Company's Bakken Proved Reserves Almost Double, Exceeding a Half-Billion Barrels of Oil Equivalent
58 Percent Estimated Production Growth Achieves 2012 Target.
Continental Resources, Inc. increased its year-end 2012 proved reserves to 785 MMBoe (million barrels of oil equivalent), a year-over-year gain of 54 percent. With the 2012 increase, Continental has grown proved reserves at a compound annual growth rate of 45 percent since year-end 2009.
Continental's 2012 proved reserves had a net present value discounted at 10 percent (PV-10) of $13.3 billion, a 45 percent increase over the PV-10 of $9.2 billion for proved reserves at year-end 2011. Proved reserves growth in 2012 primarily reflected strong production growth in the Bakken play of North Dakota and Montana, which Continental believes is the nation's premier oil play. Continental is the largest producer and leaseholder in the Bakken, with approximately 1.1 million net acres. The Company has also accelerated production growth in its South Central Oklahoma Oil Province (SCOOP), an oil- and liquids-rich play in Oklahoma.
Thirty-nine percent of Continental's total 2012 proved reserves, or 309.0 MMBoe, were proved developed producing (PDP), compared with 40 percent of year-end 2011 proved reserves. Crude oil reserves represented 72 percent of 2012 total proved reserves, a significant increase over year-end 2011, when crude oil accounted for 64 percent of the Company's 508 MMBoe in proved reserves. The higher percentage of crude oil proved reserves in 2012 was accomplished despite two crude-oil concentrated divestitures.
Continental currently operates 85 percent of its total proved reserves, compared with 86 percent at year-end 2011. "We continue to increase our concentration in high-value, high-growth, crude oil assets, especially in the Bakken," said Harold Hamm, Chairman and Chief Executive Officer. "We are growing the value of our Bakken assets through strategic acquisitions, exploration, and the expanded use of pad drilling, which should improve efficiencies and translate into even better rates of return." Through acquisitions and leasing, Continental increased its Bakken leasehold by 24 percent in the past year, from 915,863 net acres at year-end 2011 to 1,139,799 net acres at year-end 2012.
The Company is also leveraging the increased demand for high-quality Bakken crude oil at U.S. refineries. "We have more than adequate pipe and rail capacity out of the basin at this time, so we can move our production to the most advantageous markets," Mr. Hamm said. "Realizing the Bakken's full potential is essential to our five-year plan to triple production and proved reserves by year-end 2017, while increasing operating margins."
Strong Production Growth
Continental's 2012 production totaled 35.7 MMBoe, a 58 percent increase over production of 22.6 MMBoe for 2011, in line with the Company's production growth guidance for 2012. Estimated fourth quarter 2012 production was 9.8 MMBoe, or 106,831 Boe per day, a 42 percent increase over fourth quarter production for 2011. The Company deferred some fourth quarter well completions to stay within its capital expenditure budget for 2012. Fourth quarter 2012 was the 19th consecutive quarter in which Continental has increased production compared with the immediately previous quarter. Based on continued production growth, as well as an acquisition and a divestiture announced December 20, 2012, Continental's current production is approximately 116,000 Boepd.
Increased Proved Reserves
Continental's 2012 proved reserves in the Bakken totaled 564 MMBoe, almost double proved reserves in the play at year-end 2011. The Company's Bakken proved reserves had a PV-10 of $9.9 billion at year-end 2012. Other significant components of year-end 2012 proved reserves included the SCOOP play in Oklahoma, with proved reserves of 63 MMBoe (PV-10 of $955 million) and the Red River Units, where proved reserves increased in the past year to 78 MMBoe (PV-10 of $2.0 billion).
Exploration and development activity was the primary driver in the Company's 2012 proved reserves growth, adding 234 MMBoe of proved reserves in the year, of which 27 percent were PDP and the remainder PUDs (proved undeveloped reserves). Also notable was the fact that the Company for the first time booked proved reserves in lower benches of the Bakken Three Forks formation, with the recognition of three PDPs and 11 PUDs in 2012. Continental has completed two wells in the Three Forks second bench and one well in the third bench. Traditionally operators in the play targeted the Middle Bakken zone above the Three Forks and only the first bench of the Three Forks zone.
Ryder Scott Company, L.P. evaluated properties representing 98 percent of the Company's proved reserves and 99 percent of Continental's PV-10 at year-end 2012, with Continental reserve engineers evaluating the remaining properties.Continental has two major exploration/appraisal programs planned for 2013. The Company is testing productivity of the lower Three Forks benches with a 14-well program at locations across the play. In addition, the Company has initiated the first of four increased density pilot programs that will involve multiple wells in the Middle Bakken and the first three benches of the Three Forks zone, to test the appropriate density for full development. Successful results from these programs would prove commercial productivity and could significantly impact future reserve bookings.
The Company expects to begin reporting results from new lower-bench productivity tests quarterly over the next 12-to-18 months."2012 was a good year for Continental. We completed the move of our headquarters to Oklahoma City, and we increased our focus by selling mature properties and redeploying capital to higher growth-rate assets," said Rick Bott, President and Chief Operating Officer. "We have expanded our land position, increased production, increased proved reserves, embarked on an ambitious exploration/appraisal program, retooled our marketing efforts, secured capital to fund our ongoing growth, and continued to build our leadership and technical staff.
"As we begin 2013, we see multiple catalysts and opportunities to enhance the value of our operations, particularly with these lower Three Forks programs and further delineation of our SCOOP acreage. 2013 looks to be as exciting as 2012," Mr. Bott said.
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