OIL CUTS CONTINUE

Harold Hamm, the CEO of Continental Resources, of late was in the news owing to his bitter divorce case and the size of the check (pictured above) that he wrote his ex-wife. She originally rejected the check but eventually cashed it, according to reports.

The check was for $974 million,790 thousand,317 hundred and 77/100.

Last time we checked the census there are supposed to be seven billion of us currently inhabiting the planet. Probably one-half of one-half of one-tenth of one-fourth of one-eighth of one-sixteenth of one-twenty fourth will ever get a chance to write a check like that let alone cash one.

Hamm is an oil magnate and his views are of interest to anyone who follows the industry. Recently, he spoke at a conference in Houston.

Hamm: Oil prices could rise sooner than you think

Posted on January 28, 2015 at 12:39 pm by Ryan Holeywell in Crude oil, Production

(AP PhotoKevin Cederstrom)

HOUSTON — The market doesn’t understand just how quickly oil companies are scaling back their activities, and as a result, oil prices could rebound faster than many observers expect, Continental Resources CEO Harold Hamm said Wednesday.

Hamm, addressing the Argus Americas Crude Summit in downtown Houston, noted the slew of companies that have quickly pulled back on their capital expenditures as oil prices have fallen by more than 50 percent since the summer.

He said exploration and production companies can’t afford to borrow money, and falling stock prices make it hard to raise cash by issuing equity. “You’re limited in what you can do if you don’t conserve cash,” said Hamm, whose company is primarily active in North Dakota and Oklahoma.

Continental Resources recently cut its 2015 capital budget from $4.05 billion in 2014 down to $2.7 billion this year. Hamm — considered one of the pioneers of hydraulic fracturing — noted that his own company went through five or six budget revisions before settling on that figure.

He said oil companies will save cash by laying down rigs and deferring well completions until service companies’ rates drop further. ”Why complete a well today when these service costs are coming down?” Hamm said.

He also said some companies will likely stop producing oil from existing wells and simply leave it underground as they wait for oil prices to increase. “It’s not going anywhere,” Hamm said. “It’s locked in a rock.”

Daily oil production from the country’s biggest plays — the Bakken, the Permian Basin and the Eagle Ford — could actually start to decrease mid-year or even earlier, Hamm said. That’s considerably sooner than other observers’ forecast, who’ve said production would still likely increase this year even if drilling activity slows.

“U.S. producers will demonstrate market discipline and act uniformly,” Hamm said. “We have the same market forces on us, so we do the same thing.”

“The market does not appreciate how rapidly U.S. producers are reacting,” he added.

Hamm acknowledged he didn’t know at what level oil prices will bottom out. In the longer-term, he said, they’ll likely be less than $100-per-barrel the industry has enjoyed in recent years as the markets come to understand the size of the resource base U.S. shale drillers have access to.

Hamm apparently is not alone in his view. For another view, see Montana Bakken.