Continental Resources Appoints New President

September 19, 2014 Kirk Eggleston

Continental Resources appointed a new president and COO this week, following the reportedly unexpected resignation of Rick Bott last week.

The company provided few details when Bott left his position, other than he was leaving "to pursue other opportunities." Bott's replacement is Jack Stark, 59. Stark has been with Continental since 1992, and was formerly the company's Senior VP of Exploration.

Continental Stock Dips Slightly

In the midst of its leadership change, Continental also announced that it plans to increase its' portfolio-wide capital expenditures budget for 2014 to $4.55-billion ($2.85-billion in the Bakken). The reason for the increase has to do with Bakken well costs, which the company revealed this week are $10-million per well. That's more than $2-million per well, compared to the same time last year. This comes at at time when most operators in the area are reducing the well costs. According to Forbes, as a result of the higher than expected well costs, the company's stock dropped ~8% (about $5 per share) on Sept. 18th.

Continental is the largest oil producer in the Rockies, Bakken Shale play and the SCOOP play combined. It is the second largest producer in the Bakken, behind Whiting Petroleum, which just recently acquired Kodiak Oil & Gas.

Bakken Natural Gas - Too Much of a Good Thing?

September 17, 2014 Kirk Eggleston

The oil & gas renaissance in the U.S. has nearly catapulted the country to the top spot for oil production in the world, and most experts believe the U.S. will hit this target by next year. But is it possible that the country and the Bakken has too much of a good thing? When it comes to natural gas that may be the case.

According to the BP 2014 statistical world energy review, the U.S. is currently the top natural gas producing country in the world at 328 Bcf/d. Over the past five years, natural gas production has grown over 20% in the U.S., thanks in large part to the shale revolution. But the price of natural gas has struggled to break $4/mmbtu, and oil companies in North Dakota's and Montana's Bakken Shale and the Eagle Ford Shale in South Texas have flared much of their produced natural gas in favor of capturing oil, which is a much higher valued commodity. Currently, the WTI price of crude oil is hovering around $95/bbl.

In North Dakota, where production from the Bakken Shale is highest, the state flares just under 30% of its produced natural gas. Recently, the first of several new rules has been enacted in the state to combat flaring. The North Dakota Industrial Commission (NDIC), the state's regulatory body for the oil and gas industry, hopes to capture 90% of Bakken natural gas by 2020; however, serious infrastructure improvements, including gas gathering systems and natural gas pipelines will need to be implemented in the Williston Basin for this goal to be achieved. The alternative could mean operators will need to shut-in wells to meet flaring guidelines - that's bad news for them, the state and mineral owners.

What this boils down to is the U.S. has an abundance of natural gas, which is a good thing. The bad thing is the country lacks the infrastructure to capture all of it.

With world usage of natural gas accounting for 24% of all primary energy consumed, there is decidedly a market for natural gas. But the only effective way to transport natural gas to foreign markets is to liquify it, which is costly. Ultimately, natural gas production is subject to the free market. As long as the price stays low, there's less economic benefit for operators to produce it, and companies to transport it and market it.

Major Bakken Producer's President Quits - Continental Resources

September 12, 2014 Kirk Eggleston

The Bakken's second largest producer, Continental Resources, Inc., announced this week that President and COO W.F. "Rick" Bott, 54, has resigned to "pursue other opportunities." According to company officials, his duties will be absorbed by senior management. Bott joined Continental in 2012, and worked previously at Cairn India Ltd and in Devon Energy Corp's international division.

“Continental CEO Harold G. Hamm said, “we are grateful for his professional contributions and wish Rick the very best.”

During the second quarter of 2014, Continental Resources completed 224 gross (93 net) wells in the Bakken, and finished the reporting period with an inventory of approximately 84 gross operated (66 net) Bakken wells drilled, but not completed. Continental’s Bakken production totaled 108,573 boe/d (North Dakota: 94,702 boe/d, Montana: 13,871 boe/d) for the second quarter, which was an increase of 11% quarter-on-quarter and 23% year-over-year.

Continental says it is ahead of its five year plan to triple production and proved reserves from 2012 to 2017 and maintains its leadership position as the largest oil producer in the Rockies, Bakken Shale play and the SCOOP play combined.

Continental currently holds ~1.14-million net acres in the Bakken.

Rail Lines Face Bottlenecks in Bakken

September 5, 2014 Kirk Eggleston

At the Surface Transportation Board (STB) hearing this week in Fargo, ND, officials from the state and other upper Midwestern states urged U.S. regulators to put pressure on railroads to fix issues that are blocking grain shipments. The culprit some believe is the oil & gas industry - in August, approximately 60% of oil produced in North Dakota was transported out of the state by rail, and some argue the railroads are favoring oil companies over agriculture.

Bloomberg reported, as grain produced last year sits in storage, waiting for trains to carry it to market, the bottlenecks may get worse as an anticipated record grain harvest begins, officials warned.

“John Hoeven, the Republican Senator from North Dakota, said at the hearing, “the bottom line is that we need greater rail capacity to meet the growing needs of North Dakota’s expanding economy and dynamic businesses and farms. To make that happen, railroads must commit to investing in more rail infrastructure, including more locomotives, more railcars and more crews.”

In June, the board ordered the railroads to provide weekly updates on bottlenecks. Regulators can order railroads to prioritize certain shipments over others, although that power is rarely used, the Bloomberg article noted.

BNSF Railway, along with Canadian Pacific Railway Ltd., was directed by the STB to appear. Earlier in 2014, BNSF said it would hire 5,000 workers and add 500 locomotives to expand its network. The company said it’s spending $390-million on expansion and maintenance projects in North Dakota in 2014. Since 2009, traffic in and out of North Dakota has increased by 144% on BNSF.

Conoco's Bakken Production Up 19% - Q2 2014

August 27, 2014 Kirk Eggleston

Liquids production volumes from Conoco Phillips' (COP) Lower 48 assets increased by 22% year-over-year thanks largely to the Eagle Ford and the Bakken, company officials reported in their second quarter 2014 report at the end of July.

COP production grew by 38% year-over-year to 208,000 boe/d in the Eagle Ford Shale and Bakken Shale plays combined. That's ~39% of the company's total production for its Lower 48 asset portfolio. In the Bakken alone, production grew 19% quarter-on-quarter from 43,000 boe/d to 51,000 boe/d. However, company officials expect for the rate of growth to slow in both plays in the second half of the year due to multi-pad drilling effects and weather-related issues in the fourth quarter.

“Conoco’s EVP, Exploration and Production Matt Fox, said, “we expect to have multi pad drilling effects and are anticipating winter weather impacts in the fourth quarter. So the rate of growth will slow in the second half of the year. The net effect of this is we are still on track to achieve our 2014 volume targets for both the Eagle Ford and Bakken but we do expect rates to flatten in third and fourth quarters and then begin to ramp up as we head in to 2015.”

COP company officials say previously announced spacing pilot tests are being implemented in the Bakken, and more opportunities are being identified to tighten up well spacing.

Continental Stock Dips Slightly

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