Some Random Notes and Comments Regarding Continental Resources (CLR) -- August, 2011 -- 2Q11 -- Bakken, North Dakota, USA

Some random notes and comments from the 2Q11 earnings report from Continental Resources and other sources reported at about the same time.

Some of these items are huge. The market has had a huge pullback, and many of the Bakken companies have been hit hard, the price of oil is way down, but step back a few moments, and look at some of things CLR is doing and saying. It really is quite remarkable.

First: CLR says they will increase 2011 oil production by almost 40% year-over-year. That's huge. Remember, this was a horrendous year in North Dakota for the first half: worse blizzards and worse winter in recent memory (maybe setting all-time records) and then the flooding, road closures and continued muddy conditions slowed down things in the North Dakota oil patch significantly in the 2Q11, but even with all that, CLR says it will increase production almost 40% year-over-year. Think if XOM, or COP,  or CVX said they were going to increase production by a similar amount.

Second: CLR is going to raise its CAPEX. It was already huge. CLR will raise their CAPEX to $2 billion. I can't get a handle on that; I don't have a feeling for $2 billion, but there are some states in the union with a budget crisis and a gap of $2 billion. And here, we have one company that will allocate just a portion of their earnings to CAPEX. Incredible. CLR is not the only Bakken company raising its CAPEX for the year. I think WLL said they were going to; someone else said the same thing the other day, that they were selling some weak-performing assets to raise cash to increase CAPEX. I see increased CAPEX across the board for 2H11 in the Bakken and it will continue into 2012. For investors, think of how this will effect oil service companies. (That link regarding state budget deficits: Florida: $4 billion deficit; Washington State: $5 billion deficit; Minnesota: $5 billion shortfall; Wisconsin: $3.6 billion deficit; Connecticut borrows $1 billion to cover budget gap. And one company, in the Bakken, will spend $2 billion on CAPEX. That provides some perspective.)

Third: quick, what's the average EUR for a Continental Bakken well? Increasing, decreasing, staying the same? CLR now raises the average EUR for a CLR Bakken well to 603,000 boe per well. That's an average folks. That means there will be some huge wells to offset wells that come in "only" at 300,000 boe EUR. Investopedia commented on this on August 11, 2011.

Fourth: CLR earnings up more than 30% in 2Q11. Again, this was a horrible quarter for operations in North Dakota, and CLR increased earnings by more than 30 percent.

Fifth: production for 2Q11 grew almost 39%. Either right on target, or slightly above target, and again, despite horrendous operating conditions this spring.

Sixth: data point -- snapshot -- CLR has 46 gross wells yet to be completed. These wells have sunk costs; they've reached total depth. They're waiting to be fracked. That will take a couple of days once the team is at the site. Some wells will tap into existing pipeline; others will have to truck out the oil. Many of the wells will be restricted in production due to flaring regulations. But 46 gross wells just waiting to be completed. And, again, that's just CLR.

Seed corn.