Continental eyes free cash flow from 2018 shale production

By Luke Geiver | February 20, 2018

Continental Resources has 800 to 900 reasons why it believes it can be set apart from other exploration and production companies in 2018. At $60/b oil, the Oklahoma City-based team with major shale operations in the Bakken and the SCOOP/STACK, the company will generate $800 million to $900 million in free cash flow. Even if oil trades in the low-to-mid $40’s, Continental will remain cash flow neutral. And, for every $5/b change in oil, the company could generate an additional $250 to $300 million. A $0.10 change in Henry Hub natural gas prices will yield a cash flow impact of $5 million to $10 million.

“This year Continental expects to set itself apart by generating up to $900 million of free cash flow while delivering top-tier production growth,” Harold Hamm, chairman and CEO said. The majority of free cash flow will be used for paying down debt, strengthening the balance sheet or increasing shareholder value. Plans and outlook for 2019 have also been discussed and Continental believes free cash flow generation will be similar to 2018 two years from now with a yearly budget that is a bit higher. This year the projected return on capital employed will range between 10 and 15 percent.

In 2018, Continental will spend more than three-fourths of its drill and completion budget in the Bakken and SCOOP Springer assets. The overall D&C budget will total $2 billion with the overall budget set for $2.3 billion. In addition to drilling and completion activity, Continental has plans for leasehold work, workover activity and facilities.

The Bakken team will run six drilling rigs and approximately six completion crews. The teams will work to drill 142 new wells and complete nearly 190 wells. The ratio of wells awaiting sales by the end of the year and the wells in progress will be back to a normal working backlog, according to the company.

In Oklahoma, Continental will run 15 drilling rigs with more than half targeting the STACK’s Meramec and Woodford formations. Between four and five completion crews will be active for the year and by year’s end, 118 wells be in operation.

Later this week, Continental will hold a call with investors to talk about 2017 and 2018 highlights.