SCOOP, STACK Plays Flourish, Per Continental’s Report

SCOOP, STACK Plays Flourish, Per Continental's Report

Citing good 1st quarter results in both the SCOOP and STACK resource plays, as well as in other plays where they are active, Continental Resources released its quarterly financial figures April 29 with the announcement that its performance has “underscored the company’s formula for success.”

Continental’s SpringBoard Project charted oil growth that is ahead of schedule, with the company’s first six Woodford wells averaging initial rates of 1,660 barrels of oil equivalent per day (Boepd) per well. The Oklahoma City-based oil giant also observed that its STACK wells continue to deliver outstanding results.

Overall, the company reported net income of $187 million, or $0.50 per diluted share, for the quarter ended March 31, 2019.

“Continental’s outstanding first quarter 2019 results reflect our commitment to our formula for success. The combination of high quality Bakken and Oklahoma assets with efficient, low cost operations translates to strong corporate returns and sustainable cash flow generation,” said Harold Hamm, chairman and chief executive officer.

Harold Hamm, Chairman and CEO, Continental Resources
Harold Hamm, Chairman and CEO, Continental Resources

Daily Oil Production up 18% over 1Q18

First quarter 2019 production increased 16% over first quarter 2018, averaging 332,236 Barrels of Oil Equivalent (Boe) per day. First quarter 2019 oil production increased 18% over first quarter 2018, averaging 193,921 barrels of oil (Bo) per day. First quarter 2019 natural gas production increased 12% over first quarter 2018, averaging 829.9 million cubic feet (MMcf) per day.

SpringBoard: Ahead of Schedule

The Company’s first quarter 2019 SCOOP production increased 9% over first quarter 2018, averaging 67,659 Boe per day. The Company completed 15 gross (13 net) operated wells with first production in first quarter 2019.

Project SpringBoard oil production is growing ahead of schedule, averaging ~14,000 Bo per day in the first 28 days of April 2019. The Company has updated its SpringBoard oil production growth target to 18,000 Bo per day in third quarter 2019, compared to the initial target of 16,500 Bo per day. Cycle time improvements and higher early time well productivity are accelerating production growth and enabling the Company to achieve its objectives for 2019 with 25% fewer rigs. The Company currently has 9 rigs drilling, 33 wells waiting on completion and 39 wells producing in Project SpringBoard.

In first quarter 2019, the Company completed the first 6 Woodford wells in Project SpringBoard, which flowed at a combined initial rate of 9,960 Boe per day, averaging 1,660 Boe per day per well, which includes 1,245 Bo per day per well. These wells are currently outperforming the legacy 1.5 MMBoe Woodford legacy oil type curve.

How the STACK Stacks Up

Continental’s first quarter 2019 STACK production increased 6% over first quarter 2018, averaging 56,513 Boe per day. During the quarter, the company completed 9 gross (5 net) operated wells with first production in 2019.

In the over-pressured condensate window, the 5-well Tolbert unit flowed at a combined initial rate of 18,700 Boe per day, averaging 3,740 Boe per day per well, which includes 1,180 Bo per day per well. In the over-pressured oil window, the 3-well Lugene unit flowed at a combined initial rate of 9,270 Boe per day, averaging 3,090 Boe per day per well, which includes 1,540 Bo per day per well. The Tolbert unit was developed with 2-mile laterals and the Lugene unit with 1-mile laterals. Continental also completed its first 3-mile Meramec well in STACK. The Blondie 1-6-7-18XHM 3-mile lateral flowed at an initial rate of 3,400 Boe per day, which includes 2,460 Bo per day per well.

Financial Update

“Continental’s capital-efficient and highly productive first quarter 2019 results underscore our commitment to delivering shareholder value in 2019. We are extremely pleased with our execution on cost metrics and the potential for favorable updates to these targets later in the year,” said John Hart, Chief Financial Officer.
Continental Resources 1st Quarter 2019 Chart
Continental Resources 1st Quarter 2019 Chart

As of March 31, 2019, the company’s balance sheet included approximately $264.4 million in cash and cash equivalents, $5.77 billion in total debt, and $5.50 billion in net debt (non-GAAP). The company anticipates further reducing net debt to $5 billion in 2019.

In first quarter 2019, Continental’s average net sales prices excluding the effects of derivative positions were $50.05 per barrel of oil and $2.56 per Mcf of gas, or $35.56 per Boe. Production expense per Boe was $3.59 for first quarter 2019, below annual guidance of $3.75 to $4.25 per Boe. Total G&A expenses per Boe were $1.60 for first quarter 2019, also below annual guidance of $1.70 to $2.00 per Boe.

The company’s first quarter 2019 crude oil differential was $4.77 per barrel below the NYMEX daily average for the period, a 43% improvement over fourth quarter 2018 and within annual guidance of $4.50 to $5.50 per barrel. The wellhead natural gas price for first quarter 2019 was $0.60 per Mcf below the average NYMEX Henry Hub benchmark price. The company expects further improvement to the natural gas differential in 2019.

Continental realized approximately $13 million of cash gains from natural gas hedges in the first quarter. For the balance of 2019, natural gas is hedged 577,000 MMBtus per day at an average NYMEX Henry Hub price of $2.80.

Non-acquisition capital expenditures for first quarter 2019 totaled approximately $750.2 million, including $631.1 million in exploration and development drilling and completion, $14.8 million in leasehold, $51.3 million in minerals, of which 80% was recouped from Franco-Nevada, and $53.0 million in workovers, recompletions, and other. Continental’s first quarter capital expenditures reflect an accelerated pace of development due to improved cycle times and efficiency gains which resulted in 8 more net wells being completed and 6 more net wells being spud during the quarter than budgeted while using the same number of rigs and completion crews. The company maintains its $2.6 billion capital expenditures guidance for 2019.

Continental Resources is a top 10 independent oil producer in the U.S. Lower 48 and a leader in America’s energy renaissance. Besides being the largest leaseholder in the Bakken play, the company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the STACK plays. For more information, visit www.CLR.com.

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