Continental Resources plans to spend two thirds less on capital expenditures this year compared to last year’s spending plan. The Oklahoma City company made the announcement Tuesday it had a budget of $920 million in non-acquisition capital expenditures which is a 66 percent reduction from 2015’s $2.7 billion budget. Continental expects its average production to be approximately 200,000 barrels of oil equivalent (Boe) per day this year.
“Continental’s 2016 budget confirms our intense focus on cash flow neutrality,” said Continental Chairman and Chief Executive Officer Harold Hamm. “Strategically, we are dedicated to preserving the value of our premier assets and building operational efficiencies in preparation for crude oil prices to stabilize and start recovering later this year. Fortunately, our lean organization and strong liquidity have us well-positioned to manage through this period until the recovery begins.”
When the final totals are tallied for 2015, Continental expects its actual non-acquisition expenditures to be approximately $2.5 billion. That’s about $200 million under budget. The company also expects its average production for 2015 to be around 221,700 Boe per day. Continental will report full year 2015 financial results on February 24, 2016.
Looking forward, Continental believes its first quarter 2016 production will be around 210,000 to 220,000 Boe per day. By the end of the year, the company expects to ramp down production to the 180,000 to 190,000 Boe per day range.
If West Texas Intermediate crude prices average $37 a barrel for the year, Continental expects to be cash flow neutral. If it hits $40, the company estimates 2016 results would be cash flow positive in excess of $100 million.
“Our 2016 budget reflects the improved operating efficiencies and well performance we achieved over the past year,” said Continental President and Chief Operating Officer Jack Stark. “These accomplishments are a testament to the quality of Continental’s assets and operations, which continue to provide us strategic optionality to deal with the volatility in today’s energy market.”
Continental also has the flexibility to adjust capital expenditures this year if necessary.
“We will continue to focus on our investments in our core operating areas and expect to realize further efficiency gains and cost reductions as we optimize our portfolio,” said Senior Vice President and Chief Financial Officer John Hart. “In terms of our budget, each $5 move in WTI prices impacts our full-year cash flow by $150 million to $200 million.”
While 35 percent of Continental’s 2016 capital expenditures will be in North Dakota’s Bakken, the company also plans to spend 28 percent of its budget in the SCOOP play, 15 percent in the STACK play, and seven percent in the Northwest Cana Joint Development area in Oklahoma. Continental will operate a total of 19 wells this year, down from 23 in 2015.
