Climbing oil prices have helped push a surge in profits and revenues for Continental Resources Inc. in the first quarter, and with that news, the company kicked off an ambitious multi-year oil development program targeting Oklahoma’s STACK & SCOOP plays and announced Project Springboard.
Q1 proved solid for Continental with surging production in two areas where Continental operates, the North Dakota portion of the Bakken Shale and the STACK, helped offset declines elsewhere. The company activated six rigs in the Bakken in the first quarter and plans to maintain that level through the rest of the year. In the SCOOP, Continental had eight operated rigs working, five targeting the Springer formation, one targeting the Woodford Shale and two targeting the Sycamore formation.
Continental Resources reported a first-quarter profit of $234 million, or 63 cents a share, up from a net income of $469,000, or less than a penny a share, in the year-ago quarter. Adjusted for one-time items, the company had a net income of $255 million, or 68 cents a share, up from $154 million, or 41 cents a share in the first quarter of 2017.
Revenues surged to $1.14 billion, up from $685 million one year ago. The company reported earnings before interest, taxes, depreciation, amortization and drilling expenses of $876 million, up from $482 million in the year-ago quarter.
Continental produced 287,410 barrels of oil equivalent per day in the first quarter, up 34 percent from one year ago.
In an effort to accelerate development of its oil and liquids-rich assets, Continental said it would move three of the five rigs deployed in the natural gas window of the STACK, on the grounds that the acreage, which is part of its joint development agreement (JDA) with SK E&S, is “now essentially held-by-production.” Two rigs are to be moved to the over-pressured oil window of the STACK, while one rig will be set up in the over-pressured condensate window of the SCOOP. SK E&S, a subsidiary of South Korea’s SK Group, formed the JDA with Continental in 2014 to focus on natural gas targets in the northwest portion of the Cana-Woodford Shale.
During the company’s Q1 2018 Earnings Presentation, Continental Resources announced the onset of full-scale development in the SCOOP. Their flagship project, Project Springboard, is located just outside of Chickasha, Oklahoma in Grady County and contains some 70 square miles (about 45,000 acres) of contiguous leasehold and nearly 400 million barrels of oil equivalent. Spread across 6 townships, wells drilled in the Springboard Project will target the Springer, Woodford and Sycamore formations in two phases with Springer wells in the first phase and Woodford and Sycamore wells in the second.
Thus far, of the 29 planned units, two units appear to have been developed, six are in progress, and the remaining 21 are awaiting further development. Three rigs are currently on location in the northern portion of the project drilling on the Birt and Lowers leases. Another two rigs will join the project mid-year according to Continental.
Continental has been active in this area since 2009. Nearly 100 permits have been approved within the Springboard footprint, mostly for New Drills. They’re clustered east to west along section lines near the project area core. Today, 11 of the 100 are currently active.
The 4-well “Triple H” is the most recent unit to be developed. The wells targeted the Springer formation and drilled with 2-mile laterals. The combined 24-hour IP of the four wells was 6,065 barrels of oil equivalent, 88% of which was oil.
During the earnings call Thursday to discuss Q1 2018, President Jack Stark said the Sycamore and Woodford were “very oil-rich,” and the company expects to see 60-80% of production weighted toward oil. “Keep in mind this is the area where we’re actually going to be able to reduce our costs for doing a Woodford well by $1 million,” Stark said. “Our teams came in and have laid out just a beautiful picture of what it takes to do that and how we accomplish this. It’s been tested and we’re ready to implement that type of drilling design going forward… “We’re going to be able to really drive the cost down and increase the efficiencies like never before from a drilling and completion standpoint. On top of that, the infrastructure that we’re going to be putting in there — for gathering and distributing water — is going to be there and be able to be used as we move into development of the Woodford and Sycamore.” Stark also mentioned that Continental is working on “another project of pretty much similar size and scale and working interest that would be up after this. It is in the SCOOP.”
Given Continental’s announcement of Project Springboard and it’s robust drilling plan, the timing of the company’s recent agreement with Enable Midstream couldn’t have been better. The Project Wildcat Pipeline secures takeaway capacity for Continental’s gas production from its STACK/SCOOP wells facility the growth and development of its oil projects.
More on this in an upcoming feature article on OklahomaMinerals.com. Other Contributors to this article: Julie Parker and Gib Knight