A Closer Look at How America’s Oil Champion Plans to Deliver

Photo credit: ConocoPhillips

Continental Resources (NYSE: CLR  ) has a plan and is sticking to it. It's a good thing too, because the plan is working. As the company enters year two of its five year growth plan, investors can expect one thing: more oil. Let's take a closer look at the company's 2014 guidance numbers.

The big picture
Continental is planning on spending $4.05 billion in capital to grow its oil and gas production by 26%-32% next year. That's a little bit more than the $3.6 billion it spent this year, which is expected to yield a 38%-40% year-over-year increase in its production. While it might seem odd that the company is spending more money, but growing less quickly, it's important to remember that it's growing off a much larger base.

Overall, Continental expects to be producing about 200,000 barrels of oil equivalent per day, or BOE/d by December of 2014. That's quite a boost from the 135,700 BOE/d the company averaged last quarter. Continental remains on plan to triple its production by 2017 to 300,000 BOE/d. That bold goal is being fueled by the capital it's spending in both the Bakken and the S.C.O.O.P.

Betting big on the Bakken
Continental plans to spend $2.505 billion on the Bakken next year. That will grow its production from 88,000 BOE/d as of last quarter to more than 130,000 BOE/d by next December. It's really an outsized bet for the company. To put Continental's dominance into perspective, larger rival ConocoPhillips (NYSE: COP  ) is only spending $4 billion on the Bakken as part of its five year plan. While that's good for an 18% compound annual growth rate, it's off of a much smaller base of around 30,000 BOE/d. Clearly, much of Continental's future is tied to its success in developing the Bakken.

The scoop on the S.C.O.O.P.
That being said, Continental's future isn't solely tied to the Bakken. In fact, the company is spending $885 million next year to develop its position in the South Central Oklahoma Oil Province. Continental quietly built up a position in the play and is now actively developing it. Continental is really upping the ante so to speak as it's going from 10 drilling rigs to an average of 18 next year.

It's not the only company that sees promise in the Cana Woodford Shale of Oklahoma. Devon Energy (NYSE: DVN  ) , for example, has about 250,000 net acres in the play, which is just slightly less than Continental's 277,000 net acres. While Devon's acreage is a bit farther north, it still sees great promise in the play with it recently being unveiled as a new cornerstone asset for the company. The bottom line here is that this play adds another big future growth driver for Continental.

Final Foolish thoughts
Continental has put together a solid plan and it's already delivering results. In fact, the company is ahead of the pace it needs to meet its ambitious 2017 goal. That makes Continental a great way for investors looking to play the great American oil story.

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