Continental Resources (NYSE:CLR) is putting substantial capital into developing the Woodford Shale in Oklahoma, as the company tries to accomplish its goal of tripling proved reserves and production by 2014.

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Not So Little
The Woodford shale doesn't get as much attention from investors as better-known shale plays, like the Eagle Ford or Haynesville Shale, but the industry is quite active here. There are currently 61 rigs operating in the Woodford Shale, and more than 1,200 horizontal wells have been completed to date here. Continental Resources is most active in the Anadarko portion of the Woodford Shale, where the company has approximately 251,000 net acres under lease.

Continental Resources History
Continental Resources first got into the Woodford Shale in late 2007 with the completion of the Hancock 1-36 H and Bart Wood #1 wells in the Cana area. The company currently operates six rigs in the play and plans to move to eight rigs by the end of 2010. Continental Resources has completed 8.2 net wells to date in the Anadarko Woodford Shale. The company has been testing the southeastern portion of the Anadarko Woodford Shale because of the high liquids content of well there, and just drilled its third test well here and reported production of 2.5 million cubic feet per day of natural gas and 88 barrels per day of oil.

Continental Resources has allocated $230 million to develop the Anadarko Woodford Shale in 2011. This is 19% of the company's total drilling capital budget of $1.2 billion. It estimates that its rate of return on wells drilled in the Anadarko Woodford Shale will range from 20% to 80%. The low end of the range is based on a NYMEX natural gas price of $3 per Mcf, and the higher return scenario incorporates a $6 per Mcf natural gas price. The analysis also assumes a $7.6 million cost to drill and complete a well, and an estimated ultimate recovery (EUR) of 7.1 Bcfe per well.

Continental Resources has found other prospective pay zones uphole from the Woodford Shale, and plans to test these formations some time in the future. The company also has a 47,000 acre position in the Arkoma Woodford Shale, but is only putting $9 million in capital here in 2011.

Other Players
Other exploration and production companies in the Woodford Shale include Cimarex Energy (NYSE:XEC), which has 100,000 net acres in the play. The company will spend $300 million to drill 35 net wells in 2010. Devon Energy (NYSE:DVN) is also making major investments in the Woodford Shale. During the second quarter of 2010 earnings conference call, management said that the play "offers some of the best economics among gas plays in North American shale."

Newfield Exploration (NYSE:NFX) has acreage in the Woodford Shale, but the company is shifting capital to other areas and has reduced its rig count from nine at the beginning of 2010 to the four currently operating.

The Bottom Line
The Woodford Shale is a target of Continental Resources, as the company embarks on its aggressive plan to triple total company production and reserves by 2014. (Before jumping into this hot sector, learn how these companies make their money. See Oil And Gas Industry Primer.)

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