Houston, 29 October (Argus) — Just as it approaches its last five-year growth target 18 months ahead of schedule, US upstream independent Continental Resources is mapping out plans to again triple its production, this time by 2017.
Meeting the new output projections will require continuing to boost capital budgets, outspending cash flow, at a time when other US onshore oil producers are moderating their drilling activity. But Continental chief executive Harold Hamm – the richest US oilman – said the growth will create billions of dollars in value because it will be underpinned by low-risk drilling in shale formations where returns on investment are high, in some cases around 40-50pc.
Production will surge to about 300,000 b/d of oil equivalent (boe/d) in 2017, up from an estimated 97,000 boe/d in 2012. Reserves will climb to more than 1.5bn boe over the same period, up from the current 610mn boe. Hamm sees further growth after 2017 propelling Continental into a peer group that includes companies such as Apache and Anadarko Petroleum, which produce more than 700,000 boe/d.
“Our objective is to transform Continental into the next American super-independent energy company operating on a new level of scope and value creation,” he said.
Capital spending will rise to an estimated $3.4bn next year from $3bn in 2012. US investment bank Raymond James called the growth plan far more aggressive than expected. The bank was expecting capex of $2.4bn and 2017 production of 220,000 boe/d. Just a few months ago, Continental warned it might slow drilling activity due to a drop in crude prices.
Oil prices have since rebounded, and crude from the Bakken formation of North Dakota is selling at a premium to US benchmark West Texas Intermediate (WTI), rather than the discounts of earlier this year, thanks to increased rail service. Continental is the largest producer and the most active driller in the Bakken.
The company said in 2010 that the Bakken has 24bn boe of recoverable oil, more than six times the amount estimated by the US Geological Survey in 2008. Since then, successful drilling in deeper layers of crude deposits has shown the formation has 56pc more oil in place than previously thought, suggesting recoveries may total 32bn boe, according to Continental.
The company is also testing whether its Bakken acreage can be successfully developed with 160-acre well spacing, rather than the current standard of 320 acres. The firm would have potential for more than 13,000 drilling locations and could quadruple its reserves with 160-acre spacing.
Continental's other major development area is the Anadarko Woodford formation of Oklahoma. The company made a new discovery, dubbed the South-Central Oklahoma Oil Province (Scoop), deep below an area where conventional oil deposits have yielded production of 3.2bn bl of crude.
Scoop is mostly oil and NGLs, making it more lucrative than dry gas fields in the area. Continental has assembled more than 170,000 net acres there, with potential reserves of 1.8bn boe. The company is already producing nearly 8,000 boe/d from Scoop, rising from less than 2,000 boe/d a year ago.
Continental sees Scoop and other onshore discoveries providing thousands of new drilling locations, helping to sustain the company's rapid pace of growth through 2017 and beyond.
“We will be first super independent entirely focused on unconventional oil plays,” Hamm said.
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