Continental Resources Enters Into Joint Venture With SK E&S Of South Korea
Continental Resources, Inc. (“Continental” or the “Company”) (NYSE: CLR) announced today it has formed a joint venture with a wholly-owned U.S. subsidiary of SK E&S Co. Ltd (“SK”) to jointly develop a significant portion of Continental’s Northwest Cana Woodford natural gas assets, primarily in Blaine and Dewey counties, Oklahoma. SK E&S is a subsidiary of SK Group, one of the largest conglomerates in South Korea and part of SK Holdings, a Fortune Global 100 company.
Continental sold a 49.9% interest in approximately 44,000 net acres in the highly prospective Northwest Cana area of the Anadarko Woodford Shale play, including interests in 37 producing wells, for total consideration of approximately $360 million. Continental received $90 million at closing, and SK has committed to pay an additional $270 million to carry 50% of Continental’s remaining share of future drilling and completion costs (the “carry”). Continental anticipates no change in its 2014 and 2015 capital expenditures, its production mix of crude oil and natural gas, or its overall production targets as a result of this agreement.
“We are excited to establish this joint venture with such an established and highly regarded major international energy company,” said Harold G. Hamm, Continental’s Chairman and Chief Executive Officer. “We are proud SK has chosen to join with Continental in SK’s initial investment in U.S. shale natural gas.”
J. J. Yu, President and Chief Executive Officer of SK E&S, said, “SK E&S is pleased to join with Continental Resources, a proven leader in developing U.S. unconventional resource plays, in what we expect will be a long-term strategic relationship in energy production.”
Continental and SK have entered into a joint development agreement (“JDA”) under which Continental has five years to utilize the carry, subject to extension under certain circumstances. The JDA also establishes an area of mutual interest (“AMI”) in Northwest Cana and certain incentives for the joint venture to expand its leasehold position. Continental will be the operator for all current and future wells that are operated by the joint venture. The Company plans to commence drilling in the AMI during November 2014, with four operated rigs running by the end of the year.
“This joint venture is consistent with our strategy to enhance the value of all our assets,” said Jack H. Stark, Continental’s President and Chief Operating Officer. “The structure creates a joint venture that we expect will be cash flow positive for Continental throughout the life of the project and should deliver single-well economics that compete with any other wells in our world-class inventory when the carry is applied.”
“Our agreement with Continental underscores SK’s 20-plus year commitment to the U.S. market as a platform for the globalization of our energy business and as a source of value-creation for stakeholders in both companies,” said Shaun Parvez, President of SK E&S Americas.
Source: Continental Resources