Home General U.S. Oil Firm Continental Resources Halts Shale Output Seeks To Cancel Sales

U.S. Oil Firm Continental Resources Halts Shale Output Seeks To Cancel Sales

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The biggest oil maker in North Dakota has postponed most of its production in the U.S. state and informed some customers it would not offer crude after prices dived into negative territory this week, people familiar with the matter claimed.

Continental Resources Inc, the company managed by billionaire Harold Hamm, stopped all drilling and shut-in most of its wells in the state’s Bakken shale field, 3 people familiar with production in the state claimed on Thursday.

Global oil prices have declined because of oversupply and tumbling demand due to the coronavirus crisis.

U.S. crude prices fell into negative territory this week – indicating suppliers had to pay people to take oil – due to lack of storage space, prompting moves by operators to halt output.

Shut-ins have been particularly fast in North Dakota, which generated more than 1.4 million barrels per day (BPD) of oil in 2019, making it the 2nd largest U.S. generating state after Texas.

State officials claim production has already declined by about 300,000 BPD. This month, a rival operator in North Dakota Whiting Petroleum became the first significant shale producer to file for bankruptcy.

Coming into this year, Continental generated nearly 150,000 BPD in the Bakken, according to company figures.

Hamm, an early supporter and informal adviser to President Donald Trump, has advocated massive government intervention in the oil markets in response to Saudi Arabia’s decision to flood markets with supply last month. He called for investigations into the “illegal dumping of crude oil” by Saudi Arabia and Russia.

He has also said Texas energy regulators should consider mandating 25% production cuts to boost prices and called for probes into Monday’s collapse in crude prices.

Continental had reduced its production through May by 30% before the latest price crash and suspended its dividend.

A rival who saw Continental’s notice of force majeure claimed that, without state regulators requiring output cuts, a contract could not be canceled just because sales were unprofitable for a time.

Continental is prone to bad prices because it did not hedge future production; banking economic growth would alleviate costs. Many big shale makers use derivatives as a kind of insurance policy to lock in a price for their future output.

Bakken crude this week was selling regionally at roughly $3 a barrel, far below the U.S. benchmark, claimed Ron Ness, president of the North Dakota Petroleum Council. The benchmark settled at $16.50 on Thursday.

A spokeswoman for Continental did not react to requests for statements.

Bloomberg had earlier recorded the company announced force majeure on at least one contract to deliver oil because it could not have anticipated the price rout.

Continental shares on Thursday rose 6% to $13.23. They are down 61% in the year so far.

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