The U.S. energy sector renaissance under way the past five
years is continuing as domestic drillers such asContinental
) hone ways to reach oil and natural gas in fields across the
The rich deposits of formerly unrecoverable oil and gas could
make the U.S. energy-independent in the next decade as the
practice of horizontal drilling continues to be a chiefly North
Land grabs are expected to keep happening, but to be more
orderly as growth matures. Smaller players with a foothold in
U.S. shale formations are likely to benefit from having entered
the regions early.
Continental, whose stock lifted 53% in 2013, is the sixth
largest name in IBD's Oil & Gas-Exploration & Production
industry group, afterEOG Resources (
),Anadarko Petroleum (
),Pioneer Natural Resources (
),Devon Energy (
) andNoble Energy (NBL) .
Continental is also one of the largest producers of oil in the
Bakken play in the Dakotas -- it does roughly 65% of its total
Harold Hamm is CEO of the Oklahoma-based company and has
always been in the oil business, but not always on the top. He
started out as a gas station attendant before starting a tank
He recently spoke with IBD about opportunities and challenges
for domestic drillers in 2014:
Shell (RDS) left Eagle Ford in 2013 because land was too
expensive. Is the private land grab over?
I think for a while there was a big land grab going on. I won't
say it's over but it's definitely down from what it was. Most
companies had a budget outspend; we are seeing reduced outspend
on projects for the next year. Our company is looking at half the
outspend that we have had in the past.
How will drilling abroad affect domestic drilling?
Everyone expected we would see shale development all over the
world. But that earlier thought perhaps has waned some due to the
experience in Poland, due to some of the obstacles in other
places. Some of the countries could have a lot of shale gas and
oil, but those countries don't need it yet, like Russia for
We are on track to see fulfillment of earlier predictions we
will see energy independence in this country in 10 years, so that
would be 2020-2021 -- we are on track to do that.
A lot of people get into a little bit of a hurry -- once they
realize that this could happen they get to thinking that it would
It's going to take longer with oil -- it's unlike natural gas,
in that it's a commodity that isn't as plentiful on the Earth as
gas is. Gas is easier to find, gas is easier to produce. A
molecule of oil is about three times the size of a molecule of
natural gas. It doesn't come through the rock as well and it
doesn't come through the shale as well, so it's going to take
With gas we've reached a crowded market real quickly because
when shale gas started coming on, supply and demand was pretty
much in equilibrium, even though gas prices were a little bit
elevated due to projected shortages and the fact that we would
have to import natural gas. With oil we were at a 60% deficit at
the height of imports in the country, in 1997 or 1998. As
increased supplies come on we have to make that deficit up.
Where do you see oil prices going next year?
I think 2014 we will see fairly stable prices. A lot of people
tend to forget that OPEC is still there. It takes $80 a barrel to
maintain the quality of life in Saudi Arabia. If it gets much
below that, they would cut back the amount of oil being produced.
You can't forget OPEC even though it looks we might be able to
supply our own needs here in this country within the next several
What are your expectations for the regulatory and legal climate
Federal regulation for fracking has been pushed for, and I think
everyone understands pretty well that the states have done pretty
well for the past 100 years (in regulating drilling) and continue
to do a good job. I don't think there will be any regulations
come about as a result of fracking.
How important is fracking to drillers vs. other types of
Fracking was basically a distraction, a divergence. There is just
one thing that created this energy renaissance that we are
experiencing today: horizontal drilling. The ability to use Space
Age technology to drill down two miles below the ground and then
turn right and go two to three miles further in these twin-bed
reservoirs and expose a lot of the rock to the bore hole.
Multistage completion technology has helped but the primary No. 1
factor has been horizontal drilling.
If the land grab isn't quite over, where do you see development
A lot of the shale plays have already been identified in the U.S.
There may be some other applications but we are almost 20 years
into this renaissance when all the plays were being identified --
the Barnett, the Bakken, the Marcellus, Haynesville,
What can we expect from a more mature drilling environment?
Perhaps slower, more orderly development. And we are seeing that
in the Bakken, going from a high rig count of 237 to a stabilized
rig count of 180.
What are your overall expectations for 2014?
I see a lot of great things occurring for our country, for
national security. A lot of people are being put to work in the
If you look around, the oil-producing states have very low
unemployment numbers. One of the biggest (benefits) is the
psychological benefit, the fact that America can be
energy-independent. I think that's done more for our country than
any single thing.
The New America section featured Continental Resources on Oct.
9, among 10 oil and gas companies profiled in the fourth quarter