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Continental Resources, Inc. (CLR), Kodiak Oil & Gas Corp (USA) (KOG): Despite Mother Nature, the Bakken Oil Boom Continues

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North Dakota’s oil and gas production hit a new all-time high this past May according to recently released data from North Dakota’s Industrial Commission. Preliminary estimates indicate that oil production reached 810,129 barrels of oil per day, which is up from the previous record of 793,852 set the prior month. Natural gas production in the state also rose from 861.1 MMcf/d in April to 899.9 MMcfe/d in May. This is great news for the region’s producers, which have battled through rough weather all year, but were still able to produce record amounts of oil.

Bakken oil well. Source: Newfield Exploration Co. (NYSE:NFX)

This news bodes particularly well for Bakken-focused producers like Continental Resources, Inc. (NYSE:CLR) and Kodiak Oil & Gas Corp (USA) (NYSE:KOG). Continental has one of the largest positions in the play, with 1.2 million net acres as of the end of last quarter. It’s also the largest producer and driller, likely making it one of the driving forces behind May’s record results. This means that Continental could produce exceptional quarterly results when it reports earnings on Aug 7.

Continental Resources, Inc. (NYSE:CLR)While not as large as Continental Resources, Inc. (NYSE:CLR), Kodiak Oil & Gas Corp (USA) (NYSE:KOG) has been growing its presence in the Bakken rather aggressively, which makes it a company to watch. The company just closed a $660-million acquisition of Bakken properties, which, when combined with its organic growth, will enable Kodiak to more than double its daily oil production this year. However, the one rub against Kodiak is that its well costs are high relative to its peers. It has been also working hard to get those well costs down, and it has focused on reducing the average drilling days per well to save money.

One of the biggest problems this year in keeping average drilling days at bay has been the weather. There have been load restrictions in place, as May was one of the wettest on record for North Dakota. Further, April was challenged by heavy snow, which blocked more than 80% of the state’s highways. Setting new records in spite of these weather challenges is reason for the industry to celebrate. However, the weather could have had an impact on Kodiak Oil & Gas Corp (USA) (NYSE:KOG)’s well costs, which is something to watch when it reports on Aug 1.

Oil and gas producers face many risks, with weather being one that could really impact a company’s results if it’s focused on just one play. This is where a producer like Newfield Exploration Co. (NYSE:NFX), for example, can have a leg up on more focused producers. Newfield, which operates in four major U.S. basins, including the Bakken, can move its capital around if it runs into issues with the weather or prices. The plan this year is to spend about 16% of its capex budget on the Bakken, which will produce 25% oil production growth year over year. The flexibility of working in multiple basins has enabled Newfield to work around weather and infrastructure challenges in the Bakken to grow its overall oil and natural gas liquids production by 39% this year.

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