Continental is boosting production, spending
Continental Resources Inc.’s oil and natural gas production surged 37 percent in the fourth quarter of 2017 and is likely to grow again in 2018, the company said Thursday.
The Oklahoma City company announced its preliminary 2017 results and 2018 budget Thursday, six days before it is scheduled to release its full 2017 earnings report.
Continental executives said they plan to spend about $2.3 billion in capital expenditures in 2018. They said in November they were on pace to spend about $1.95 billion in 2017. The increased 2018 drilling budget is fueled by free cash flow growth as the company will continue to operate within cash flow levels, CEO Harold Hamm said in a statement Thursday.
“This year Continental expects to set itself apart by generating up to $900 million of free cash flow while delivering top-tier production growth,” Hamm said. “We plan to use the majority of this excess cash to continue paying down debt, further strengthening our balance sheet and increasing shareholder value.”
Hamm said the company
expects a return on capital of 10 to 15 percent, assuming an average oil price of $60 a barrel and a natural gas price of $3 per thousand cubic feet. A $5 per barrel change in the average price of oil prices would affect annual cash flow by $250 million to $300 million, and a 10 cent change in the natural gas price would affect cash flow by
$5 million to $10 million, the company said.
Continental executives expressed much more confidence in the strengthening price of oil than of natural gas. The company has hedged about 80 percent of its natural gas production at an average price of $2.88, but it has no hedges on oil production, “allowing the company to fully participate in the upside of oil prices,” Continental executives said in Thursday’s statement.
Continental is expected to use six rigs to drill 142 wells in North Dakota’s Bakken Shale and 15 rigs to drill 118 wells in Oklahoma’s SCOOP and STACK fields in 2018.
In the fourth quarter of 2017, Continental produced almost 287,000 barrels of oil equivalent per day, up 37 percent from the year-ago quarter. Oil represented 59 percent of the company’s fourth quarter production, up from 55 percent one year ago.