Continental’s Reserves Try to Keep Pace with Surging Production



Growth in reserves

Continental Resources (CLR), an independent crude oil and natural gas producer, witnessed reserves growth over the past three years. According to the latest data available, its total reserves increased 24.6% to 1,351 million barrels of oil equivalent (or MMBoe) in 2014, from 1,048 MMBoe in 2013. In 2013, reserves jumped 38% from the previous year.

In comparison, Pioneer Natural Resources’ (PXD) reserves decreased 5.6% in 2014 over the previous year. Concho Resources’ (CXO) reserves increased 27% during the same period. Continental Resources is 1.4% of the Energy Select Sector SPDR ETF (XLE). It’s also 0.25% of the iShares U.S. Energy ETF (IYE).

In 2014, 64% of Continental Resources’ reserves was crude oil. The rest was natural gas and natural gas liquids (or NGLs).

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Reserves-to-production ratio

Continental Resources’ (CLR) 2014 crude oil and natural gas production increased 28% over 2013. It recorded a 39% increase in 2013 over 2012. Continental Resources’ surging production growth was stronger than its reserves growth in 2014. This led to its reserve life, or reserves-to-production ratio, falling to 21.3x, from 22.0x in 2012.

In other words, it would take Continental Resources around 21.3 years to deplete proved reserves under the 2014 production rate, all other things remaining constant. Read the previous part of this series to know more about Continental Resources’ production trend.

How Continental Resources increased energy reserves

In the past two years, Continental Resources has been adding to its reserves, primarily through the extension of existing oilfields and the discovery of new fields. There has been a limited asset purchase and sale effect to its reserves. In 1Q15, the company started concentrating on well completions. Its 2015 capex (capital expenditures) program focuses primarily on development drilling in the North Dakota Bakken and SCOOP (South Central Oklahoma Oil Province) plays to maximize recoveries and returns.

In the following part, we’ll discuss Wall Street analysts’ recommendations on the upstream companies we’ve covered in this series.


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