Continental Resources (NYSE:CLR) raised production growth guidance for 2012 on the back of the company's aggressive development of the Bakken and Woodford plays. The company also hiked capital spending for the year as it faced rising costs in its operational area.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers

Production Growth
Continental Resources reported production of 94,852 barrels of oil equivalent (BOE) per day during the second quarter of 2012, up 76% on a year over year basis. This production continued to grow and reached 100,000 BOE per day in June 2012.

The strong results has compelled Continental Resources to raise production growth guidance for 2012, with the company expecting growth to range from 57 to 59%, up from the previous range of 47 to 50% growth.

This is phenomenal growth and puts Continental Resources in the top growth tier in the oil and gas industry. Another fast growing operator is Range Resources (NYSE:RRC), which reported year over year production growth of 42% in the second quarter of 2012 as the company moved to develop the Marcellus Shale and other plays in the United States. The company also raised its 2012 production growth estimate and now expects growth of 35% for the full year.

SEE: Oil And Gas Industry Primer

Capital Spending
The increase in production growth guidance for Continental Resources was accompanied by a $700 million increase in capital spending in 2012, bringing the total budget to $3 billion for the year.

Continental Resources indicated that the extra funds would be used to accelerate development of the Bakken and to increase working interests in wells here and in the Anadarko Basin, where the company is developing the Woodford Shale.

The company also said that the company is facing higher drilling and completion costs for Bakken wells in 2012, with operated wells averaging $9.2 million. CLR is seeing even higher costs for non-operated Bakken wells, with an average cost of $11.3 million.

Continental Resources has reduced its operated rig count from peak levels reached in late 2011 and early 2012. The company is currently operating seven rigs in the Anadarko Basin, down from the previous level of 16, and has reduced its Bakken rig count from 26 to 19.

This cost trend goes contrary to what some other operators are experiencing in the onshore United States. Concho Resources (NYSE:CXO) reported that the company saw a softening of prices for drill pipe, pressure pumping equipment and land rigs in the Permian Basin during the most recent quarter.

SEE: Oil: A Big Investment With Big Tax Breaks

Other Capital Spending Hikes
Other companies have also announced higher capital spending in 2012 as they seek to accelerate development of various oil and gas properties. Callon Petroleum Company (NYSE:CPE) raised its 2012 capital budget by $13.5 million, or approximately 10%, boosting total spending to $152.5 million for the year. The company is active in the Permian Basin and will use the extra funds on infrastructure needed to transport and process production as well as leasehold acquisitions to set up for future growth.

The Bottom Line
Continental Resources is growing even faster than it expected and will no doubt achieve its long-term goal of tripling production by 2016. Unfortunately, the company is plagued by higher costs and will have to spend more to accomplish this over the next few years.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Economics

    Will Silver Recover in 2016? (SLV, GLD, JJC)

    The end of the silver downtrend is likely to coincide with similar recoveries in gold, iron and copper.
  7. Stock Analysis

    The Top 5 Silver Penny Stocks for 2016 (LODE,AG)

    Learn about five of the top silver penny stocks and why investors may want to consider adding them to their investment portfolios in 2016.
  8. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  9. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  10. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center