Continental Resources to defer completion activity, cut Bakken rigs

Continental Resources Inc., Oklahoma City, plans to defer some well completion activity and trim its Bakken shale rig count in an effort to reduce 2015 capital spending by $300-350 million.

The company says completion activity will be deferred except for where it has contractual considerations or it accomplishes specific strategic objectives. In the Bakken, Continental is reducing its operated rigs to 8 from 10 by the end of the month.

The company’s guidance for 2015 remains unchanged. Continental continues to expect production growth of 19-23% for the year compared with 2014, but now expects to exit the year with production in a range of 200,000-215,000 boe/d.

The bottom end of the range is 10,000 boe/d lower than its previously stated outlook, reflecting an increase of inventory from the previously expected 100 gross operated wells that are drilled but not yet completed at yearend to the current estimate of 160 gross wells drilled but not yet completed at yearend. Maintenance capital to maintain 2016 production at the 2015 exit rate is now projected at $1.6-2 billion.

“While we do not believe today’s low commodity prices are sustainable long term, we are committed to living within cash flow until they recover,” said Harold Hamm, Continental chairman and chief executive officer.

The company previously noted that its actual capital spending was trending below its $2.7 billion nonacquisition capital expenditures budget, adding that if weak oil prices persisted, it would take additional measures to balance capital expenditures with reduced cash flow.

“We believe it is in the interest of shareholders to defer new production growth until we see stronger commodity prices,” said John Hart, Continental chief financial officer. “Annual production growth is expected to be toward the top end of our guidance range, even with deferred completions. Production expense per boe and general and administrative expense per Boe are also trending positively toward the low end of guidance.”

Hart said, “Lower capex spending and excellent operating performance should position us to be cash flow neutral for the remainder of 2015 in an environment of approximately $50[/bbl] for West Texas Intermediate.”

He said, “In a $40[/bbl] WTI environment, our updated spending outlook would result in capital expenditures being approximately $150 million over cash flow.”

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