Continental Resources, Inc. (CLR), Oasis Petroleum Inc. (OAS), Pioneer Natural Resources (PXD): What’s Padding Profits in the Bakken?

Helping margins

All of this translates into big cost savings for Bakken producers. Take Continental Resources, Inc. (NYSE:CLR) for example, which projects that it will complete 300 net wells in the Bakken during 2014. By saving $1.3 million on each well, Continental will pocket an extra $390 million over the course of the year. That’s a pretty substantial figure when you consider that the company generated $1.6 billion in cash flow from operations during 2012. While Continental Resources, Inc. (NYSE:CLR) is still a long way from closing its funding gap, drilling efficiencies will have a meaningful impact on the firm’s free cash flow.

Drilling efficiencies also allow producers to do more with less capital. For example, cost savings at Pioneer Natural Resources (NYSE:PXD) will result in the company being able to drill 130 wells with 10 rigs in 2013 compared to drilling a similar number of wells with 12 rigs in 2012.

Foolish bottom line

While investors focus on rapid production growth, falling costs are a far more important trend in the Bakken. As the highest cost producer, the formation is the most vulnerable to lower oil prices. Cheaper drilling is critical to ensure the long-term viability of the play.

The article What’s Padding Profits in the Bakken? originally appeared on Fool.com and is written by Robert Baillieul.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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