Continental Resources Inc. has partnered with a major South Korean energy services provider to develop shale assets in Oklahoma.
According to an Oct. 27 announcement, Continental has formed a joint venture with a wholly-owned U.S. subsidiary of SK E&S Co. Ltd. to 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 percent 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 percent of Continental’s remaining share of future drilling and completion costs. 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 Continental chairman and CEO Harold G. Hamm. “We are proud SK has chosen to join with Continental in SK’s initial investment in U.S. shale natural gas.”
The companies have entered into a joint development agreement under which Continental has five years to use SK’s funding, subject to extension under certain circumstances. The agreement also establishes an area of mutual interest in Northwest Cana and certain incentives for the joint venture to expand its leasehold position.
“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,” said SK E&S president and CEO J.J. Yu.
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 established mutual interest area in November, with four operated rigs running by the end of the year.
The joint venture will create a positive cash flow for Continental throughout the life of the project, according to Continental president and chief operating officer Jack H. Stark.
“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.