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Wintry Conditions Impacting Producers from Rockies to Appalachia

Bakken Shale biggie Continental Resources Inc. has joined a growing list of U.S. onshore operators indicating that rough winter weather is cutting into volumes on a lack of completions and takeaway.

The Oklahoma City-based operator is the top leaseholder in the Bakken with 1.2 million net acres; it also is a dominant player in the South Central Oklahoma Oil Province, dubbed SCOOP, where it has around 403,000 net acres.

CEO Harold Hamm pointed to "abnormal winter weather" in December and January that delayed some completions and deliveries, which caused problems in the final three months of 2013.

The discount to West Texas Intermediate crude, including transportation, is estimated at $13.00/bbl in 4Q2013, "about twice as high as the average for the first nine months of the year," the operator noted. Full-year 2013 differential is expected to be approximately $8.25/bbl, compared with an annual guidance range of $6.00-8.00.

The wintry delays cut into volumes, which combined with a shift to multi-pad drilling, impacted production expenses in the final quarter.

Continental won't issue 4Q2013 earnings until Feb. 26, but it estimated that expenses would be 90 cents/boe more than 3Q2013's $5.17/boe. Debt, depreciation and amortization also is forecast to be around $1.50/boe above the $18.87 recorded in the previous period.

"Weather affected the fourth quarter, but the timing of production gains also reflects our continued shift to large, multi-well drilling pads," said COO Rick Bott. "This is a key driver of future efficiency gains and production growth. Such strong execution continues to underpin our confidence in achieving Continental's five-year plan to triple production and proved reserves.”

Continental began this year with an inventory of 100-plus gross wells that are drilled but not yet producing.

Magnum Hunter Resources Corp., a top Appalachian and Williston basin producer, filed a Form 8-K with the Securities and Exchange Commission late Friday indicating that it has having trouble completing Utica and Marcellus shale wells because of the extreme cold.

Wells from the Stadler pad in Monroe County, OH, and Mill Wetzel pad in Wetzel County, WV, "are likely to see delays of four weeks," noted Wunderlich Securities analyst Irene Haas. On that news, the analyst reduced the 1Q2014 production forecast for Magnum to 17,881 boe/d from 21,018 boe/d.

"The weather conditions have prohibited completion operations on a number of wells in Appalachia," Haas said in a note Monday.

Freeze-offs could impact Appalachian output for months, according to Genscape Inc. (see Daily GPI, Jan. 31). Among other producers being impacted by the weather is Chesapeake Energy Corp., which issued its 2014 guidance last week (see Shale Daily, Feb. 6).

"In light of some winter weather challenges experienced in December, and year-to-date thus far in January and February, we anticipate that the fourth quarter 2013 and first quarter 2014 time frame will mark our production low point and that we will see a significant quarter-to-quarter ramp up beginning in the second quarter of 2014," CEO Doug Lawler told analysts during a conference call.

Chesapeake isn't scheduled to issue its 2013 results until the end of the month, and Lawler said it was difficult to ascertain with certainty the impact of the "weather interruptions" in, among other places, the Utica.

"It's something that we're working through, and what you can expect to see is that the weather is not going to be something that lasts too long...We will be continuing to drive that value into the subsequent quarters."

The weather's impact should keep Chesapeake's volumes flat in 1Q2013, with expected growth this year overcoming the losses, Lawler said.

Anadarko Petroleum Corp. also expects the wintry conditions to impact first quarter results. Operations in the Rockies were slowed during the fourth quarter, but they still were within guidance (see Shale Daily, Feb. 4).

And Oasis Petroleum Inc. COO Taylor Reid said last week Williston weather "was more severe than what we would call a normal winter," which cut into quarterly volumes (see Shale Daily, Feb. 6).

Permian Basin and Midcontinent operators have warned since late November that the freeze-offs and ice storms would impact oil and gas numbers (seeShale Daily, Dec. 6, 2013). A winter storm ahead of Thanksgiving reduced production guidance for Midland Basin producers that included Pioneer Natural Resources Co., Laredo Petroleum and Energen Corp. (see Shale Daily, Dec. 5, 2013.

Pioneer through December lost about 6,000 boe/d in 4Q2013 on the Texas storms (see Shale Daily, Jan. 22). Permian heavyweight Apache Corp., which issues its report on Thursday, also has warned that quarterly volumes would be impacted.

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