Continental Resources Waits for Sustained $45 bbl Oil Prices to Complete DUCs
Continental Resources (NYSE: CLR) is nearing cash flow neutrality and hopefully the end of the year will bring improved oil prices to lift them into the green. Continental has spent $630 million of the company’s $920 million budget in the first half of the year leaving only 32% of the budget for the second half of year so expect the company to have lower activity in the fourth quarter.
Largest DUC Inventory in the Bakken
Continental has had very minimal activity in the Bakken in 2016 when it comes to completion activity leaving an astounding number of uncompleted wells in their inventory. The company predicts that they will have around 190 uncompleted wells at the end of 2016 which is a ~29% increase from the end of 2015. Energent Group is tracking the company’s inventory of uncompleted wells which is currently 150 wells. The company continues to focus on reducing costs where they are targeting a completed well cost of $6 million.
Map of Continental Resources drilled but uncompleted wells:
Source: Continental Resources, Energent Group
Focus Continues in STACK & SCOOP
In the STACK, CLR currently is running 5 rigs in targeting the Woodford and 6 rigs targeting Meramec. The company’s completed well cost is down 20% from 2015 and is targeting $9 million per well. Rig activity also continues in the SCOOP with the company running 4 rigs and has increased the amount of proppant per foot by 50% on average. This enhanced completion design has increased production by 40%.
Source: Continental Resources
The company has continued to increase the amount of frack activity in Oklahoma during 2016 and is relying heavily on Halliburton to do the work. So far the company has fracked 22 wells during 2016 and the number is expected to grow. Continental has around 80 uncompleted wells in the area with just over half in Blaine County where the majority of their activity is currently located.
Source: Energent Group
Debt Reduction Efforts Pending
In an effort to reduce debt levels going forward Continental has $503 million in non-strategic assets sales pending. The two areas where CLR is looking to sell is in the SCOOP and Bakken with about 110,000 net acers. The SCOOP deal is looking to sell about 29,500 net acers with about 550 net Boepd of production for $281 million and the Bakken deal includes 80,000 net acres with 2,800 net Boepd of production for $222 million.
Strategy Moving Forward
Looking forward CLR will continue to focus on reducing debt levels and grow within reason based on sustainable crude oil supply and demand fundamentals and price. The company has also released price targets for when they will bring activity back showing that they are cash flow natural at $37 per barrel where they will focus on the strength of their balance sheet. From the mid to upper $40 per barrel range they will look to complete the inventory of uncompleted wells in the Bakken and once oil prices go above $60 they will possibly look to add more rigs.