Continental Resources Inc. on Tuesday reported a second-quarter profit of almost $243 million as oil and natural gas production surged 26 percent from the year-ago quarter.
The Oklahoma City-based oil and natural gas producer’s second-quarter revenue ballooned 72 percent to $1.14 billion backed both by the strong production and a 51 percent increase in the company’s oil sales price to an average of $63.35 per barrel.
“Continental is in an advantaged position in the current market, with high rate of return oil plays benefiting from existing infrastructure,” CEO Harold Hamm said in a statement Tuesday. “As we look into the second half of 2018 and beyond, Continental and its shareholders have an exciting opportunity to accelerate capital-efficient, oil-focused production growth while remaining disciplined in achieving our targets for free cash flow and debt reduction.”
Production jumped to 284,059 barrels of oil equivalent per day in the second quarter, up 26 percent from 226,213 equivalent barrels per day in the second quarter of 2017. In northwest Oklahoma’s STACK play, production jumped 62 percent to 51,722 equivalent barrels per day, while SCOOP production added 6 percent to 64,708. Production in the Bakken jumped 32 percent to 158,119 equivalent barrels per day.
In Oklahoma, Continental is expected to average four completion crews and 18 rigs in the second half of the year, increasing to 19 rigs by the end of the year. In the Bakken, the company is expected to average five completion crews and six rigs in the second half of the year, increasing to seven rigs by the end of the year.
Continental executives earlier this year unveiled plans for Project SpringBoard, a 70-square mile area of the SCOOP where the company plans to drill 350 wells. The company has 11 rigs active in the area and plans to increase activity to 13 rigs by the end of the year, the company said.
“Project SpringBoard is an outstanding, high-impact oil project for Continental and its shareholders,” Continental President Jack Stark said in a statement. “This project alone has the potential to increase Continental’s oil production by as much as 10 percent over the next 12 months.”
Based on the strong production growth in both Oklahoma and the Bakken, Continental executives on Tuesday boosted their 2018 production guidance to a range of 290,000 to 300,000 equivalent barrels per day, which would represent a year-over-year growth of 20 percent to 24 percent. The new range is up from previous guidance of 285,000 to 300,000 equivalent barrels per day.
Don’t hedge your bets
While production jumped from the year-ago quarter, Continental experienced an even stronger increase in average oil sales price. While most companies locked in sales prices as oil markets grew beyond expectations earlier in the year, Continental executives chose not to secure hedge contracts, allowing the company to benefit from prices that continued to rise throughout the first half of the year.
“That’s part of the vision here that Mr. Hamm and the team has had a very constructive view on oil prices in the near term,” Rory Sabino, vice president of investor relations, said in an interview Tuesday. “Being unhedged on the oil side has served us well, being able to capture the price recovery.”
Continental received an average price of $63.35 per barrel of oil and $2.65 per thousand cubic feet of natural gas in the second quarter, up from $41.91 for oil and $2.63 for natural gas in the year-ago period.
The company’s quarterly profit of $243 million translates to 65 cents a share and is up from a loss of $63.6 million, or 17 cents a share, in the second quarter of 2017.
Adjusted for one-time items, Continental had a profit of $273 million, or 73 cents a share, up from an adjusted loss of $1.8 million, or less than a penny a share, one year ago.
Earnings before interest, taxes, depreciation, amortization and drilling expenses was $897 million, up from $479 million in the year-ago quarter.
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