Oil recently dropped to less than $40 a barrel, dwindling demand for gasoline has driven pump prices to near five-year lows, worldwide demand for energy has plunged because of the poor global economic climate and natural gas prices have plummeted.

So why is Harold Hamm smiling?

Hamm, president, chief executive officer and chairman of the board of Enid-based Continental Resources, says his 41-year-old company is prepared to ride out the current economic storm.

“2008 has been a very volatile year,” Hamm said. “But our company has been very well-positioned,” Hamm said.

Despite the world economic turmoil, 2008 has been a positive year for Continental Resources, Enid’s only publicly traded company.

In the first three quarters of 2008, Continental Resources reported strong growth in cash flow, net income and production. In the second quarter the firm reported it doubled its revenue.

But in July, crude was at a record high $147 per barrel, a far cry from today’s prices.

“We’re concerned like anybody else with the economy, there’s no doubt about that,” Hamm said.

Key factors for Continental’s success, Hamm said, are its prominence in the Bakken Shale formation in North Dakota and Montana, what he called “the hottest oil play in America today,” as well as what he called “low leverage.”

Continental Re-sources is the largest lease-holder in the Bakken Shale formation, with more than 600,000 acres under lease. A United States Geological Survey re-port on the Bakken region estimated the amount of technically recoverable oil at between 3 and 4.3 billion barrels.

“That’s a tremendous play and our company is very well positioned in it,” Hamm said.

And that, Hamm said, is just what can be recovered with today’s technology. With new techniques for extracting the oil, he added, the output “could be twice that.”

Bakken isn’t the only focus of activity for Continental Resources. The company also is drilling in the Red River area of eastern Montana, southwest North Dakota and northwest South Dakota; the Arkoma Woodford Shale area in southeastern Oklahoma and the Anadarko Woodford area of western Oklahoma, among others.

Continental recently completed a Woodford Shale well in western Oklahoma, an area where the company has 100,000 net acres of leased land. A second well is in the works.

“We’re going to continue to grow,” said Jeff Hume, Con-tinental’s chief operating officer. “We have to weather the lulls but, at the same time, you have to take two views. You have to take the long-term view of growth, and Harold’s always been a builder, but at the same time you have to manage today’s reality. I think we’ve done a very good job of that.”

One important area of interest for Continental Resources is a formation known as Three Forks/Sanish deep below the soil of western North Dakota.

“Continental has drilled nine Three Forks/Sanish wells below the Bakken, and they are turning out almost twice as good as the original Bakken wells themselves,” Hamm said. “It could bode well for our country, having that type of stable oil production in the U.S.”

“We have a great inventory of opportunities in front of us in acreage and multiple plays,” Hume said.

As of Sept. 30, Continental Resources reported $229.4 million of long-term debt.

“We have very low leverage, a good balance sheet, very low debt,” Hamm said, “compared to size of company we are. We intend to operate within cash flow. That’s just been our long-term philosophy. It bodes well for operation. We don’t borrow a lot of money to drill with.”

That philosophy, Hamm said, can be traced to the company’s roots.

“I guess it’s the conservative nature of doing business in northwest Oklahoma,” he said. “You try to keep yourself in a debt-free environment, if you can.”

“It’s a capital-intensive industry,” Hume said. “We spend a lot. When it goes away, you have to adjust to it.”

Continental’s 2008 budget was $883 million, Hamm said. That has been trimmed to $609 million in 2009. The 2008 budget originally was set around the $600 million range, but was adjusted upwards as the price of crude oil climbed. The 2009 budget, Hume said, is based on oil prices of some $70 per barrel, and thus might have be adjusted downward if prices remain low.

“If prices rebound as we foresee them I think we’ll probably spend that $609 million that we had planned, if they stay low we’ll probably be below it,” Hume said. “We’ll keep our company in line with our cash flow and adjust it as we should.”

This has been a roller-coaster year for the company’s stock prices, as well. On July 11, Continental Resources stock fetched $83.81 per share. By Dec. 5, the stock price had plummeted to $12.01. Lately the stock has clawed its way back up to more than $18 per share.

The drop hasn’t discouraged Hamm from adding to his holdings of Continental Resources Stock. He purchased 50,000 shares in September and 50,000 more in November, according to the Web site MarketWatch.

“Our stock has been hit hard, as well as a lot of other people’s,” Hamm said. “It’s doing well comparatively with a lot of oil and gas companies.”

Oil prices were artificially high when they reached $147 per barrel last summer, Hamm said, and artificially low when they recently dipped below $40. He said he doesn’t expect the low prices to last any longer than the high prices did.

The Organization of Petro-leum Exporting Countries (OPEC) will eventually return the price to around the $70 per barrel level, Hamm said. He cited a recent “60 Minutes” interview, during which Saudi oil minister Ali Naimi said he saw $75 as a reasonable price for a barrel of oil.

“My thinking is, that’s about where the price should be,” Hamm said. “But my opinion doesn’t matter. We’ve been under OPEC control for pricing in crude oil since 1977. I don’t see any break in that. Those countries are the only countries that have excess capacity. They are the ones that are going to control the price. If he (Naimi) believes $75 is the number, I tend to think that he’s going to be pretty well right.”

Until the price climbs back near $75 per barrel, however, drilling activity will be scaled back. Continental recently announced its drilling budget would be cut from $663 million this year to $541 million in 2009.

“If the price goes real low, we step on the brake real hard,” said Hamm. “We’re pretty flexible. We don’t have long-term commitments on rigs. We’ve got a lot of flexibility in that we can shut operations down.

“I don’t believe that we should be trying to force a lot of additional product, either oil or gas, into a market that doesn’t need it. That’s just not smart.”

That, Hamm said, is in the short-term. But the oil and gas business is not a short-term business.

“We’re in a business that you have to plan a long ways ahead,” Hamm said. “We’re used to that. We’ve been conditioned to doing that for the last 40-some years. Whether it’s getting a project off the ground, planning for it, all that takes months and maybe even years. Once you get under way you’d like to go ahead and see it through. But, when times like this come, you just have to let those plans wait for a while. That’s what we are doing in several instances.”

Hume emphasized Conti-nental intends “to honor all contractual commitments and protect our acreage. We’re looking at this price as a temporary lull.” The low price, he said, “is putting a tremendous downward pressure on activity, not just for Continental, but for the entire industry.”

Continental Resources has some 400 employees nationwide, 200 in Enid. The company has added 68 jobs in Enid and more than 100 company-wide in 2008. Hamm said he saw no problem maintaining that staffing level.

“We have no plans to lay off Continental employees,” Hamm said.

Continental Resources’ em-ployees, Hamm said, are the company’s biggest assets.

“We’ve got a good quality staff of people here in Enid,” Hamm said. “Their work ethic is real good, they work hard and do a good job.”

Looking ahead to 2009 for Continental Resources and the rest of the oil industry, a lot depends on the price of oil.

“As an industry and a nation we’re liable to have a tremendous fall-off if prices don’t stabilize within the next four to six months,” Hume said. “We’re hoping they will.”

Hamm said he sees crude oil climbing “to a reasonable price,” sometime in 2009, but he sees the recession that has hit the overall economy lasting longer.

“I think things are going to get better, but it may take all year to do it,” Hamm said. “It may be into 2010 before it gets a whole lot better.”

Worldwide demand for oil, Hamm said, is likely to rise in 2009.

“I see demand creeping up again without a doubt,” said Hamm. “The alternatives aren’t there and won’t be for a lot of years.”

Oil will bounce back more quickly than natural gas, Hume said, because gas is more closely tied to industrial usage.

“I think the oil side will come back quicker because it’s your transportation fuel, it’s your agricultural engine that runs agriculture,” he said.

The future looks bright for Continental, Hamm said, because of the company’s heavy emphasis on oil (80 percent of Continental’s production and reserve) over natural gas, its amount of oil reserves and its strong balance sheet.

“We are in a location that lets us be a pretty low-cost provider,” Hamm said. “Our rent is not near as high as it is in Houston.”

Continental’s emphasis is exploration, rather than simply trying to exploit another company’s find. That will serve the company well in the future, Hamm said.

“We’re explorationists here at Continental,” he said. “We’ve got a long history of finding oil and gas in very large quantities. That’s what we do. I think the future is really good for our company in regards to that.”

That exploring nature can pay high dividends or exact high penalties.

“We’ve done that and we’ve paid the price for it,” Hamm said. “You pay the price for it in dry holes and failed interests. We’re very effective in what we do and we’ve got a seasoned team of explorationists. We set ourselves apart in that regard.”