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CLR Provides Strong 2014 Outlook

Zacks Equity Research

Leading Bakken oil producer, Continental Resources Inc. (CLR) provided a bullish production outlook for 2014. The company expects to increase total crude oil and natural gas production in the range of 26% to 32% in 2014. Continental expects average daily production of 170,000 to 180,000 barrels of oil equivalent (Boe) per day, with an exit rate of approximately 200,000 Boe per day for Dec 2014. Of the total production, 70% is expected to be crude oil.

Continental’s organic capital expenditure for 2014 is estimated at approximately $4.05 billion. The budget takes into account the ongoing trend of reduction in well costs. The company has set a new goal to reduce average operated Bakken completed well costs by 3% to 5% by the end of 2014.

Continental's 2014 budget reflects 400 net well completions (1,090 gross), with 94% located in the company's two key operating areas, the Bakken in North Dakota and Montana and the South Central Oklahoma Oil Province (:SCOOP). The 2014 well count represents a 22% increase over current budgeted completions of 329 net wells in total for 2013.

Exploration drilling accounts for approximately $500 million of 2014 capital expenditures, a 16% increase over 2013's exploratory drilling budget. Exploration activity will focus primarily on continued density drilling tests in the Bakken, further testing of the lower Three Forks formation in the Bakken, and further appraisal and a density spacing test in SCOOP.

Oklahoma City-based Continental is an independent exploration and production (E&P) company focused on the Bakken, Cana and Niobrara shale plays. It has leases on nearly 1.1 million acres in the Bakken Shale region.

The company operates in the North, South and Eastern regions of the U.S. Its North region is north of Kansas and west of the Mississippi river and comprises North Dakota Bakken, Montana Bakken, the Red River units and the Niobrara play in Colorado and Wyoming. The first two hold the maximum promise for Continental.

The Southern region includes Kansas and all properties south of Kansas and west of the Mississippi river, comprising the Anadarko Woodford and Arkoma Woodford plays in Oklahoma. The Anadarko and Arkoma Woodford plays are the second most important for the company.

In Dec 2012, the company sold the crude oil and natural gas properties in the East region. As of now, the remaining East region properties comprise undeveloped leasehold acreages east of the Mississippi River that are managed as part of the company’s exploration program.

Continental retains a Zacks Rank #3 (short-term Hold rating). However, there are Zacks Ranked #1 (Strong Buy) stocks in the oil and gas industry such as Range Resources Corporation (RRC), Carrizo Oil & Gas Inc. (CRZO) and Whiting Petroleum Corp. (WLL) that appear attractive in the short term.


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