For the three months ended March 31, 2007, net income was $53.8 million, or $0.34 per diluted share (pro forma for the 11 for 1 stock split in connection with the initial public offering in May 2007) on revenues of $121.1 million. This compares to net income of $50.3 million, or $0.32 per diluted split-adjusted share, on revenues of $103.8 million for the three months ended March 31, 2006.
"Despite lower oil and gas prices, our net income and EBITDAX increased 7% and 17%, respectively, during the first quarter of 2007 as compared to the prior year's first quarter," said Harold Hamm, Chairman and Chief Executive Officer. "The 22% increase in first quarter 2007 production volumes from our drilling operations, 19% lower per unit production expense and approximate $1.00 per barrel improvement in our crude oil basis differential contributed to the gains in net income and EBITDAX. Further improvement in the differential is expected in the second quarter."
The following table presents average daily production and capital expenditures for each of the Company's principal regions for the three months ended March 31, 2007.
Average daily production Capital expenditures (boepd) (thousands) Red River Units 12,599 $37,589 Bakken Field 8,114 47,317 Other Rockies 1,724 8,050 Mid-Continent 4,747 15,755 Gulf Coast 727 (214) Total 27,911 $108,497
During the first quarter of 2007, the Company participated in the completion of 54 gross (29.8 net) wells with a 96% gross (95% net) success rate and invested $108.5 million in drilling and capital facilities, $12.8 million for undeveloped acreage and $0.8 million for seismic. For the year, the Company plans to invest $437 million in 2007, including $363 million for drilling, $31 million for capital facilities and recompletions, $32 million for undeveloped leases and $7 million for seismic.
In the Red River Units, average daily production was up 2,956 boepd, or 31%, from the first quarter 2006 average due to increased density drilling and response from enhanced oil recovery operations. During the first quarter, the Company completed 10 gross (9.7 net) horizontal wells and 7 gross (6.7 net) horizontal re-entries within the Red River Units. The Company currently has five drilling rigs working in the Red River Units.
In the Bakken field, average daily production was up 1,555 boepd, or 24%, from the first quarter 2006 average due to results from the 640-acre infield drilling program in the Montana portion of the field and a 366 boepd gain from drilling operations in the North Dakota side. During the first quarter, the Company drilled 19 gross (11.7 net) wells in the Bakken field with 100% success. The Company currently has four operated drilling rigs working in the Montana Bakken and five drilling rigs in the North Dakota Bakken, including three drilling rigs operated under a joint venture agreement with ConocoPhillips.
In the Montana Bakken, the Company participated in 14 gross (10.2 net) completed wells during the first quarter. The Company is finishing development of its acreage on 640-acre spacing and is currently evaluating the potential to develop the Montana Bakken on 320-acre spacing. The Company's first 320-acre well, the Margaret 3-15H, was recently completed for an incremental gain of approximately 300 bopd. These initial results are in line with expectations. The Company plans to monitor the Margaret 3-15H production and drill a second 320-acre infill well during the third quarter to further test the potential for 320-acre development.
In the North Dakota Bakken, the Company participated in 5 gross (1.5 net) completed wells during the first quarter. Initial production rates from these North Dakota Bakken wells ranged from 75 bopd to 420 bopd. Recently, the Company completed the Filkowski 1-1H (63% WI) for approximately 300 gross bopd. The State Weydahl 44-36H (33 % WI) was also completed recently with initial flow rates as high as 1,000 gross bopd and was flowing approximately 560 gross bopd after 10 days of production.
In the Oklahoma Woodford Shale field in the Mid-Continent region, the Company currently has four operated drilling rigs working and plans to add a fifth drilling rig in the second half of the year. During 2007, the Company expects to invest approximately $82 million drilling 23 gross (10 net) operated wells and 100 gross (7 net) non-operated wells in the Woodford Shale field.
During the first quarter, the company completed 2 gross (.5 net) Woodford Shale wells and participated in another 12 gross (.5 net) non-operated Woodford Shale completions. The two Company-operated completions, the Meyer Trust 1-13H (34% WI) and Foster 1-6H (17% WI), are currently producing approximately 3,000 Mcfd and 2,200 Mcfd of natural gas, respectively. Daily gross natural gas production from the non-operated wells averaged 2,000 Mcfd per well during the month of March. Recently, the Company completed two additional wells, the Holder 1-5H (52% WI) and Harden 1-20H (32% WI) which are producing approximately 675 Mcfd and 2,500 Mcfd, respectively. Since the beginning of the year the Company has acquired an additional 14,000 net leasehold acres in the play bringing the Company's total net leasehold in the play to approximately 44,000 net acres. The number of un-risked potential drilling locations on the Company's Woodford Shale acreage is approximately 1,900 gross (275 net), assuming 160-acre spacing.
Financial and Operational Outlook
The Company expects to file a Form 8-K in June 2007 to provide investors guidance on certain financial and operational measures for 2007.
Continental Resources is an independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. The Company focuses its operations in large new or developing plays where horizontal drilling, advanced fracture stimulation and enhanced recovery technologies provide the means to economically develop and produce oil and natural gas reserves from unconventional formations. The Company completed its initial public offering in May 2007.
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