The global oil market is in for some big changes this fall if oil tycoon Harold Hamm’s crystal ball proves accurate.
During a quarterly update conference call on Aug. 6, the Continental Resources Chairman and Chief Executive Officer predicted an “energy paradigm shift will have profound long-term consequences worldwide starting with the U.S. crude export ban being lifted so America can finally compete freely in world energy markets.”
He foresees the world demand growth and low oil prices rebalancing eventually; meanwhile, recent world events like the Iranian nuclear agreement and the Organization of Petroleum Exporting Countries (OPEC) actions have shifted momentum to an all-time high.
“OPEC has announced plans to reduce production beginning in September and we think that may be the first of many,” Hamm said.
OPEC output dropped in July by 362,000 barrels according to a Bloomberg survey, but it still continues to produce two million barrels per day above its quota, analysts say. U.S. oil production is also dipping. On Aug. 5, the Energy Information Administration showed that U.S. crude inventory fell 4.41 million barrels which is three times more than expected.
Hamm said oil exports “make too much sense economically, especially as this administration moves to lift restrictions on Iranian oil exports.” He added that lifting the ban has bipartisan support in by both the House and Senate. Hamm was confident in his forward-looking statements, but he exhibited the same certainty in November when Continental chose to monetize nearly all of its oil contracts through 2016. Back then, Hamm said he felt oil prices were at “the bottom rung … and we’ll see them recover pretty drastically, pretty quick” only to watch prices fall even further over the past eight months.
Bakken production to drop off
Total U.S. production is expected to further decline by the end of 2015 and into 2016 if oil prices remain low, and Continental announced it would cut its rig count in the Bakken by another 20 percent in that environment. It is currently running 10 of its 25 total rigs within the region. However, Continental’s second quarter production was up 10 percent over the first quarter and continuing to increase. The company said it is “pretty impressive” since it had slashed rig count in half at the end of 2014. With greater efficiencies and enhanced completions in the Bakken, Continental is targeting 800,000 barrels of oil equivalent per well of estimated oil recovery this year compared to the 550,000 barrels it averaged in 2014. This production boost has helped cut development costs in half.
“For every dollar spent on Bakken wells in 2015, we’re getting 80 percent more reserves than in 2014,” said Jack Stark, president and COO.
However, Continental’s Bakken production will begin to taper off, the company said, as it enjoys higher rates of return and more opportunities to hold acreage by production within its projects in Oklahoma. Hamm said the company will wait for the market to rebalance before it focuses on growth in the Bakken again.
“These reserves and resource plays are not going anywhere,” Hamm said. “We all have a long future.”