Shares of Continental Resources (NYSE:CLR) cratered 59.7% in March, according to data provided by S&P Global Market Intelligence. Weighing on the oil company was a more than 50% crash in crude oil prices, which forced it to slash spending.
Crude oil prices crumbled last month due to the dual shockwaves from the COVID-19 pandemic and the unexpected end of Russia's market support agreement with OPEC. Those issues are causing oil to pile up in storage facilities, which are filling to the brim. That has the industry growing concerned it will run out of storage space, which would push oil even lower, forcing companies to shut off their oil pumps.
The steep dive in oil prices will cut deeply into the cash flows of producers like Continental Resources, so the company slashed its capital spending budget in mid-March by 55% to $1.2 billion. The company estimates that it can fund that spending level with cash flow at an average oil price of less than $30 a barrel, which is right around its recent level.
That lower budget will result in the energy company reducing its rig count in North Dakota's Bakken shale from nine to three while cutting its Oklahoma activity level from 10.5 down to four. Because it will be operating fewer drilling rigs, Continental expects its production volume to fall by about 5% this year compared to its initial forecast of 4% to 6% growth from 2019's average.
Continental Resources responded quickly to crashing crude prices by slashing spending. However, it's not yet clear how much demand the COVID-19 outbreak will destroy, nor whether Russia and OPEC will work out their differences. As a result, oil prices could head even lower and stay there for quite a while. That would put more pressure on Continental's stock price and could force it to cut even deeper into its spending plan as well as potentially turn off unprofitable wells.