No Continental divide
Company's stock gets big boost after announcement of water asset sale
A disappointing cut in interest rates and flat pricing for oil didn't dissuade Continental Resources investors from pushin git ssh are price higher Wednesday after the company announced its old a water gathering and recycling system in Blaine County for $85 million and had made other moves intended to boost its future oil production.
Investors traded about 2.44 million shares of Continental stock, about 100,000 shares more than its average volume, pushing its value to $37.17 a share, up 12 cents, or 0.3%, for the day. The stock, traded on Nasdaq under Ham mt he ticker
symbol CLR, finished higher on a day when the broader market closed off 1.2%.
Early Wednesday, Continental officials said the company sold the water gathering and recycling system to Lagoon Water Solutions and entered into along-term agreement with Lagoon to provide it with ongoing water sourcing, gathering and disposal services as it continues to develop its holdings in that portion of the STACK play.
Jake Dollar hide, CEO of Long bow Asset Management Co. in Tulsa, took investors' reaction as an enthusiastic endorsement of Continental's deals.
The company, he noted, hasn' t slowed down its efforts to maximize oil production f or a decade, adding that Wednesday's announcements were just further confirmation the company remains on a path to achieve that goal.
“They applauded t hose actions buy buying shares, rather than selling ,” Dollarhide said. “And that happened during a difficult market environment. That company-specific news was
why the stock price improved today.”
Lagoon Water Solutions' executives, meanwhile, also were pleased with the agreement, as they said it enables t he Oklahoma City- based company to become the first to provide recycled water for completion operations in Oklahoma.
They said the deal also brings the company's total miles of pipe to 200, making it the largest system in Oklahoma operated by a midstream company.
“We believe strongly in our commitment to being the premier solution for oil and gas operators' water midstream needs and are excited about our management team securing such a significant deal with a respected, top-tier operator like Continental,” Kevin Lafferty, Lagoon Water Solutions CEO, stated in a release issued Wednesday.
“This acquisition expands our network of reliable gathering and disposal assets in the core of the STACK play and further guarantees reliable takeaway water solutions for STACK operators.”
As for boosting oil production, Continental announced Wednesday it has acquired additional leasehold in SCOOP from an undisclosed party for $79.5 million, noting that adds up to 150 well locations targeting the Woodford and Sycamore formations in the region to its drilling inventory.
Continental officials also said the company has executed several other strategic acreage trades that added 3,000 acres to its core operating areas, increasi ng Continental's working interest in several high-valued operated units being developed this year.
Together, officials estimated ongoing work involving both of those acquisitions will add about $55 million in previously unbudgeted dollars to Continental's capital expenditure plans for 2019.
However, Continental's top executive's remarks about the changes focused on the sale of the water infrastructure system.
CEO Harold Hamm s ai d Continental still owns and operates three other water infrastructure systems in Oklahoma and 10 others in the Bakken Shale.
“The divestiture of this water handling facility for $85 million underscores Continental's ability to innovatively generate value from its assets,” Hamm stated in a release announcing the sale.
Hamm said Continental estimates the assets are worth about $1 billion, adding, “these facilities contain significant added value for our shareholders.”
Continental on Wednesday also provided an update on its ongoing efforts to acquire minerals working with Franco-Nevada.
So far this year, the company has spent more than 75% of its budgeted $125 million to acquire minerals during the first half of the year, officials said.
Additionally, the two parties also have agreed to boost that amount to $150 million to “capitalize on favorable market conditions.”
Officials said they expect Continental will recoup 80% of that this year. Excluding the capital expenditures mentioned Wednesday, officials said the company remains on track to spend $2.6 billion for capital expenditures in 2019.