Filed under: CEO Insights
If you are opposed to the continued use of fossil fuels in the world, then you are not in the position to embrace the modern-day renaissance of oil and natural gas in America.
Since President Obama’s election three and a half years ago, he and his administration have done everything in their power to stop fossil fuel usage, including a carbon tax, increased federal regulations, delays in federal permitting, infrastructure permitting denials for the Keystone XL Pipeline, capital starvation for drilling by the elimination of intangible drilling costs, and depletion allowance. All of these actions are designed to result in higher costs at the pump for the consumer. At the same time, there are billions of dollars in subsidies being given to solar, wind and all other alternative sources of energy.
In short, the President is opposed to drilling for oil and gas to supply America’s needs and future. I have been in this business for over 45 years and I can assure you there just isn’t any way to coax oil and gas from the rocks they are in to bring them to the surface for consumption without drilling a well!
The President is faced with a situation today which even he doesn’t have the power to stop. I will just call it the modern-day American Energy Renaissance. This renaissance was brought about by independent producers in the United States and Canada. It is called precision horizontal drilling. This technologic breakthrough over the past two decades has resulted in the ability to place a wellbore or drainage lateral in a thin-bedded rock formation of 10-15 feet of producing formation exposed to the wellbore for two miles or more. You now have 9,000-10,000 feet of producible wellbore. In the case of Continental Resources’ Cedar Hills Field in Bowman County, North Dakota, this technique was all that was required to create wells in an oilfield with an ultimate recovery of 250 million barrels.
Horizontal drilling has caught on quickly; 98% of North Dakota wells are horizontal and about 70% of the rest of the wells in America in large resource plays across the country are drilled horizontally. Natural gas supply has soared from estimates of a 10 year supply to more than a 100 year supply.
Since 2005, oil production in America has been increasing instead of declining. The U.S. now leads the world in the discovery of new oil reserves. Ironically, President Obama wants to take credit for this magnificent achievement, but, government had nothing to do with it! Continental worked with other small, independent oil companies for over 15 years to break the code and bring the great Bakken oil production to its current level. George Mitchell spent 16 years breaking the code on the Barnett Shale gas play which revolutionized natural gas resource plays. Governmental research and aid was non-existent and our energy policies continue to hinder our efforts even today.
Continental and other operators have de-risked this gigantic Bakken oil resource play that covers 9 million acres (or 15,000 square miles) through drilling wells across the Play. However, out-of-date government reserve practices limit the extent of proven reserves to only include direct off-sets in contact with known proven production if these can be drilled in five years. These reserve practices were designed for conventional reservoirs, not widespread resource plays covering entire productive basins. These reserve limitations are at best out-of-date and perhaps even archaic. They count U.S. oil and gas reserves at just 2% of the world’s total despite the fact that the U.S. is currently third in the world in oil production (behind only Saudi Arabia and Russia). The limitations on reserves in America would lead one to believe our future oil potential is insignificant when in fact it is renowned and surging ahead!
Yes, the American energy renaissance is both powerful and real. This renaissance is capable of restoring American energy independence. Currently we are supplying 58% of our petroleum needs. This is up from 40% in 2006 when we were importing 60% of our needs. We have come a long way quickly and it is my conviction that in the next five years we can add another 3 million barrels per day of oil production. DEPA (the Domestic Energy Producers Alliance) has declared that the Americas, North and South, could be energy independent in the next decade.
The challenge is huge, but achievable. Energy independence cannot be realized without new crude oil pipelines, other infrastructure. The Keystone XL Pipeline and others need approval now, not continued delays. Producers need regulatory stability, not threats and lawsuits by the Department of Justice, nor increased regulations from all governmental agencies.
The rewards can be great, and include:
Stabilized Gasoline Prices. Sufficient domestic crude oil supply will both lower prices and provide stability.
National Security. We will not be at the mercy of unfriendly regimes whose interests conflict with our own.
Balance of Trade Correction. This means we keep our money in America.
American Jobs. The energy sector is the only bright spot in the job market for the past three years that can be illuminated to include an additional one million U.S. workers employed. Plentiful energy entices manufacturing back to the U.S. to take advantage of our superior workforce.
American Wealth Creation. U.S. steel companies in Ohio and Pennsylvania roll the pipes used in oil and gas. Detroit benefits in the sale of pick-ups and trucks used in the industry. American companies benefit, royalty owners benefit, states benefit, and the U.S. government benefits because good things flow from American Oil.
The Psychological Uplift of Energy independence is perhaps the largest reward of all. Energy independence would free us from OPEC’s dominance and influence. We would be producing for ourselves and using U.S.-produced oil and gas to power our future.
Although long overdue, the United States can now take control of its own destiny with a real energy policy and purpose. This will be a crucial issue in this election and I believe Mitt Romney is the candidate who can help us turn our energy potential into reality. We have everything to gain as we follow this road to progress and prosperity. Our very way of life is at risk if we do not.
Filed under: CEO Insights
I have been quoted with saying that of all the oil fields in North America, there’s just one Bakken, and I’ve believed it since Continental completed the Robert Heuer 1-17R in Divide County in 2004. The Heuer was the the first commercially successful well in the North Dakota Bakken to be both horizontally drilled and fracture stimulated, and that early success stirred interest and investment. That well grew the Bakken into the play we know today.
Now here we are seven years later and Lynn Helms with the Department of Mineral Resources has confirmed that North Dakota will become the third-largest oil-producing state in the nation by 3Q 2012. North Dakota surpassing California, and predicted to top Alaska’s Prudhoe Bay, too – that will put the Bakken just behind Texas.
Continental people are proud of our Bakken heritage and we keep investing to lead the way. We currently have 901,000 acres of mineral rights leased, and that’s more than anyone else. We’ve done well here and we’re doing right by the great people of the state by funding emergency care services as well as historical preservation. Our latest project, which we commemorated on October 27, celebrates the achievements of the North Dakota people, their hard work ethic and their vision for the land.
For those who could not join us, here are the words to the monument we dedicated at the Divide County Historical Society’s Pioneer Village in Crosby, North Dakota.
“With classic pioneer spirit, the people of Divide County, North Dakota have raised crops and livestock that have fed the world for the past century.
It was here in 2004 that the innovation and perseverance of modern-day oil pioneers at Continental Resources perfected the technology that opened the tremendous potential of the North Dakota Bakken oil field.
Today, along with food, this land is also producing oil that is energizing the nation. Divide County and Continental Resources are leading the nation into a future of greater energy independence.
In March 2004, Continental Resources’ Robert Heuer 1-17R well was the first commercially successful well in the North Dakota Bakken to be horizontally drilled and fracture stimulated.
Located 15 miles southeast of Crosby, this well ushered in a new era in the American oil industry by unleashing the development of the enormous Bakken oil field. This re-energized North Dakota’s economy, supporting families, schools and businesses.
Most importantly, it reversed the 40-year decline in American oil production, reduced America’s dependence on imported oil, and dispelled the myth that America was running out of oil.”
Robert Heuer and Harold Hamm commemorate the Heuer 1-17R in North Dakota.
Filed under: CEO Insights
The decision to relocate Continental Resources’ headquarters from Enid to Oklahoma City was necessitated by our unique leadership position in the Bakken oil field. Located in North Dakota and Montana, this enormous field of about 15,000 square miles or 9 million acres is responsible for pushing our corporate growth projections to 35-37 percent per year. We believe the estimated recoverable reserves to be 24 billion BOE, among the world’s largest oil fields. This represents decades of development ahead, and this development demands hiring technical industry specialists faster than we could in Enid.
It is because of the Bakken that Continental is on track after 1 ½ years to meet its goal of tripling in size over 5 years, from 2009 to 2014. There is only one Bakken in America and its impact will materially reduce our nation’s dependence on foreign oil.
Enid is a wonderful City and a great place to grow a successful business. Continental is simply the latest example of what can be achieved when you plant your roots in Enid.
We chose Oklahoma City because while it is home to numerous successful natural gas companies, Continental brings diversity to that group because we are an oil company. Our production and reserves are about 75 percent oil and we represent a new opportunity for industry professionals.
To meet our growth requirements, we see Oklahoma City as the nation’s Energy Capital of the Future and the place where we need to be.
Filed under: CEO Insights
Focus on the Future
Spring is a time of growth, of change and of new directions. It is an exciting time, full of life and possibility. We see this every year in nature, and this spring we are experiencing it at Continental.
On March 1 we presented a public offering of 10 million shares of common stock to accelerate our drilling program, fund our capital budget and repay all amounts outstanding under our revolving credit facility. On March 21 we announced that we will be locating our headquarters in Oklahoma City. On March 25, our strong stock hit a new 52-week high as it traded at $71.87, compared with a previous 52-Week high of $71.38. And now, as we move through May, we are presenting a redesigned Web site to help visitors learn even more about Continental with the new www.contres.com.
The pace of this change has been quick, but we have received outstanding press coverage for our initiatives and we have our people to thank. It is the strong team we have built at Continental, from our newest employees to our industry veterans, who have enabled our business to rapidly expand.
Commitment to the Present
As Isaac Asimov famously said, the only constant is change. At Continental, we choose to embrace this philosophy and the new opportunities that come with growth, and we also choose to remain committed to our present.
As we begin our transition from an Enid company to an Oklahoma-based company with an increasingly national presence, we stand behind our pledge to support the community that helped Continental reach our potential. We have a new look, location and long-term goal for growth, but we still hold the same hometown values.
I am proud to have built Continental in Enid and I see great things in both Continental’s and Enid’s futures.
Filed under: CEO Insights
While the national economy is still struggling, and investment by many companies has significantly decreased, Continental has been busy making improvements in some of our most important business areas – those that directly affect our people.
Equipping our people with the right tools enables Continental to confidently continue on the aggressive five-year growth path we have planned – a path which, after completing year one, we are on target to achieve. These tools include business and land management systems such as SAP Accounting and Quorum Land, continued focus on internal training in areas such as technical systems, health, safety and environmental programs, and the management skills we need to move from a smaller to a larger company. In 2010 alone we grew our team by approximately 25 percent to more than 500 nationwide.
Through it all, our culture has been the driving force for our success. Oil exploration requires creativity, curiosity and a willingness to take bold risks, like drilling where others have given up on finding oil. We continue to guide the company with a no-blame policy for exploration and innovation endeavors so we retain that tolerance for risk that has brought us our greatest finds. Our culture has made us who we are, and while we have plans to keep on growing, we plan to never outgrow the spirit that got us here.
While earning awards is not why Continental people come to work each day, it gives me a special pleasure to know that objective, credible organizations see the value in our efforts. Recently, we earned the title of “No. 1 Ranked Public Company in Oklahoma” for a second time in the last three years as reported in The Oklahoman by Standard & Poor’s for years-ending June 30, 2010 and 2008. Additionally, Forbes Magazine has ranked us No. 23 of “America’s 100 Best Small Companies.” These are accomplishments we can all celebrate.
Filed under: CEO Insights
Continental Resources is proud to announce that we are giving our Message From The CEO a 2.0 upgrade. We are transitioning to Harold Hamm CEO Insights, a new resource for sharing the culture and philosophy behind the business news you’ve come to expect.
We had an excellent meeting with investors and equity analysts October 12 at Continental’s Investors Day, which we held at the historic Skirvin Hilton Hotel in downtown Oklahoma City.
Almost 100 invitees attended the event, and they had the unusual opportunity to get the Continental story first-hand from our geology, land, drilling and operations team-members, representing the Anadarko Woodford, Bakken and Niobrara plays. It was a long but very productive day – in the morning, we had presentations on each play with plenty of time for Q&A, then we had more time over lunch to discuss individually our plans for developing these three strategic plays, which we expect to drive Continental’s growth for the next decade and beyond.
While the theme of the event was “Drilling Down in the Anadarko Woodford,” we shared a thorough review of the geology, economics and growth prospects for each play, ending with a summary of our 2011 capital expenditure budget, our plan to grow production 30% in 2011, and our goal to triple Continental’s production and proved reserves by year-end 2014.
It was an exciting and gratifying day, and we concluded by taking two buses of analysts and investors on a tour of the Anadarko Woodford play, which really popped their eyes open as to the aerial extent of the overall play. They didn’t expect to see the amount of drilling and well-completion activity that has already ramped up just 90 miles west of Oklahoma City. It’s quite a sight.
In short, we showed them who Continental is, beyond the top executives who normally meet with Wall Street investors. They heard from long-term key hands like Neil Olesen and Ken Kerrihard, but also from some of our newer, younger people, like Ola Adisa, Andy Rihn and Matt Callaway. We even talked our sage reservoir expert Archie Taylor into getting up on stage to present, and he knocked it out of the park!
The most gratifying aspect of the event was the many investors and analysts who came up to me and other Continental people afterward to tell us what great insight they now have on who Continental is and how we operate. They loved the obvious shared commitment and excitement of the challenges that we face in achieving our goals.
One investor, Phil Meyer, told me, “Harold, every company talks about teams, but it’s clear that you guys really operate that way. This has been really, really impressive. It’s no wonder that Continental has been so successful.”
Yes, that’s who we are, and I was very proud to see the teams demonstrating this to our investors. As I told our investors, “I may be the largest investor, but I’m still an investor just like you. Today I wanted you to see why I’m so excited to be invested in Continental.”