CEO of Continental Resources, Harold Hamm a pioneering fracking company said that his company could be in for an extra boost in the future if U.S. crude prices continue its rally.
According to Hamm, the North Dakota’s Bakken shale fields of which Continental was the pioneer in shale drilling is getting the extra boost in the rise of oil prices which is at a 3 ½ year high and still has room to rise.
West Texas frackers have had to work through problems in their pipeline capacity which has plagued them in North Dakota. But now with crude prices rallying their debt load is a financial windfall shrinking its debt load.
Hamm believes that oil will settle in the mid-$70 to $80 lows, he does not believe that it will reach $100 in the future or even $90 a barrel. He believes it will settle at around $72 a barrel reaching the $80 mark.
The XOP which tacks ETFs of oil and gas exploration and production space has risen almost 22 percent this year and year to date is up almost 16 percent.
Over the past 12 months shares of Continental have risen 60 percent. Hamm believes that at the current prices the company will be able to generate a free cash flow of $1 billion which will be used to offset their debt load.
High Operating Expenses over a Prolonged Period
High operating expenses related to hydraulic fracturing, and horizontal drilling, that are used to squeeze oil and gas from shale rock formations saw Continental with a debt of $6.17 billion in the first quarter of this year after a prolonged period of low crude prices.
Last year the controversial Dakota Access Pipeline was opened, making it easier to get the oil to market from North Dakota to Illinois cutting costs of three and a half dollars.
The pipeline which runs through Native American lands drew a lot of attention with protests by tribes and environmentalists following the decision by Donald Trump to open the land for the pipeline.
U.S. Production at Record Highs
U.S. crude production by shale drilling has been at record highs with new rigs being added every week, but with not enough pipelines, the opening of the North Dakota Access Pipeline has overcome the supply problem.
For the week ending May 18 U.S. commercial crude inventories rose by 5.8 million barrels contrary to analyst’s forecasts of a decline.
On Wednesday U.S. crude prices fell 36 cents at $71.84 a barrel, while Brent crude futures gained 24 cents at $79.81 a barrel.