Continental Resources, North Dakota’s second largest oil producer, announced that it will be cutting its budget for 2015 yet again amidst the persisting slump in oil prices. However, the company does anticipate continued production growth.
As reported by Reuters, last year Continental CEO Harold Hamm cancelled all of the company’s oil hedges. He called Saudi Arabia, the de facto leader of OPEC, a “toothless tiger” and placed his bets on an oil price rebound. Alas, oil prices have yet to climb significantly, which has spurred thousands of layoffs as well as budget reductions across the industry.
Continental’s goal for the remainder of the year is to save up to $350 million by reducing its North Dakota rig count from 10 to eight and temporarily halting the completion of most wells. In a statement, Hamm said, “We are reducing capital expenditures to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve.”
For 2015, the company plans to spend between $2.35 billion and $2.4 billion, compared to the previously forecast $2.7 billion. Continental Chief Financial Officer John Hart said, “We believe it is in the interest of shareholders to defer new production growth until we see stronger commodity prices.” The goal is to not spend more than the company takes in, but executives said oil prices would need to be above the $50 per barrel for this to happen. Hart added, “Obviously we are in a dynamic environment, and our outlook could change.”
Although the budget has been reduced further, Continental anticipates that its output will climb between 19 and 23 percent this year, thanks in part to increases in efficiencies and the use of new technology. The company now projects its output for 2015 to be between 200,000 and 215,000 barrels of oil equivalent per day (boe/d). Previous projections had the low end of its production guidance set at 210,000 boe/d, but because of delayed completions, that figure was reduced.
“We are pleased with our results year-to-date, and operating performance versus guidance remains strong, especially in terms of production growth and cost controls,” Hart said in a statement. “Annual production growth is expected to be toward the top end of our guidance range, even with deferred completions.”