Oklahoma City's Continental Resources Inc. is preparing for a 26-32% increase in oil and natural gas production in 2014, CEO Harold Hamm said Tuesday.

The operator unveiled new guidance and spending forecasts for the coming year, part of a five-year strategic plan launched in 2012 to triple production and proved reserves by the end of 2017 (see Shale DailyOct. 10, 2012). The update was for "year one" of the project, Hamm explained during a conference call.

"Here's what we set out to do in year one: increase production 35-40% over 2012, a goal that we have since revised upward to a range of 38-40%," he said. "This is considerably above the average compound growth rate of 25% that we need to achieve to meet the five-year goal...As of June 30, 2013, we estimated proved reserves at 922 million boe, concentrate and crude oil.

"Thirdly, through acceleration of our exploration program, we set out to confirm the productivity of Three Forks, our wide area of the Bakken; expand and derisk further a geographic footprint in the Bakken; and expand and derisk further our footprint in the South Central Oklahoma Oil Province, or SCOOP, as we call it. We are accomplishing all three of these...

"The headline numbers for 2014 are production growth in the range of 26% to 32%, supported by a nonacquisition capital expenditure budget of $4.05 billion. We expect to exit December 2014 at approximately 200,000 boe/d." Continental remains on track to increase total output by up to 40% this year with spending of $3.6 billion.

Production in the coming year is forecast to average to 170,000-180,000 boe/d, about 70% weighted to crude oil. The 2014 budget for the two primary operating areas reflects a 22% increase over 2013, Hamm noted.

About $500 million is set aside in 2014 for total capital expenditures (capex), 16% more than this year, with the Bakken getting the lion's share at 71%.

The well count will increase only slightly in 2014, up by one to 21 total. Most of the rigs will be working North Dakota, where 17 are planned. About 300 net wells (886 gross) are forecast across the play.

Bakken production should continue to be "pretty steady, pretty much as it has been this year," said COO Rick Bott. "As we drill these larger pads, there is some variability, maybe by a quarter basis in terms of when we turn wells on, but we'll keep essentially approximately a flat inventory in terms of wells waiting on completion. So, we anticipate that growth to be reasonably steady."

Continental has derisked about 2,362 square miles in its Bakken/Three Forks operations. "Now it's a question of really identifying sweet spots within that...We'd like to get some little bit more of results, we're going to do more deeper bench testing." Results from the pilots and derisking should make waves "in a big way" by 2015, said Bott.

Determining the prospectivity of all of the benches in the two-state formation is the primary goal, Hamm added. "I think by midyear...that we're going to be well into seeing these developments, that's why we're doing the early work, that's why we begin doing the early exercises to prove these out and see what our productive limits are."The SCOOP operations would receive about one-quarter of the 2014 capex, but drilling in the Continental-dominated play is expected to sharply increase. The rig count should almost double, to 18 from the current 10, with about 74 net wells planned.

The focus in the coming year is to drill up to 75% of the Bakken wells on pads to increase efficiencies and cut costs by 3-5%, said Bott.

"We do see some opportunities for incremental efficiencies that we can gain," said Continental's Jeff Hume, vice chairman of strategic growth initiatives. "But we also see a lot of just fundamental blocking and tackling on cost controls. And some of those are not in any single case, maybe a big needle mover. But we have quite a few individual buckets that do add up. And so if we can achieve that 5%, that puts down at about a $7.6 million completed well cost for Bakken."

First up is completing a field development plan for the Bakken with density pilots, something for which investors have been pining.

"Drilling results, production history and the microseismic data from these density pilots will be critical to the formation of our full-field development plan for the Bakken," Bott said. Continental's 2014 capex budget provides for three more density pilots in the Bakken.

In the SCOOP play, a "key" in 2014 is to add more rigs and drill extended laterals, said the COO. Continental expects to exit this year with 12-14 rigs operating in the SCOOP, then add one to two rigs from January through March.

The oil-focused producer has seen the spread for 2014 from this year between West Texas Intermediate (WTI) and Brent crude oil "closing in," said Hume.

 "Most of the Bakken production, 70-80% of that, is moving by rail to the East and West Coasts. So we have expenses, rail expense to those coasts and...then you're marketing on a Brent price at those locations. So as the spread comes together, your differential to WTI increases...That's why we've increased it. The net, the wellhead, is actually increasing because we are seeing a higher WTI price. But the differential, we're basing it all on WTI and it's just a function of the mathematics of those two curves closing together and the physical marketing against the Brent barrel on the coast."