1. Continental Resources Capital Spending vs Production Review 2007 through 2015

2. Oil Price Rollercoaster Ride since 2008 – U.S. Supply / Crisis DrivenTB B L S D A Y
US PRODUCTION $ / B L
OIL PRICE / BBL
LOWEST PRODUCTION LEVEL SINCE 1940s
Graph by Author using EIA oil production and price data (12/ )
Major Event: Shale Oil Boom reversed multi-decade oil production low
U.S. Supply: Peaked at 9.6M BBL per day in June 2015.
Oil Price: High pre-Lehman bankruptcy at $145 / BBL; lows under $40 per BBL in late Dec 2008 – March 2008 , Aug 2015 and Dec ?.

3. Very Steep U.S. Production decline without substantial on-going CapEx
Current EIA Estimate
8.8M AVG ‘16 TB B L S D A Y
2M BBL / day marginal supply gone $ / B L
Price ? or ? in the future
INDEX TO SEPT 2015 DOLLARS
Graph by Author using EIA oil production and price data (9/ ), Federal Reserve CPI Index (10/30/2015)

4. 44 U.S. Shale Oil Drillers Capital Spending: 2007 – 2015
Recent Oil Price Drop has caused Major Reset in Shale Driller Capital Budgets
44 U.S. Shale Oil Drillers Capital Spending: 2007 – 2015
Q4’14: $40B
$31B
$22B
$18B Q3
Source: cnbc.com, “US Drillers- Stuck with Negative Cash Flow and Lots of Debt’, 12/2/2015
Peak U.S. Oil production: 9.6M BBL/Day (Jun’15)
Current U.S. Oil production: 9.2M BBL/Day (Nov’15)
EIA Estimated 2016 Production: Average 8.8M BBL/Day
Source: EIA.gov, 12/10/15

5. CLR OIL PRODUCTION HAS RISEN WITH LARGE CAPEX INVESTMENT$ M I L O N ? B L S D A Y
CAPEX $M
OIL BBL/DAY
Graph by Author using data from CLR 10-Q,s and 10-Ks ,

6. Example Company with Steep CapEx Spending Decline: CLR
2014 AVG
$1200M / QTR $ M I L O N
CAPEX $M
EST RUN RATE $400-$500M / QTR
Graph by Author using data from CLR 10-Q,s and 10-Ks , CLR Guidance

7. Bakken Play Horizontal Tight Oil Well Decline Rate
Preliminary analysis which tends to show EIA forecast may overstate 2016 U.S. oil production capability

8. Shale Oil Play High Contribution to U.S. Oil Production Increase
Continental Resources: Tight Oil Drives U.S. Production Increase
1.6% Market Share B L / D A Y B L / D A Y
US TOTAL
CLR
.5% Market Share
Graph by Author using data from CLR 10-Q,s and 10-Ks , EIA.gov

9. Example: Continental Resources Expected production decline
Continental Resources Expected Oil Production Decline Rate
CLR model update once more rapid decline begins Q4 and Q1 will be important information.
Models of other major shale drillers being prepared to confirm analysis
FORECAST
+/- 10% B L / D A Y $ M I L O N
ASSUMES CLR CAPEX BUDGET CUT TO $500M / QTR SUSTAINED THROUGH 2016
FORECAST BASED ON REGRESSION OF 6 MTH LAG OF TRAILING 2 YEARS OF EFFECTIVE CAPITAL SPENDING
EFFECTIVE 2Y CAPITAL SPENDING IS ACTUAL SPENDING ADJUSTED BY ESTIMATED WELL DECLINE RATE OVER A TWO YEAR PERIOD (i.e. Spending 2 1/2 years ago is given 21% weight)
CORRELATION OF 6 MTH LAG OF 2Y EFFECTIVE CAPEX TO CURRENT QTR PRODUCTION IS
Graph by Author using data from CLR 10-Q,s and 10-Ks , Proprietary data forecasting model
CLR 3Q’15 Guidance: Maintenance capital to maintain 2016 production at the 2015 exit rate ( BOE/day, including gas) is now projected to be $1.6 to $2.0 billion.

10. Alarming Trend: Shale Fields Showing Rapid Shift to Natural Gas
25%
30%
35%
OIL
75%
70%
65%
Data Reflects More Marginal Wells Drilled / Wells Aging
Graph by Author using data from CLR 10-Q,s and 10-Ks
Less Oil Available in the Future; the Best Fields have been Drilled