Triple Play: Hamm Hits Home Run with Bakken
Harold Hamm may be Forbes magazine's 33rd richest person in America, but he did not grow up with a silver spoon in his mouth. He was the youngest of 13 children born to Oklahoma sharecroppers. Hamm, who lived in a one-bedroom, house in the country with no plumbing or electricity, has come a long way in 64 years. Today, the high-school educated independent operator is worth between $5.5 and $7 billion, and owns at least 190 MMbbl of oil and natural gas, which is more than any other American.
Hamm left home when he was 17 and got a job pumping gas in Enid, OK. When he graduated from high school in 1963, the oil and gas industry was booming and Hamm was itching to get into the business. He had no money saved for college, so he cleaned tanks for a contractor and learned the business – everything from drilling to production – by talking to local engineers and geologists. Just two years later he bought his first truck, a fluid-hauler, and started his own tank truck service – Harold Hamm Tank Truck Service. By day, Hamm hauled drilling mud and water to rigs; by night, he studied maps of the area trying to identify oil plays.
It didn't take long for Hamm to locate a small oil play running across three counties in northwest Oklahoma. Hamm bought up leases in the area and drilled a wildcat well in Alfalfa County in 1971. Royal Dutch Shell had previously attempted drilling in the area, but abandoned the well when a fire broke out. However, Hamm was successful. The first well he drilled surrendered about 20 b/hr (480 b/d), the second well came in about 75 b/hr, and the third gushed at 100 b/hr. The well cost him $90,000 to drill. Just three years later in 1974, Hamm started a drilling firm with 13 rigs; which yielded about $1.5 million/year. Today, Continental Resources reports a market cap of $3 billion.
Hamm realized that he got lucky with the limited knowledge he gained from picking the brains of his customers. So, in 1975 he decided to go to college and study geology. With a greater understanding the Earth and its history, Hamm shifted his reserve and production profiles toward crude oil. Today, crude oil accounts for about 73% of Continental's production.
In 1993, Hamm expanded his exploration into the Midwest and Rocky Mountains and focused on the Cedar Hills Field in North Dakota. Hamm had to issue $150 million of notes with a 10.25% coupon to finance his project. Under Hamm's leadership, Continental Resources drilled the initial horizontal well, the Ponderosa 1-15, in April 1995. The price of oil then collapsed in 1998 and Continental lost $18 million. Today the Cedar Hills units make up the 7th largest onshore oil field in the continental US. The company reported production of 14,953 Boe/d in Q3 2010.
But the Bakken shale play in Montana and North Dakota is Hamm's sweet spot. He holds 800,000 acres in the 7-million-acre play. In 1995 when the Bakken play was first discovered, reserve estimates were put at 150 MMbbl. The most recent estimate in June 2010 has it at 8 Bbbl. Thanks to horizontal drilling, fractional stimulation and enhanced recovery techniques, the Bakken area is more economical to develop and produce crude oil and natural gas reserves.
According to Continental's latest financial report, Bakken production climbed to 22,520 Boe/d in Q4 2010, which makes up 47% of the company's total production. Continental completed or participated in completing 222 wells in the North Dakota Bakken in 2010, which brings its total wells drilled in this area to 475 as of Dec. 31, 2010.
Hamm also led Continental to complete three ECO-Pad projects in North Dakota. According to the company, ECO-Pad technology allows four wells (two Middle Bakken, two Three Forks) to be drilled from a single pad on two adjoining 1,280-acre spacing units. Application of ECO-Pad technology is expected to increase recoveries per well and to reduce drilling costs, completion costs, and environmental impact by centralizing operations on a single pad.
In the Montana Bakken, Continental completed two wells in Q4 2010. The two wells were fracture-stimulated with 24 stages each and had initial production rates of 642 gross Boe/d and 412 gross Boe/d. Continental completed or participated in 11 wells in the Montana Bakken during 2010, bringing its total completed wells to 171 in the area.
"Continental completed the first commercially viable well in the North Dakota Bakken that used both horizontal drilling and fracture stimulation – the Robert Heuer 1-17R in Divide County in March 2004," Hamm said in February. "We were an early pioneer in the play, and since then we've established Continental as the leading leaseholder. We expect the Bakken to drive our growth for many years."
According to the report, at year-end 2010, Continental had a total of 855,936 net acres leased in the Bakken play, with 623,649 net acres leased in North Dakota and 232,287 net acres in Montana. The company operates 21 drilling rigs in North Dakota and two in Montana.
"Our 2011 capital expenditures budget is $1.75 billion," Hamm said. "We plan to focus on accelerated drilling in the Bakken Shale and Anadarko Woodford Shale plays, resulting in production growth in a range of 35 – 37% for 2011, compared with our previous target of 30%.
Most recently Hamm announced that he bought the old Devon Energy building in downtown Oklahoma City last year for $22 million. He will be moving Continental Resources from Enid, OK next year once Devon's new building is complete. Hamm says that moving his company to Oklahoma City is necessary to grow the company, which is on track to triple in size in the next five years thanks to his Bakken fields.
Not only is Hamm dedicated to his E&P programs, but he's also committed to curing diabetes through the Harold Hamm Oklahoma Diabetes Center.
In 2007, Harold Hamm and his wife Sue Ann, through their charitable foundation, committed $7 million in support of the Oklahoma Diabetes Center at the University of Oklahoma Health Sciences Center and later gave an additional $3 million to help acquire the building that is now the Harold Hamm Oklahoma Diabetes Center.
An earlier gift to OU from the Harold and Sue Ann Hamm Foundation endowed three faculty chairs – one in adult diabetes, one in clinical diabetes research and one in adult diabetes clinical care or research. Additionally, $2 million was directed to the new Oklahoma Diabetes Center facility, and $1.4 million was used as bridge funding to support research and clinical activities as the endowments are established.
The Harold Hamm Oklahoma Diabetes Center was established by an act of the state Legislature in July of 2006. In addition to a state appropriation of $10.5 million, the Center has received more than $16 million in private gifts and pledges, including the founding gifts by Sue Ann and Harold Hamm.
Not only is Hamm the CEO of Continental Resources and a major contributor to curing diabetes, but he also serves as chairman of Hiland Partners, LP, a publicly owned natural gas processing and gathering company, and as chairman of the Oklahoma Independent Petroleum Association, the nation's largest and most influential statewide oil and gas association.
- Shale King Hamm Wants to Give Oil Forecasters a Reality Check (Nov 16)
- Shale Billionaire Hamm Slams 'Exaggerated' US Oil Projections (Sep 22)
- Continental Resources CEO: Absolutely No New Debt (Aug 09)