Continental Resources raises 2015 output guidance

OREANDA-NEWS. November 06, 2015. Continental Resources raised its 2015 output guidance as falling costs allowed the key Bakken producer to ramp up while keeping spending in check.

The independent expects output to grow 24-26pc this year compared with a forecast of 19-23pc increase made in August and 16-20pc made in December. Production cost is likely to fall to \\$4-\\$4.50/bl of oil equivalent (boe) for the year versus the \\$4.75-\\$5.25/boe made in August, while general and administration (G&A) expense will fall to \\$1.70-\\$2/boe from \\$2-2.50/boe.

The revised guidance shows that some US shale producers with good acreage still have room to bring down costs, pointing to the resilience of the unconventional industry. US production last week rose by 48,000 b/d to about 9.2mn b/d, with most of the increase coming in the Lower 48 states, latest data from the Energy Information Administration (EIA) showed. The rise comes amid a 60pc plunge in the US rig count to its lowest since April 2002.

"We continue to deliver on cost controls and operating efficiencies, while maintaining our exploration focus," chief executive Harold Hamm said. The company improved "across the board in the key metrics we control – faster drill times, lower completed well costs and strong well results from enhanced completions."

The independent will give its 2016 guidance in December or January, and has the option to reduce drilling further as focus remains on balancing capex with cash inflows. Capex for this year remains unchanged at \\$2.7bn.

"If low commodity prices persist in 2016, we have additional Bakken rigs coming off contract, so we can further reduce capital expenditures," said chief financial officer John Hart.

Drilling and completion costs declined on average by about 25pc since year-end 2014, because of a fall in costs of services such as rigs, chemicals and crew and improved efficiency. For its core Bakken acreage in North Dakota, drilling and completion cost have dropped to \\$7mn per well from \\$9.6mn per well at the end of 2014.

Third quarter net output rose 25pc from a year earlier to 228,278 b/d of oil equivalent (boe/d). But fourth quarter output is expected to decline compared with the third, with the producer likely to exit 2015 at 210,000 boe/d.

Continental is currently operating 23 rigs, including 8 rigs in the Bakken and 15 rigs in Oklahoma. It has recently added two completion crews in Oklahoma, bringing the total count to three. It does not have any active completion crews in the Bakken.

The producer increased its commitment under its revolving credit facility to \\$2.75bn. It also termed out \\$500mn of revolving debt. Terming out of debt is typically done by transferring it within the balance sheet, by converting it from short-term to long-term debt.

"These transactions reduce overall borrowing costs and demonstrate our ability to provide additional liquidity," Hart said.

After these transactions, Continental will have \\$880mn of borrowings against its unsecured credit facility,leaving \\$1.9bn available.