Continental Resources (NYSE:CLR) continued its industry-leading production growth in the first quarter of 2011 as it moved rapidly to develop the Bakken and Woodford formations on its properties. The company is attempting to triple production and reserves in a five-year period.
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First Quarter 2011 Recap
Continental Resources reported production of 51,663 barrels of oil equivalent (BOE) per day in the first quarter of 2011, up 34% from the 38,428 BOE per day in the same quarter last year. On a sequential basis, production increased 8%.
Despite this increase in production, Continental Resources reported a GAAP net loss of $137.2 million, or 80 cents diluted earnings per share (diluted EPS) in the quarter. This loss was caused by the company's mark to market of its derivative portfolio used to hedge the volatility of oil and natural gas prices. (To learn more, see Practical And Affordable Hedging Strategies.) This mark to market resulted in a non-cash charge of $369.3 million in the quarter.
Other companies were also hit with an unrealized loss on their derivatives portfolio during Q1 2011. Denbury Resources (NYSE:DNR) reported a non-cash loss of $172.3 million before taxes due to the change in fair value of the company's derivatives portfolio.
In 2009, Continental Resources established a goal of tripling the company's production and reserves by the end of 2014. This goal was to be met through developing the company's inventory of assets in North Dakota, Wyoming and Oklahoma.
Continental Resources achieved much of its production growth in Q1 2011 through developing the Bakken formation on its acreage in North Dakota and Montana. The company participated in 58 gross wells during the quarter and increased production by 67% on a year-over-year basis to more than 25,000 BOE per day.
The exploration and production industry is flocking into the Williston Basin in pursuit of oil assets to develop. Northern Oil and Gas (NYSE:NOG) is active in the basin and has plans to drill 40 net wells in 2011.
Continental Resources is also developing the Woodford Shale as part of its goal of tripling production and reserves over a five-year period. During Q1 2011, the company participated in 26 gross wells and reported production from the Anadarko Woodford Shale of 2,685 BOE per day.
Continental Resources is focusing much of its efforts on the Cana area of the Woodford Shale, as wells here produce liquids along with the natural gas. Cimarex Energy (NYSE:XEC) is also working in the Cana Woodford Shale and has participated in 212 gross wells here since entering the play in 2007.
Continental Resources is also involved in the Niobrara Shale and recently finished drilling its first well here. The well is currently flowing back fracturing fluid, and the company might release production results for this well in Q2 2011.
On Target to Triple Size by End of 2014
As one of the fastest-growing exploration and production companies, Continental Resources continued that production growth in Q1 2011. The company is on target toward its goal of tripling the company's size. (To learn more about the oil industry, see Oil And Gas Industry Primer.)
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