Continental Resources (NYSE: CLR) has recently announced its plans to further cut its capital expenditures for the upcoming year but also projects the activity will increase production growth by up to 20 percent when compared to last year.
Last month the company announced it would be cutting its budget from $5.2 billion to $4.6 billion. However, those figures have been updated and expenditures will now be cut from $4.6 billion to $2.7 billion. Since the summer, oil prices have dropped by nearly 50 percent with this month seeing prices hovering around $60 per barrel. Continental Chairman and Chief Executive Officer Harold Hamm said, “This revised budget prudently aligns our capital expenditures to lower commodity prices, targeting cash flow neutrality by mid-year 2015.”
Additionally, the company plans to decrease its current operating rig count from 50 to about 34 by the end of the first quarter of 2015. Continental plans to keep 31 rigs in operation for the full year. Of these rigs, only 11 will be operating in North Dakota’s Bakken formation. Four of the remaining rigs will be operating in the Northwest Cana area of the Anadarko Woodford formation, and 16 will be operating in the South-Central Oklahoma Oil Province (SCOOP).
Hamm also commented, “This budget also maintains our financial flexibility and strong balance sheet while continuing to grow production in our core Bakken and SCOOP plays. The depth and quality of our asset base coupled with our financial strength allows us to be adaptable in a variety of price environments.”
The new budget is based on the completion of 188 net wells in the Bakken formation where its core acreage is located. In this area, the company will be targeting an estimated ultimate recovery rate of 800,000 barrels of oil equivalent per well. In the SCOOP play, the company will focus on completing 81 net wells. In the Northwest Cana play, the company plans to complete 11 net wells. Cost estimates for completed wells in the coming year are anticipated to average about 15 percent less than 2014 costs as service expenses adjust to lower commodity prices.