Key Bakken producer Continental Resources is selling more assets as part of a plan to reduce debt and shore up its balance sheet.
In the latest deal, the independent is shedding properties worth $222mn in North Dakota and Montana. The sale includes 68,000 net acres of leasehold in the Williams county in North Dakota and 12,000 net acres in the Roosevelt county of the other state. Output from the areas was about 2,800 b/d of oil equivalent (boe/d).
"This is our third sale of non-strategic assets this year, with total expected proceeds of more than $600mn," chief executive Harold Hamm said. "We plan to apply proceeds to reduce debt and strengthen our balance sheet."
Continental's plan reflects a broader strategy deployed by many other independent like ConocoPhillips, Chesapeake and Devon Energy to shed non-core assets to repay debt and shore up their balance sheet as cash flows remained squeezed amid a plunge in crude prices to a 12-year low of $26/bl in February. While the market has recovered, they still remain below the breakeven cost for a host of producers.
In May, Continental announced the sale of about 132,000 net acres of leasehold in the Washakie Basin in Wyoming for $110mn. It sold 29,500 net acres in the eastern SCOOP play in Oklahoma for $281mn in August.
"Continental is routinely contacted by other operators concerning assets that are non-strategic for us that represent significant value to other operator's development plans," Hamm had said earlier this month during the company's second-quarter earnings call.
The independent did not change its output guidance for the year despite these sales as it expects its inventory of drilled but uncompleted wells (DUC) to provide future growth opportunities as prices recover.
Continental has about 215 gross operated DUCs in inventory, of which 165 are in the Bakken. It expects the total to grow to 240 by year-end, with 190 in the Bakken. The Bakken DUCs have an average estimated ultimate recovery (EUR) of 850,000 bl of oil equivalent (boe)/well and can be completed at a cost of between $3.0m-$3.5mn/well.
Continental raised its 2016 output guidance during its second-quarter earnings on better-than-expected production across its major assets. It now expects production to range from 210,000-220,000 b/d of oil equivalent (boe/d), 5,000 boe/d higher than a previous guidance given in May.
It wants to bring down its total long-term debt to $6bn from $7.15bn as of 30 June.
