Continental Resources Strengthens Bakken Focus With Two Transactions
Company Expects Lower 2013 Production Operating Costs per Boe and Increased Production
OKLAHOMA CITY, Dec. 20, 2012 /PRNewswire/ -- Continental Resources, Inc. (NYSE: CLR) has completed the acquisition of 119,218 net acres in the Bakken field, primarily in Williams and Divide counties, North Dakota, from Samson Resources Company for $649.3 million in cash, subject to post-close adjustments. The acquisition includes production of approximately 6,500 barrels of oil equivalent per day (Boepd), of which 82 percent is crude oil.
In addition, Continental completed the sale of properties and approximately 1,100 Boepd of production in its Eastern Region for $125 million in cash, subject to post-close adjustments.
Combined, the transactions are expected to reduce 2013 production operating costs per barrel of oil equivalent (Boe), compared with previous guidance, and increase production growth to a range of 35-to-40 percent. The Bakken transaction increases Continental's leasehold to 1.1 million net acres, further strengthening its position as the No. 1 acreage holder and producer in what the Company believes will prove to be the largest oil field in the nation.
"We bought the Bakken acreage to develop it and expand it," said Harold Hamm, Chairman and Chief Executive Officer. "This is consistent with our continued concentration of investment in high rate-of-return projects. Together the transactions add 20 net Bakken wells to our 2013 drilling program, in addition to other well completion activities, and eliminate 11 Eastern Region wells."
The acquisition includes 45,167 net acres (77 percent held by production) located along the Nesson Anticline in a jointly developed area of mutual interest (AMI) between Continental, as operator, and Samson. As a result of the acquisition, Continental's average working interest in the AMI acreage increased to 71 percent, compared with the previous working interest of 46 percent.
The balance of the acquired net acreage (74,051 net acres) is primarily located immediately west of the AMI acreage and is 40 percent held by production. Subsequent to the acquisition, Continental has an average working interest of 34 percent in the non-AMI area, but it will operate a majority of this acreage, due to the distribution of its ownership.
The Company noted that the acquisition has two strategic elements.
In the AMI acreage, Continental is focused on accelerated development:
In the non-AMI acreage, Continental's strategic focus is expansion through exploration and new technology. The Company is already in the process of expanding and de-risking the non-AMI area, where it previously had ownership:
Finally, Continental believes the entire acquisition area of 119,218 net acres has potential for deeper Three Forks development, based on three strategically placed cores taken in 2011.
"This is a classic bolt-on acquisition, from a number of perspectives – strategic, tactical and financial," said Rick Bott, President and Chief Operating Officer. "It fits nicely into our deeper bench Three Forks de-risking plan, and we expect it to add immediate value. Within the next 30 days we plan to spud the first of 10 wells in the northern region, targeting the deeper benches to confirm commercial production and appraise our down-spacing concept, so we can quickly leverage operational efficiencies with pad drilling."
Revised 2013 Guidance
* Excludes acquisition capital expenditures
"The net effect of the two transactions should enhance our cash margins," said John Hart, Senior Vice President and Chief Financial Officer. "We're funding the acquisition at attractive rates from our existing revolver and continue to maintain strong liquidity for funding operations."
Continental recently increased the borrowing base for its revolving credit facility to $3.25 billion, from the previous base amount of $2.75 billion. The Company currently has commitments of $1.5 billion under the revolver.
About Continental Resources
Cautionary Statement for the Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
The Company cautions readers that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control, incident to the exploration for, and development, production, and sale of, crude oil and natural gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating crude oil and natural gas reserves and in projecting future rates of production, cash flows and access to capital, the timing of development expenditures, and the other risks described under Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, registration statements and other reports filed from time to time with the SEC, and other announcements the Company makes from time to time.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, the Company's actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company, or persons acting on its behalf, may make.
Except as otherwise required by applicable law, the Company disclaims any duty to update any forward-looking statements to reflect events or circumstances after the date of this press release.
SOURCE Continental Resources