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Continental Resources has stopped drilling operations and shut in most of its wells in North Dakota, Reuters reports, citing sources familiar with the situation, who also added that the company had notified some of its clients that it would suspend deliveries.
Earlier this month, official data from North Dakota showed that oil producers had idled as much as 25 percent of wells in the state, cutting production by 260,000 bpd. This is a large portion of the state’s total oil output, which averaged some 1.45 million bpd in February, according to data from the state’s Department of Mineral Resources. Since then, North Dakota has shed as much as 40 percent of drilling rigs.
In mid-April, State Mineral Resources Director Lynn Helms said that some oil producers were considering building storage facilities near the wells to stock up on the crude they have already pumped to sell it later when prices improve.
Continental, according to Reuters, had cut its production by close to a third even before oil prices swung below zero on Monday. It also suspended dividend payments. The company’s chief executive, Harold Hamm, is a proponent of heavy government intervention in the industry to control production, including asking Texas regulators to institute a 25-percent mandatory production cut.
The Texas Railroad Commission has been discussing mandatory cuts, but in the latest update, reported by the Houston Chronicle, the three commissioners delayed their vote on the topic until next month.
Continental has found itself in a more vulnerable position than fellow shale producers who hedged their 2020 production at prices now much higher than the current level of U.S. benchmarks. Unlike them, Continental bet on continued price improvement and did not hedge. Instead, Bakken crude traded at about $3 per barrel this week--much lower than even battered WTI, which recovered some of its massive losses to trade at $16-17 a barrel since the Monday crash.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.