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Continental Resources Reports First Quarter 2016 Results

Three New STACK Completions Further Confirm the Potential of Continental's Over-Pressured Meramec Position in Oklahoma2016 Production Guidance Raised to 205,000 ’ 215,000 Boe per Day with Higher Year-End Exit Rate of 190,000 ’ 200,000 Boe per Day; No Change in 2016 Capital BudgetFourth Density Pilot in SCOOP Woodford Flows at Combined Peak 24-Hour Rates of 87 Million Cubic Feet of Natural Gas and 3,928 Barrels of Oil per Day from Seven New WellsCompany Sells Non-Core, Non-Producing Wyoming Assets for $110 Million in April; Proceeds Used to Reduce Debt

OKLAHOMA CITY, May 4, 2016 /PRNewswire/ -- Continental Resources, Inc. CLR, +12.81% (the "Company") today reported a net loss of $198.3 million, or $0.54 per diluted share, for the quarter ended March 31, 2016. Adjusted net loss for first quarter 2016 was $150.5 million, or $0.41 per diluted share.

EBITDAX for first quarter 2016 was $314.6 million. Definitions and reconciliations of adjusted net loss, adjusted earnings per share and EBITDAX to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures can be found in the supporting tables at the conclusion of this press release.

"We started 2016 with record quarterly production, lower operating costs and excellent results in STACK," commented Harold Hamm, Continental's Chairman and Chief Executive Officer. "The resilience of our production has allowed us to increase our production guidance for 2016 without increasing capex. This reflects the quality of our assets and the success of our enhanced completion technology. Our new production guidance includes curtailing production approximately 10,000 Boe per day from early April through July. The majority of the reduced production is in STACK and SCOOP. We are managing production volumes for higher oil and natural gas prices that we expect in second half 2016."

Production Exceeds Expectations

First quarter 2016 net production totaled 21.0 million barrels of oil equivalent (Boe), or 230,800 Boe per day, up 3% from fourth quarter 2015 and 12% higher than first quarter 2015. Total net production for first quarter 2016 included 146,500 barrels of oil (Bo) per day (63% of production) and 506.0 million cubic feet (MMcf) of natural gas per day (37% of production).

Based on strong first quarter production, the Company today increased its production guidance for 2016. The Company expects to exit the year between 190,000 and 200,000 Boe per day, which is an increase of 10,000 Boe per day. Likewise, 2016 average production is now expected to be between 205,000 and 215,000 Boe per day.

The following table provides the Company's average daily production by region for the periods presented.










1Q


4Q


1Q

Boe per day


2016


2015


2015

North Region:







North Dakota Bakken


129,168


125,583


120,957

Montana Bakken


10,434


10,772


14,581

Red River Units


11,300


11,654


12,953

Other


649


902


681

South Region:







SCOOP


64,616


64,534


49,882

STACK/NW Cana


11,127


7,709


3,433

Arkoma


2,037


2,124


2,124

Other


1,471


1,658


2,218

Total


230,802


224,936


206,829

Over-Pressured STACK / NW Cana JDA

"A key factor driving our strong first quarter results is the exceptional performance of our over-pressured Meramec wells in STACK," said Jack Stark, President and Chief Operating Officer. "These wells are delivering some of the highest rates of return in the country. STACK has quickly become another premier growth platform for Continental Resources and our shareholders, potentially adding as much as 25% to the Company's net unrisked resource potential at current prices."

STACK/Northwest Cana production increased 44% to 11,127 Boe per day in first quarter 2016, compared to fourth quarter 2015. Continental has 11 operated rigs in STACK, after transferring one operated rig from SCOOP. Six of these rigs are targeting the Meramec formation, and five are targeting the Woodford formation in the Northwest Cana joint development area of STACK.

The Company reported three new Meramec completions in the over-pressured oil window of STACK. Initial 24-hour production test rates for these wells were as follows:

  • Foree 1-18-7XH flowed 1,411 Bo and 3.9 MMcf of natural gas (2,061 Boe) per day from a 7,200-foot lateral;
  • Bernhardt 1-13H flowed 810 Bo and 1.4 MMcf of natural gas (1,046 Boe) per day from a shorter 4,550-foot lateral, and
  • Quintle 1R-10-3XH flowed 1,559 Bo and 3.5 MMcf of natural gas (2,150 Boe) per day from a 9,850-foot lateral. Continental noted that the Quintle's flow rate is early and still climbing.

The Company also has five additional Meramec wells in STACK in various stages of completion, including the Gillilan 1-35-26XH, Verona 1-23-14XH, Madelin 1-9-4XH and Frankie Jo 1-25-24XH, which are located in the over-pressured oil window; and the Yocum 1-35-26XH well located in the over-pressured condensate window.

The Company's previously announced Meramec completions in STACK continue to produce at strong rates and pressures. Continental's first well in the over-pressured oil window, the Ludwig 1-22-15XH, which was announced in August 2015, has produced approximately 250,000 Boe (75% oil) in its first 270 days and continues to flow at restricted rates of 681 Boe per day (72% oil), with a tubing casing pressure of 1,600 psi on a 20/64" choke.

Continental's first over-pressured condensate well, the Boden 1-15-10XH, has produced approximately 240,000 Boe (28% oil) in its first 150 days and continues to flow at restricted rates of 1,267 Boe per day (26% oil), with a flowing tubing pressure of 4,700 psi on a 23/64" choke.

Completed well costs for Meramec wells in the over-pressured oil window of STACK have been reduced another 5%, to a targeted $9.5 million per operated well, based on efficiencies the Company has realized to date. Spud-to-TD drill times in first quarter 2016 averaged 30 days, down from an average of 44 days in 2015. At the current targeted cost of $9.5 million, the Company's economic model for a 9,800-foot lateral Meramec well in the over-pressured oil window delivers a 75% rate of return at $45 per barrel WTI and $2.25 per Mcf of gas, assuming an estimated ultimate recovery (EUR) of 1.7 MMBoe per well. The Company is targeting further cost reductions and efficiencies throughout the year.

Continental recently commenced drilling its first STACK density pilot at the Ludwig unit in Blaine County. The Ludwig density pilot is the first of three density pilots the Company plans to drill in 2016 to determine optimum well spacing for future field development. This will be an eight-well density test in the over-pressured oil window of STACK, including the original Ludwig 1-22-15XH and seven new Meramec wells, with four new wells in the Upper and three in the Middle Meramec, where the legacy Ludwig well is located. Wells will be spaced 1,320 feet apart in each horizon, and offset between horizons by 660 feet. Finally, an additional new well is planned for the Woodford formation in the Ludwig unit to facilitate micro-seismic monitoring and further develop the Woodford. Continental currently has four rigs drilling in the Ludwig density pilot and expects to announce results in fourth quarter 2016.

Continental added approximately 15,000 net acres to its over-pressured STACK leasehold in first quarter 2016, increasing its leasehold position to approximately 171,000 net acres primarily in Blaine, Dewey and Custer counties. Over 95% of the leasehold is located in the over-pressured STACK and approximately 70% of this leasehold is expected to be held by production at year-end 2016.

SCOOP Production

In first quarter 2016, total SCOOP net production averaged 64,616 Boe per day, slightly above fourth quarter 2015 and a 30% increase compared with first quarter 2015. SCOOP production represented 28% of the Company's total production in first quarter 2016, compared with 24% of Company production for first quarter 2015.

SCOOP Woodford net production averaged 55,474 Boe per day in first quarter 2016, or 86% of total SCOOP production. SCOOP Springer net production averaged 9,142 Boe per day, or 14% of total SCOOP production. The Springer formation is located approximately 1,000-to-1,500 feet above the Woodford.

Continental completed 6 net (20 gross) operated and non-operated wells in SCOOP in first quarter 2016, while operating an average of five rigs in the play. This includes 6 net (18 gross) wells targeting the Woodford formation and 0.2 net (2 gross) wells targeting the Springer.

SCOOP Woodford Enhanced Completions

As announced last quarter, the Company increased its EUR type curve for enhanced completed wells in the SCOOP condensate window by 15% to 2.0 MMBoe for a 7,500-foot lateral. The Company's SCOOP Woodford condensate enhanced completions have on average produced 35% higher 90-day rates and 40% higher 180-day rates, compared with offset wells completed with smaller volumes of sand. These results are approximately 5% higher than the earlier results reported last quarter.

"I am proud of our teams as they continue to increase production and improve well economics through our ongoing process for optimizing completion designs," said Gary Gould, Senior Vice President, Production and Resource Development. "We continue to apply enhanced completion designs on all new operated wells, by testing, for example, various proppant volumes, stage lengths and proppant sizes in order to determine the optimum completion design for each area in each play."

Two notable enhanced-completion step-out tests in the first quarter included:

  • Gretta 1-17-20XH in Carter County flowed at an initial production rate of 977 Bo and 9.4 MMcf of natural gas (2,546 Boe) from a 6,600-foot lateral; and
  • Sandy 1-29-32XH in Grady County flowed at an initial production rate of 440 Bo and 12.2 MMcf of natural gas (2,481 Boe) from a 9,900-foot lateral.

The Gretta is a significant step-out test, located approximately 37 miles south of the Newy unit in SCOOP Woodford, mentioned below. It and the Sandy have been producing less than 90 days, but the early production shows these wells are producing at rates above legacy offset wells.

Average completed well cost for operated Woodford wells is currently $10 million, which includes the incremental cost of enhanced completions. Continental expects to achieve a targeted well cost of $9.6 million for a 7,500-foot lateral well by year-end 2016. At the targeted cost and projected 2.0 MMBoe EUR, these Woodford wells would typically generate a 30% rate of return based on $45 per barrel WTI and $2.25 per Mcf of gas.

Newy: Fourth SCOOP Woodford Density Pilot Completed

Continental recently completed its fourth Woodford dual-level density pilot in the Newy unit. This was an eight-well density test, including seven new wells and the original Newy 1-24H well. To date the seven new wells have flowed at a combined peak 24-hour rate of 87 MMcf and 3,928 Bo per day (18,475 Boe per day). On a per-well basis, average peak production was 2,639 Boe per day (21% oil), which is in line with average peak per-well rates for the Company's three prior density pilots. The Company expects flow rates from the seven recent Newy wells will continue to increase to a higher final combined 24-hour peak rate as the wells continue to flow and clean up.

The Newy project was a dual-level density pilot in the SCOOP...


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