The Enid News and Eagle, Enid, OK

April 7, 2012

Leaving the nest, ready to fly

Continental Resources is realizing its goal of growth with its move to Oklahoma City

By Jeff Mullin, Senior Writer
Enid News and Eagle

ENID — These are heady days for Continental Resources.

The independent oil and natural gas exploration company, formed in Enid in 1967 by wildcatter Harold Hamm as Shelly Dean Oil., is growing, both in terms of production and reserve as well as in numbers of employees.

And the company is in the midst of moving its headquarters and some 250 employees from Enid to the firm’s new home in downtown Oklahoma City, a move announced just more than a year ago.

All of which is making life interesting for John Hart, Continental’s senior vice president, chief financial officer and treasurer.

“It’s exciting,” Hart said. “It has a number of opportunities and challenges that go with it. We’re continually working to manage growth, put in the proper systems, hire the proper people. What fits a company of a smaller nature doesn’t necessarily fit a company of a larger nature.”

Moving for growth

At the end of 2009, Hamm — Continental’s founder, board chairman and chief executive officer — set a goal of tripling the company’s production and reserve growth by 2014.

“We’re well on track to do that,” Hart said. “At the end of 2011 we had approximately doubled the size of the company in a two-year period. I think it’s safe to say we’re on track or ahead of schedule in that plan.”

That rate of growth, Hart said, is the chief reason the company is moving its base of operations to Oklahoma City.

“The principle reason we had to relocate is we have a significant amount of hiring that we needed to do in a very short period of time,” Hart said. “We needed to have access to a larger employee base and closer access to airports and government officials.”

Continental’s strong growth rate, Hart said, is expected to continue this year.

“Our expectation is that we’ll grow (production) 37 to 40 percent in 2012 in relation to what we grew in 2011,” Hart said. “In 2011 we grew 43 percent over 2010.”

Reason for growth

The company’s production growth is being driven by two reservoirs, or plays: the Bakken and Anadarko Woodford.

The Bakken, Hamm said recently during a speech in Montana, is the largest oil field discovered in the world in the last 40 years. At present, some 2,100 wells are being drilled in the Bakken every year.

The Bakken, which also includes the Three Forks reservoir, covers 14,700 square miles spanning northeastern Montana and northwestern North Dakota.

The Anadarko Woodford is in Grady and Blaine counties in western Oklahoma.

“The Bakken is a world-class oil play,” said Hart. “We’ve got a decade-plus drilling in that play.”

Continental was one of the first companies to explore the Bakken and is currently the largest acreage holder in the area, some 915,863 acres as of the end of 2011.

“The Bakken has had production for 50 years,” Hart said. “We were on the forefront of the usage of horizontal drilling and hydraulic fracturing in the play. Technology really unlocked that play.”

History and future of growth

Continental’s first move into the northern U.S. came in the late 1980s when the company began drilling in the Cedar Hills play in the northern Rockies in North Dakota.

“We’ve been up there for a long time and had some very good results, obviously,” Hart said. “Currently we’re the largest acreage holder in the Bakken, and we’re expanding that, and we also have the largest number of drilling rigs operating.”

Continental expects to be operating in the Bakken and Three Forks region for a long time, Hart said.

“There are decades of production in the Bakken,” he said. “We’ve got thousands of wells left to drill.”

Technology of growth

Continental’s website compares horizontal drilling to “sinking a jump shot four miles away.”

Continental can drill two miles down, then two miles sideways, to reach an oil reservoir the size of a basketball hoop.

Fracturing, or fracking, is the somewhat controversial practice of using high pressure water and sand to crack a formation deep underground, fracturing the rock and allowing oil and natural gas to flow through pipes up to the surface.

Another bit of new technology, ECO-Pad, allows Continental to drill four wells from a single drilling pad. The benefits not only are economic but environmental.

“That’s sensitive to the land in that we’re only having to build one road, we’re only having to set up one pad location,” Hart said. “We get in and we develop that area quickly and move down the highway a few miles and do it again.

“It limits truck traffic and limits disturbance to the land. It’s cost-effective for the company.”

ECO-Pad wells are about 10 percent less expensive to drill and complete than single wells, Hart said.

“It’s just a good, efficient way to develop,” he said.

Looking for growth

All the while Continental is drilling in established reservoirs, it is searching for the next big opportunity.

“We have a very active exploration group, with a number of long-term, seasoned geologists,” Hart said. “We’re always looking for the next play. We’re not by nature an acquisition company, we’re an exploration company. We’re always looking for opportunities to expand what we have.”

Continental has offices across the U.S.,  its headquarters currently divided between Enid and Oklahoma City is challenging.

“We’re used to managing multiple locations,” he said, “but from a headquarters staffing perspective it’s always better if you’re in one location.

“It’s certainly easier when you can walk down the hall and see somebody. We’re a very personal, connected company. Face time between individuals is something that’s important to us.”

Continental has moved a portion of its information technology department into its new home in downtown Oklahoma City, a building still being vacated by former owner Devon Energy. The company was scheduled to take over two additional floors of its new building in late March. The finance department is scheduled to move to Oklahoma City in late May, while the remaining departments will be moving throughout the summer, Hart said.

“Devon will be fully out by the end of June, or thereabouts,” Hart said. “We should fully occupy (the new building) by late-July or mid-August.”

Continental’s new home, which will be called Continental Oil Tower, is a 19-story, 307,000-square foot building. More than 80 percent of Continental’s employees in Enid elected to make the move. Continental is expected to employ 400 people at its new headquarters, with that number expected to grow to 450 by the end of the year.

The move, Hart said, “has gone fairly seamlessly, so far. I expect it will continue to be done in an orderly and systematic fashion as we move forward.”

Continental’s future will be projected later this year when the company’s new five-year plan is released.

“We’ve got a long-term, sustainable growth profile in front of us,” Hart said. “We expect to be a very large, self-sustaining, cash flow generating, world class oil and gas company. We’re well on track for that. I expect us to be a significantly larger company.”ꆱ