The Black Gold Oil Boom Continues
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Continental Resources (NYSE: CLR) plans to squeeze as much resources as possible out of its properties in North Dakota and Montana as the company continues to lead the industry in developing the Bakken and Three Forks formations.
Overview
Continental Resources has close to one million acres under lease prospective for the Bakken and Three Forks formations and reported oil and gas production of approximately 4.9 million barrels of oil equivalent (BOE) per day in the second quarter of 2012. This compares to only 800,000 BOE in the first quarter of 2008 and represents tremendous growth for the company over the last four years.
This growth is expected to continue for Continental Resources in 2013 with the company estimating production growth of 30% to 35% in 2013. The company will need to spend $3.4 billion in capital and complete 738 gross wells during the year to achieve this goal.
Although the major integrated oil companies have reentered the United States onshore area over the last few years, Continental Resources is still the largest crude oil producer in the Bakken formation with gross operated production of 22.2 million barrels of oil over the last twelve months.
Three Forks Appraisal
Continental Resources has been active in testing the potential of the Three Forks formation and plans to increase exploration and appraisal here in 2012 and 2013. The company has categorized the Three Forks into four separate benches and is working towards testing the second, third and fourth benches to determine the commercial viability of these zones.
Continental Resources has disclosed the results of two wells drilled and completed into the second bench of the Three Forks formation. The Charlotte 2-22H produced at an initial rate of 1,395 BOE per day and 87,000 BOE during its nearly ten months of production. The well is currently producing 167 BOE per day.
The Sunline 11-1TF well produced 1,341 BOE per day during an initial test period and after six months is producing at a rate of 242 BOE per day. The cumulative production over six months for this well is 85,000 BOE.
Continental Resources has drilled the Charlotte 3-22H well into the third bench of the Three Forks formation and is waiting on completion services. The company has also scheduled its first test of the fourth bench of the Three Forks formation and plans further derisking of both these benches in 2013 and 2014.
Higher Density Drilling
Continental Resources also plans to increase the yield of the Bakken and Three Forks formations through down spacing and is testing drilling on 320 acre and 160 acre spacing. The company has allocated $267 million in capital in 2013 and 2014 for these programs.
Resource Potential
Continental Resources reports that the company has 1.5 billion BOE of risked resources in the Middle Bakken formation and first bench of the Three Forks formation, and a successful appraisal of the lower three benches and downs pacing of its properties will add significant resources to this total.
Continental Resources estimates that it may have as much as 4.472 billion BOE of unbooked resource potential on its leasehold. This assumes the development of the Middle Bakken formation and all four benches of Three Forks on 160 acre spacing. The total resource potential drops to 2.836 billion BOE if 320 acre spacing is used.
Other Players
Other operators active in the Bakken and Three Forks formations include EOG Resources (NYSE: EOG), Whiting Petroleum (NYSE: WLL) and Hess Corporation (NYSE: HES), which reported trailing twelve month crude oil production of 17.5 million, 17.3 million and 16.9 million barrels, respectively, as of June 30, 2012.
Whiting Petroleum is also drilling into the lower Three Forks formation at the company’s Tarpon and Hidden Bench project areas. The company had a total of 712,000 net acres under lease at the end of the second quarter of 2012.
EOG Resources is currently developing the core area of its Bakken formation acreage on 320 acre spacing and plans to drill 63 net wells in 2012 utilizing seven operated rigs.
Hess Corporation has 800,000 net acres under lease and will operate 16 rigs in 2012 to develop the Bakken formation. The company’s long term goal is to increase oil and gas production from here to 120,000 BOE per day.
Continental Resources was an early mover in the Bakken formation in Montana and North Dakota and is increasing the resource yield from this play through innovative drilling techniques and appraisal of other hydrocarbon bearing zones on its properties. The extra value derived by these actions will benefit long term investors in this exploration and production company.
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