Continental Resources Inc. on Tuesday unveiled its newest oil field in an area of southern Oklahoma that has produced some of the state's richest discoveries.
The South Central Oklahoma Oil Province, known at Continental as SCOOP, covers much of four counties in south central Oklahoma. The rock is an oil-rich portion of the Woodford Shale that lies beneath oil fields tapped by some of the state's biggest oil names, including Phillips, Noble, Hefner and Skelly.
“It's a huge opportunity for the company and another great asset for us because we're looking at an asset with rates of return that compete head-to-head with what we're doing in the Bakken” in North Dakota and Montana, said Jack Stark, Continental's senior vice president of exploration.
“With that as another opportunity that is widespread and repeatable, it gives us one more avenue of growth that has as much upside potential as we see in the Bakken.”
Continental made the announcement at its investor day presentation at the Cox Business Center in downtown Oklahoma City. The play includes parts of Carter, Stephens, Grady and Garvin counties.
The new field shares many similarities with Continental's biggest and best-known production area. Because of those similarities, the company already has an advantage in southern Oklahoma, Stark said.
“Technology transfer is a huge part of this business right now,” he said. “We're accessing what were once considered just source rock. To be able to do that takes technology.
“Anything we learn on one resource play can be transferred to the next play. There's always some adjustment here and there, but the bottom line is the technology we have perfected in the Bakken is directly transferrable to what we're doing here in the Woodford.”
At the end of 2010, Continental had 94,000 acres in the area with 3 percent held by production. Today, the company has more than 170,000 acres with 23 percent held by production, including 34 wells Continental has drilled in the area.
The new field drew praise from analysts and investors attending the presentation.
“I think the SCOOP will be interesting,” said Gail Nicholson, an analyst with KLR Group in Tampa, Fla. “I don't think the market has included that potential in the stock price. People think of Continental as the Bakken. Coming out and explaining the oil potential of the SCOOP will cause people to start to think about what's there. They have a good acreage position there. They're ahead of the game.”
While Continental executives touted the new field as an area of future potential, the Bakken will continue to be the company's primary focus, Stark said.
“We call the Bakken the king of the tight oil fields,” Stark said. “It is so large and just like other good fields, it keeps getting bigger. We think the Bakken should be used as a template or standard for oil field development.”
Continental is the largest producer, driller and leaseholder in the Bakken. The company produced 22.2 million barrels of oil over the past year, has 576 net wells in the region and has identified at least 4,000 potential wells.
The increased position in both the Bakken and in southern Oklahoma is expected to help the company continue to grow, CEO Harold Hamm said.
Hamm set a new goal of again tripling its production to 108 million barrels of oil equivalent and proved reserves to more than 1.5 billion barrels of oil equivalent by the end of 2017.
Analyst Andrew Coleman said he was pleased to hear that Continental will fund its increased drilling budget without taking on large amounts of debt.
“Continental is one of my favorite stocks,” said Coleman, an analyst with Raymond James in Houston. “The pushback I get from investors is that they are spending a lot of money. But anytime you can get the growth out of the market without stretching the balance sheet, it's the right approach.”