Equity Analyst David Meats of Investment Research Firm MorningStar issued a research report called ”Continental has a dominant position in the Williston Basin and is delineating SCOOP in Oklahoma.and Updated their Star Rating on Continental Resources, Inc.(NYSE:CLR).
According to the report ”Continental Resources went public in 2007, but the company was established several decades prior by the current CEO and chairman, Harold Hamm. Originally targeting natural gas plays in Oklahoma, the focus shifted to oil in 2007 and the company became active in the Northern Rockies’ Williston Basin (North Dakota and Montana). Continental played a key role in the early development of the Bakken Shale there and now holds 1.2 million net acres prospective in this prolific oil play.
Continental Resources, Inc.(NYSE:CLR) is a top independent oil producer in the lower 48 United States and a leader in America’s energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation’s premier oil field, the Bakken play of North Dakota and Montana.
The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the STACK and Northwest Cana plays. With a focus on the exploration and production of oil, Continental has unlocked the technology and resources vital to American energy independence and is a strong free market advocate in favor of lifting the domestic crude oil export ban. In 2015, the Company will celebrate 48 years of operations.
On September 8 the Company announced plans to spend approximately $300 to $350 million less than its previously approved capital budget for 2015 to better align spending with cash flow at current commodity prices. The Company plans to defer well completion activity, except for where it has contractual considerations or it accomplishes specific strategic objectives. Continental is also reducing its operated rig count in the Bakken from 10 to eight rigs by the end of the month.
Equity Analyst David Meats continues ”More recently, the company has added a second string to its bow with the ongoing delineation of the SCOOP (South Central Oklahoma Oil Play). This acronym actually refers to the southern leg of the Anadarko Basin’s Woodford Shale in Oklahoma. The Woodford is geologically comparable to the better-known Eagle Ford and Bakken and is a decent reservoir in its own right. But it was also the source rock for the overlying Springer formation, which has more favorable reservoir properties, supporting stronger well economics.
Oil prices slumped sharply at the end of 2014 and have yet to recover, but even after accounting for this, the returns on Continental’s Springer wells look rather impressive. Like peers, Continental faces an uphill struggle coping with lower oil prices. Unfortunately, the challenge is exacerbated by the lack of downside protection.
Anticipating a faster rebound, management elected to monetize its hedges after the third quarter of 2014. The strategy provided a one-time revenue boost but left the company fully exposed to prices that are now expected to remain in the $50-$60/bbl range through 2015. Nonetheless, we believe the company has more than enough liquidity in place to ride out the current slump and return to profitability as prices recover.
Bulls Say: Continental is one of the few E&Ps with the ability to balance spending with cash flows in the current commodity price environment. 3 As a first mover in the SCOOP play, Continental has established a key competitive advantage and will continue to drive forward the delineation of this impressive new play. 3 Continental’s asset portfolio contains depth as well as quality, and will take several decades to fully develop.