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Rail shipments cut crude capacity constraints - Continental CEO
May 9, 2013 / 8:36 PM / in 4 years

Rail shipments cut crude capacity constraints - Continental CEO

NEW YORK, May 9 (Reuters) - Shipping crude oil by rail has alleviated capacity constraints in the oil-rich Bakken shale in North Dakota, the chairman and chief executive of Continental Resources said on Thursday.

“What rail has done up here is basically eliminated the overall capacity constraints,” Harold Hamm said during a first-quarter earnings conference call with analysts. “That’s been the great thing about it, if you ship everything you produce.”

The company drills for oil in the Bakken shale, a deep horizontal rock formation with oil trapped between the layers, in North Dakota, a state that has become the No. 2 U.S. oil producer behind Texas.

Continental’s Bakken production rose 60 percent above first-quarter 2012, it said in its first-quarter 2013 earnings report.

The company is moving toward using the price of North Sea Brent crude oil, the global benchmark, to hedge, or offset, its production, as U.S. crude makes its way to coastal refineries, executives said on Thursday.

The spread, or price differential, between West Texas Intermediate, the current U.S. benchmark crude, and Brent is closely watched by the market, for one, as a barometer of U.S. supply availability.

On Wednesday, the spread between the two narrowed to its lowest point in more than two years as expectations for further pipeline build outs were expected to bring more U.S. oil to market.

Crude production in North Dakota hit a record in February but is expected to accelerate further this month, the state’s Department of Mineral Resources said in April.

As Bakken production continues to ramp up, it will shift the U.S. benchmark, another Continental executive said.

“Sometime this summer or third quarter Bakken total basin production will exceed the entire 40s Brent basket in terms of volume of production,” said Rick Bott, president and chief operating officer during the call.

“...Essentially Bakken total production will reach a million, million and a half barrels a day from the basin and it will be the North American benchmark,” Bott said.

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