Increased oil production and strong prices combined to help Oklahoma City-based Continental Resources Inc. top the Oklahoma Inc. list of best-performing companies for the third time in five years.
In October 2010, Continental set a goal of tripling its crude oil reserves and production from 2009 levels within five years. The company now expects to reach the goal by the middle of next year, more than 18 months early.
“To beat our five-year goal of tripling production and doing it 18 months ahead of time was beyond our expectations,” said CEO Harold Hamm. “We were able to do it because of the quality of our assets in North Dakota and because oil prices have held up over the past three years.”
The production growth fueled an 183 percent increase in revenues and a 715 percent increase in earnings per share from July 2011 to June 2012, leading Continental to surge to No. 1 on the Oklahoma Inc. list, up from No. 21 one year ago.
To celebrate meeting the five-year goal 18 months early, Continental last month set a new goal of again tripling production and reserves, this time from 2012 levels by the end of 2017.
Much of the growth has been fueled by the success of the Bakken formation in North Dakota and Montana. Continental is the largest player in the area and owns a stake in more than 30 percent of the more than 5,000 wells drilled in the formation.
“We call the Bakken the king of the tight oil fields,” said Jack Stark, Continental's senior vice president of exploration. “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 in October unveiled its South Central Oklahoma Oil Province, known at Continental as SCOOP. The area includes parts of Carter, Stephens, Grady and Garvin 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,” he said.
The new field already has drawn the attention of Wall Street.
“Just like in anything else, diversification is positive,” said Rehan A. Rashid, analyst with FBR Capital Markets in Washington. “For investors, the Bakken is great. But if you add the diversity of another field, it's much better for me to be able to invest in the company that has something more than just one project area.”
Even though the new goal is ambitious, analyst Gail Nicholson said, she expects the company to meet the new production marks and continue growing.
“The management team members are very intelligent and are very good at planning everything out to make sure they have the personnel, infrastructure and everything else to support their efforts,” said Nicholson, an analyst with KLR Group in Tampa, Fla.