CEO: Continental Adds Midland Basin Acreage, Explores Woodford, Barnett

Continental Resources is growing a footprint in the Midland Basin—including assets previously held by Occidental Petroleum—where the private E&P aims to apply its exploration expertise.

Continental, owned by billionaire wildcatter Harold Hamm, might be best known for pioneering horizontal development of the Bakken play, where the company is one of the top oil producers.

The Oklahoma City-based E&P surprised some analysts when it made a splashy entrance into the Permian Basin through a $3.25 billion acquisition of Pioneer Natural Resources’ Delaware Basin assets in late 2021.

But Continental is expanding its reach east into the Midland Basin: Texas Railroad Commission (RRC) records show Continental became operator on dozens of new leases in Midland and Ector counties, Texas, in November 2023.

In an exclusive interview with Hart Energy, Continental CEO Doug Lawler confirmed the company has been actively acquiring on both sides of the Permian.

“Our main focus is on the Delaware side, but we’re looking also on the Midland side, as well,” said Lawler, who assumed the chief executive role at Continental at the beginning of 2023.

The new Midland County leases, 87 in total, were transferred to Continental Resources by a subsidiary of Occidental Petroleum, RRC records show.

Continental also assumed operatorship of a handful of leases from Occidental in nearby Ector County, just to the west across the county line, in November.

The Midland and Ector assets produced about 76,000 bbl of crude oil from November 2023 through January 2024—their first three months with Continental as operator—according to the RRC’s most recent data. Gas volumes totaled 123.1 MMcf over the three-month period.

Legacy vertical wells drilled on most active leases have targeted the Dora Roberts Field.

Occidental recently disclosed selling “certain non-core proved and unproved properties in the Permian Basin for $202 million” in its latest annual report. Occidental recorded a gain of $142 million by selling the non-core Permian properties.

Continental declined to offer many specifics on the lease transfers in Midland and Ector counties, but said it continues to look at Permian M&A.

“While we prefer not to comment on any specific transaction in detail, you can expect Continental to continue to be active with additional bolt-ons and new acquisition opportunities in the basin,” a Continental spokesperson said in a statement.

Occidental is getting much deeper in the Midland Basin through its $12 billion acquisition of private producer CrownRock LP.

But the CrownRock deal also pushes Occidental into more debt. The Houston-based company plans to sell between $4.5 billion and $6 billion in non-core assets within 18 months of closing the CrownRock transaction to reduce leverage, including non-core Permian assets.

RELATED

Continental Resources Makes $1B in M&A Moves—But Where?

Exploring options

Continental, which went private through a $4.3 billion acquisition by the Hamm family in 2022, has quietly been adding to its Permian footprint since entering the basin about two years ago.

The acquisition from Pioneer Natural Resources added approximately 92,000 net acres in the southern Delaware Basin—primarily in Reeves, Ward, Winkler and Pecos counties, Texas.  

But Continental’s Permian position had grown to 193,275 net acres by the end of 2023, the company disclosed in a late February filing; Continental continues to detail earnings and production figures in quarterly public filings, although the privately held company has no obligation to do so.

Continental’s Permian position sits at more than 200,000 net acres today, Lawler said.

The position has largely been built with accretive bolt-on acquisitions and smaller deals, rather than the large-scale corporate M&A that’s been red-hot among other Permian operators.

Instead of buying assets with a ton of existing production and layering new production on top, Continental focused on acquiring Permian assets with undrilled inventory and promising upside for future exploration.

That was the case with the Pioneer Delaware acquisition, Lawler said. The Delaware asset had a relatively small amount of proved develop producing assets when the deal was announced in late 2021—oil volumes averaged about 35,000 bbl/d (50,000 boe/d).

Continental’s Delaware oil production averaged around 32,416 bbl/d during full-year 2022. But oil production grew to 40,443 bbl/d in 2023.

Most of the new wells Continental has drilled and completed on the Delaware asset have attacked the popular Wolfcamp and Bone Spring formations, RRC records show.

But Continental is applying its exploration expertise to delineate horizontal drilling locations targeting the deeper Woodford and Barnett Shale intervals across its Permian footprint.

Continental has submitted production data on two Barnett wells drilled in Ector County since the company began picking up leases there in late 2022, RRC data shows.

Gardendale 121 13B #1H (10,565-ft lateral), made in October 2022, produced 201,408 bbl in its first 16 months. The Gardendale well, drilled to a depth of 11,573 ft, produced 1,718 bbl during a 24-hour initial production test in December.

A second Barnett well in Ector County—H.S. Ratliff 85-17A #1H (10,219-ft lateral)—came online in December 2022 and produced 194,725 bbl over 14 months. Drilled to a depth of 11,363 ft, Ratliff tested 380 bbl/d in December 2022.

Continental has drilled five other Barnett wells more recently for which full production data is not yet available in RRC records. Texas and most states’ rules allow producers to “tight hole” post-completion well results for six months before making the data public.

Continental’s four most recent Barnett wells, which came into production on the Ratliff Red 0904 lease in late December 2023, each had depths of more than 11,000 ft.

RELATED

To Dawson: EOG, SM Energy, More Aim to Push Midland Heat Map North

Delaware deep dive

In the Delaware, Continental has joined a small number of operators drilling deep wells targeting the Woodford formation.

Continental has submitted full production data to regulators on three Delaware Woodford wells so far—two in Winkler County and one in Pecos County. The Woodford wells were drilled to depths ranging between 13,000 ft and nearly 16,000 ft.

The two Winkler Woodford wells (8,621-ft lateral; 9,714-ft lateral) produced a combined 248,747 bbl since coming online in March 2023.

A Magnolia State Unit well (9,760-ft lateral) in Pecos County produced 144,590 bbl since coming online in April 2023. Production data on a second Pecos County Woodford well—Trees Ranch 0807 #1A—is not yet available.

The Permian hasn’t historically been a place where operators have invested in exploration because the basin already had so many easily drillable locations, Lawler said.

But Continental sees a lot of future upside, specifically from the Barnett and Woodford intervals.

“We believe where we sit today with current technology, operating experience and expertise that there are some really good opportunities [in the Barnett and Woodford] for exploration and development,” Lawler said.