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November 13th, 2014, 7:21 am | By trader | Published in LUNCH IS FOR WIMPS | Comments on this postComments Off

Continental Resources Incorporated, the biggest oil producer in North Dakota’s Bakken shale formation, posted a quarterly profit last week which met Wall Street’s expectations, aided by higher oil production and exceeding decision to prevent hedging the price of oil.

The move to sell all crude oil hedge positions for the next three years profited Continental a hefty $433 million one-time gain during the quarter.

The recent downdraft in oil prices as indefensible given the needed fundamental change in supply and demand. Moreover, the chief executive of prompted to monetise almost all of the outstanding oil hedges which allows for traders to fully participate in what is anticipated to be an oil price recovery.

Hedging provides commodity producers security from the steep price drops, though it can also set limits to profits should prices jump too high by exiting hedging. The betting dropped more than 25 % in terms of oil prices but a short -term fluke bounded the same to reverse the course.

The move was not extraordinary as Chevron Corp and Exxon Mobil Corp went to do some little hedging for their respective own production.

In a strategic hedge, Continental’s 2015 capital spending was slashed by well over $600 million indicating that they are not drilling any more rigs in the fields while prices are still down.

Given the circumstances, Continental doesn’t expect its production to jump as it did as previously forecasted next year.

Continental’s finance chief strategist asserted that they are not choosing to accelerate development by next year and will instead bse just maintaining its present pace.

The company was able to post its third-quarter net income of $533.5 million or $1.44 per share as compared with $167.5 million or 54 cents per share last year.

Including the hedging gain and other similar one-time items, the company posted profit of 81 cents per share which met analysts’ prediction according to a study by Thompson Reuters I/B/E/S.

Quarterly production went up 29 % to an average of 182, 335 barrels of oil equivalent per day. Furthermore, Continental will be foregoing the title of the largest North Dakota oil producer in the coming months when rival Whiting Petroleum is expected to close on its buyout of Kodiak Oil Gas Corporation.

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