Moody's Investors Service – the rating unit of Moody's Corporation (MCO - Free Report) – has upgraded leading Bakken oil producer, Continental Resources Inc. (CLR - Free Report) to investment grade. The rating agency also increased Continental's senior unsecured rating to Baa3 from Ba2.
The upgrade comes on the back of significant growth following the company’s success in the development of the Bakken and the South Central Oklahoma Oil Province (SCOOP) plays. The asset base has delivered and continues to provide stable returns and cash margins, which would enable the company to execute growth plans in the future.
Going forward, Continental Resources expects to increase total crude oil and natural gas production in the range of 26% to 32% in 2014. The company also expects average daily production of 170,000–180,000 barrels of oil equivalent (Boe) per day, with an exit rate of approximately 200,000 Boe per day for Dec 2014. Of the total production, 70% is expected to be crude oil.
Continental’s organic capital expenditure for 2014 is estimated at approximately $4.05 billion. The budget takes into account the ongoing trend of reduced well costs. The company has set a new goal to slash average operated Bakken completed well costs by 3% to 5% by the end of 2014.
Continental's 2014 budget reflects 400 net well completions (1,090 gross), with 94% located in its two key operating areas, the Bakken in North Dakota and Montana and SCOOP. The 2014 well count represents a 22% increase over current budgeted completions of 329 net wells in total for 2013.
Exploration drilling accounts for approximately $500 million of 2014 capital expenditures, a 16% increase over 2013's exploratory drilling budget. Exploration activity will focus primarily on continued density drilling tests in the Bakken, further testing of the lower Three Forks formation in the Bakken, and further appraisal and a density spacing test in SCOOP.
Oklahoma City-based Continental is an independent exploration and production company focused on the Bakken, Cana and Niobrara shale plays. It has leases on nearly 1.1 million acres in the Bakken Shale region.
The company operates in the North, South and Eastern regions of the U.S. Its North region is north of Kansas and west of the Mississippi river and comprises North Dakota Bakken, Montana Bakken, the Red River units and the Niobrara play in Colorado and Wyoming. The first two hold the maximum promise for Continental.
The Southern region includes Kansas and all properties south of Kansas and west of the Mississippi river, comprising the Anadarko Woodford and Arkoma Woodford plays in Oklahoma. The Anadarko and Arkoma Woodford plays are the second most important for the company.
Continental Resources currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Meanwhile one can look at better-ranked players in the energy sector like Abraxas Petroleum Corp. (AXAS - Free Report) and Harvest Natural Resources Inc. which sport a Zacks Rank #1 (Strong Buy).