Expert Outlook: Continental Resources' Harold Hamm
How long can the U.S. shale boom keep going?
It’s not a boom as much as a renaissance. We have new technology, horizontal drilling, that has been applied in this country. We’re going to see there’s a lot of these rocks that we’ve identified as source rocks—much like the Bakken and the Eagle Ford and the Barnett and Marcellus—we’ll see these rocks delineated and harvested over the next 50 years. So it’s not a boom that’ll go up and then fall back quickly. It’s going to be here a long time. If you look back to 1973, when the embargo happened, the U.S. was producing about 11 million barrels of crude oil per day, 10.95 to be exact. Today we’re at 9 million barrels of crude oil and about 2.5 million barrels of natural gas liquid, so it brings us right back to where we were in 1973.
In July, Goldman Sachs estimated that U.S. shale producers need about $85 a barrel to break even. With prices falling below that recently, is there a risk of producing so much oil that it’s no longer worth drilling?
We’re certainly not there yet. Goldman also went on to say that as prices go lower, people use more. So that’s going to happen as well. You’ll see consumption go up. We could expect demand growth here in the U.S. of about 500,000 barrels a day with these lower prices at $85 a barrel.
Given the extra expense of horizontal wells and hydraulic fracturing, can you survive in that kind of market?
We’ve estimated where our break-even point is. I don’t like to talk about it a lot because, you know, let’s don’t get panicky, but we’ve got numbers out there about where Continental would break even. It varies by operator, but in the Bakken we’ve done the homework before and it’s $50 a barrel. I don’t think we’re close to that, and I don’t think we’re going to be close to that. Certainly at $85 we’re not laying our rigs down. We’re importing a lot of oil here to the U.S. yet, so we’re not oversupplying our market.
Do you think it’s possible to do away with importing foreign crude?
We need trade partners, but we should be able to export our oil, too. We’re exporting 4 million barrels a day of refined products. These are the products that everybody uses—gasoline, diesel, jet fuel—yet we have a ban on crude oil exports. You don’t see any crude-oil-burner jet airplanes flying around. We’re exporting exactly what the consumer uses, [refined oil].
Is there a risk for the industry that Wall Street will decide the returns aren’t there anymore and start withdrawing money?
Markets react. They react at bad times; they react at good times. That’s why they call them the markets. Stocks go up; stocks go down. Bottom was reached in oil price, and it’s quickly recovering.
Where’s the next Bakken?
We have a field right here in south central Oklahoma called Scoop. It’s the oldest area of production in Oklahoma. It’s been in production a little over 100 years. And yet oil was just newly rediscovered in several formations. The Springer is a very large, broad play in that area. And the Woodford is a tremendous play in that area. And nobody thought that anything else could be found there. That’s just one great example of what’s still there. We’re seeing production increase here in Oklahoma. We’ll pass California in oil production first quarter of 2015. We’ll pass Alaska in 2017.
There are well-documented problems getting the oil from the fields to refineries—train accidents and delays in pipeline projects. How are we going to deal with that infrastructure issue?
Right now there’s a lot of pipelines that have just come into service. They’re being built, and new ones that are proposed are on the books. The [Keystone] XL pipeline was going to pick up 335,000 barrels a day of Bakken crude and take it to Cushing, [Okla.]. And that would have been a pretty simple situation. However, it’s been blocked now six years, and it doesn’t look like that’s going to happen. In the meantime, though, it stopped anybody else from building needed pipelines. So that oil went on the rail. But now, since it looks like the XL pipeline is not going to happen, there are others being built. So they’ll take that capacity.
Does President Obama get credit for overseeing the fastest increase ever in U.S. oil production?
Well, he stepped up and took credit for it. Who should have the credit are the independent U.S. exploration and production companies that took the initiative to find a better way to do things. They drill 96 percent of all the wells in the U.S. They produce 95 percent of the natural gas, 85 percent of the oil in the U.S. They’re responsible for bringing about this energy renaissance in America, not anybody else.
Edited and compressed for space.