivers for this magnitude of our oil growth was our SpringBoard project in SCOOP.

I'm also pleased to report that the average performance of all 52 Springer producers are in line with the 1.3 million BOE blended-type curve that was announced during our January SpringBoard Conference Call and shown on slide 8. The team's projected performance for the Springer was spot on. Springer also has 30 -- SpringBoard also has 32 Woodford wells producing at the end of the third quarter. Slide eight shows that the average Woodford well is trending nicely with the legacy Woodford oil-type curve early time.

STACK :

To the North in STACK, we burrowed one of the most impressive unit development projects in the company's history. The Reba Jo and Schulte units were developed within the STACK overpressured oil window and consist of 14 total wells and two separate benches within the Meramec reservoir. Combined the 14 wells delivered an impressive 38,320 barrels of oil per day and 113.8 million cubic feet per day initial rate. This equals 57,292 BOE per day or on average 4,092 BOE per day per well with 67% of the production being oil.

Drilling & Completion Effeciency

As Harold mentioned earlier, our drilling efficiencies have allowed us to reduce our rig count in Oklahoma from 19 to 12 rigs, while still achieving our corporate objectives. The completion teams continued to outperform as they completed over 530,000 lateral feet within a single quarter all while averaging a 40% increase in stimulation stages per day.

Scroll down for the rest of Continental's Q3 press release.

Q3 Financials

The Company reported net income of $158.2 million, or $0.43 per diluted share, for the quarter ended September 30, 2019. The Company's net income includes certain items typically excluded by the investment community in published estimates, the result of which is referred to as "adjusted net income." In third quarter 2019, these typically excluded items in aggregate represented $41.2 million, or $0.11 per diluted share, of Continental's reported net income. Adjusted net income for third quarter 2019 was $199.4 million, or $0.54 per diluted share (non-GAAP). Net cash provided by operating activities for third quarter 2019 was $807.0 million and EBITDAX was $828.7 million (non-GAAP).

Adjusted net income, adjusted net income per share, EBITDAX, net debt, net sales prices and cash general and administrative (G&A) expenses per barrel of oil equivalent (Boe) presented herein are non-GAAP financial measures. Definitions and explanations for how these measures relate to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures are provided at the conclusion of this press release.

"Continental teams continue to operate at a high performance level across the Bakken and Oklahoma. With an oil-weighted portfolio, investment grade level debt and a total shareholder return strategy, no other E&P company is more aligned with shareholders," said Harold Hamm, Chairman and Chief Executive Officer.

Production Update: 3Q19 Average Daily Oil Production up 20% over 3Q18   

Third quarter 2019 oil production increased 20% over third quarter 2018, averaging 198,074 barrels of oil per day (Bopd). Third quarter 2019 total production increased 12% over third quarter 2018, averaging 332,315 Boe per day (Boepd). Third quarter 2019 natural gas production increased 1% over third quarter 2018, averaging 805.4 million cubic feet per day (MMcfpd). The following table provides the Company's average daily production by region for the periods presented.

"Approximately 50% of Continental's third quarter oil production growth, year-over-year, came from our Oklahoma assets," said Jack Stark, President. "This growth was driven by the outstanding results being realized from our ongoing development of SCOOP SpringBoard and STACK."

Bakken: 145,436 Average Daily 3Q19 Oil Production up 13% over 3Q18

In third quarter 2019, average daily Bakken oil production increased 13% over third quarter 2018, averaging 145,436 Bopd. The Company's third quarter 2019 total Bakken production increased 14% over third quarter 2018, averaging 191,268 Boepd. During the quarter, the Company completed 57 gross (37 net) operated wells with first production flowing at an average initial 24-hour rate per well of 2,313 Boepd.

The Company moved into manufacturing mode in the Bakken in 2017. Since then, the Company has focused almost exclusively on the multi-zone unit development of the Middle Bakken, Three Forks 1 and Three Forks 2 reservoirs. During this time, the Company has completed 440 gross operated unit wells with an average initial 24-hour rate per well of approximately 2,300 Boepd, with an average 80% oil. Both the 2017 and 2018 Bakken programs have paid out in approximately one year.

"We are more than two years into manufacturing mode and our Bakken assets are delivering remarkably consistent results with some of the best returns in the industry," said Jack Stark, President. "These results provide a great snapshot of the quality of our Bakken assets and reinforce the confidence we have in the Bakken as a key driver of Continental's growth for years to come."   

South: 44,854 Average Daily 3Q19 Oil Production up 62% over 3Q18  

In third quarter 2019, average daily South oil production increased 62% over third quarter 2018, averaging 44,854 Bopd. The Company's third quarter 2019 total South production increased 11% over third quarter 2018, averaging 133,266 Boepd. In third quarter 2019, the Company completed 80 gross (56 net) operated wells with first production in the South. 

The Company exceeded its SCOOP Project SpringBoard oil production target for third quarter 2019 by 31%, averaging 23,641 Bopd. This outperformance was driven by operational efficiencies that brought wells on line ahead of schedule, as well as the outstanding Springer well performance in Rows 2 and 3. These wells flowed at an average initial 24-hour rate of 1,650 Boepd per well, with approximately 80% being oil. As expected, the 52 Springer wells combined in Rows 1, 2 and 3 are performing on average, in line with the blended 1.3 MMBoe unit type curve provided during the January SpringBoard conference call. The Company has raised its SpringBoard oil production target for fourth quarter 2019 from 22,000 Bopd to approximately 24,000 Bopd. To date, approximately 8.7 million gross barrels of oil have been produced from Project SpringBoard alone. 

In the Continental STACK, the Reba Jo and Schulte oil units flowed at a combined initial 24-hour rate of 57,292 Boepd, of which 67% was oil, or 38,320 Bopd. Combined, the two units contained 14 unit wells that flowed at an average initial 24-hour rate of 4,092 Boepd per well. Since second quarter 2018, the Company has completed 8 units in the over-pressured window that have outperformed expectations and unit type curves for the STACK.

"Continental's South assets in the SCOOP and over-pressured STACK window continue to deliver outstanding results driven by our geologically superior acreage position, proper unit density design and excellent execution from our operational teams," said Pat Bent, Senior Vice President, Operations.

Total Shareholder Return Strategy Update: Share Repurchases and Quarterly Dividend  

The Company has executed $187 million of share repurchases for 5.5 million shares, as of October 29, 2019. As previously announced, an initial share repurchase of up to $1 billion has been authorized by the Board of Directors, which is expected to continue through 2020. Share repurchases will be made at times and levels deemed appropriate by Company management and the Company intends to purchase shares opportunistically using available funds while maintaining sufficient liquidity to fund operating needs, capital program, and dividend payments.

The Company will be distributing its first quarterly dividend of $0.05 per share on the Company's outstanding common stock to stockholders of record on November 7, 2019. This will be payable on November 21, 2019.

Financial Update

"During 2019, Continental has strategically focused on building shareholder value by balancing significant cash flow generation with strong production growth. This has enabled the Company to repurchase $187 million in shares and complete strategic bolt-on acquisitions that add to our deep, oil-focused inventory," said John Hart, Chief Financial Officer.

As of September 30, 2019, the Company's balance sheet included approximately $35.3 million in cash and cash equivalents, $5.57 billion in total debt and $5.54 billion in net debt (non-GAAP).

In third quarter 2019, the Company's average net sales prices excluding the effects of derivative positions were $51.28 per barrel of oil and $1.12 per Mcf of gas, or $33.30 per Boe. Production expense per Boe was $3.73 for third quarter 2019. Total G&A expenses per Boe were $1.54 for third quarter 2019.

The Company's third quarter 2019 crude oil differential was $5.15 per barrel below the NYMEX daily average for the period. The wellhead natural gas price for third quarter 2019 was $1.11 per Mcf below the average NYMEX Henry Hub benchmark price.

Through September 30, 2019, the Company has realized approximately $52 million of cash gains from its natural gas hedges. As of September 30, 2019, the Company's unrealized non-cash mark-to-market gain on its natural gas hedges totaled approximately $17 million.

Non-acquisition capital expenditures for third quarter 2019 totaled approximately $681.5 million, including $578.1 million in exploration and development drilling and completion, $31.4 million in leasehold, $24.5 million in minerals, of which 80% was recouped from Franco-Nevada, and $47.5 million in workovers, recompletions and other.