Continental Resources cuts spending in Bakken oil field by $2.5B

One of the largest producers of the Bakken oil field in North Dakota, Continental Resources, has cut its 2015 capital spending plans for a second time because of lower oil prices.

The shale oil producer said it would spend $2.7 billion on wells and other investment next year down significantly from its previous plan of $4.6 billion, which was in turn reduced from $5.2 billion.

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Continental and its CEO Harold Hamm were pioneers of the U.S. shale oil boom that has seen U.S. oil production at the highest levels in 40 years.

But in 2015, Continental will reduce the number of rigs it has in operation from 50 to 34.

In spite of the planned fall in its capital spending, the company still expects its average production next year to be 16-20 per cent higher than its average for 2014.

The price of oil has fallen from a high of $107 US a barrel in June to just above $55 on the New York Mercantile Exchange today.

Other Bakken producers have already cut spending plans for 2015, in line with many Calgary-based oil producers, who also are reconsidering plans in light of the falling price. ConocoPhillips, which operates in both Canada and the U.S., cut its 2015 capitalspending budget by 20 per cent from 2014 to $13.5 billion.

Marathon Oil Corp., another big Bakken producer, will cut capital spending by 20 per cent from $5.7 billion in 2014 to a range of $4.3-$4.5 billion.

Continental surprised fellow investors in November by selling derivatives positions that would have protected the company against the impact of lower oil prices.

Hamm has said he expects oil prices to spring up again to the $80 to $95 US a barrel range.

The trimming announced late Monday will cut Continentals production costs to about $5.50 to $6 a barrel, Hamm said.

"This revised budget prudently aligns our capital expenditures to lower commodity prices, targeting cash flow neutrality by mid-year 2015," he said in a statement.