Hess Increases Bakken Production Guidance Through 2020

Hess Corp. Bakken Spacing Pilot
Hess Corp. Bakken Spacing Pilot

Hess Corp., one of the top five Bakken producers, appears to be undeterred by lower oil prices, announcing plans to increase its five year production forecast this week.

After a successful Bakken downspacing pilot program in 2014, Hess told investors it would increase its net peak production guidance in the play to ~175,000 boe/d by 2020. The increase means the company would add an additional 1,000 well locations to a total of more than 4,000.

Even at current prices, or below, there’s still many areas for attractive investment in the Bakken,” said CEO John Hess the company’s annual investor day on Monday.

Hess told investors that he believes prices will rebound, and also pointed to drilling efficiency gains made in the Bakken that reduce the cost of drilling a Bakken well.

Hess' Tioga Gas Plant Expansion Project Paying Off

At the beginning of the year, poor weather conditions delayed work on Hess' Tioga gas plant expansion project, negatively impacting Bakken production in the first-quarter. By the second-quarter, production returned to expected levels, and at the end of the third-quarter production from the Bakken increased 21% year-over-year to 86,000 boe/d, due in part to the completion of the expansion project.

Read more:Hess Production To Soar in the Bakken By the End of 2014

Hess' Q3 Bakken Operations

Hess brought 59 gross operated wells on production in the third-quarter, bringing the year-to-date total to 142 wells. Drilling and completion costs per operated well averaged $7.2 million in the third-quarter of 2014, a reduction of 8% from the third-quarter of 2013.

Read more at hess.com

Hess Production To Soar in Bakken By the End of 2014

Hess' Bakken Acreage Map
Hess' Bakken Acreage Map

Hess' first quarter 2014 Bakken production increased slightly from the fourth quarter, but company official say total Bakken production was curtailed due to the shutdown of the Tioga gas plant. Company officials now say Hess' Bakken production levels are greater than 80,000 boe/d after work was completed on the Tioga gas plant expansion.

The expansion project, which is part of a $1.5 billion investment Hess has made in the area for infrastructure improvements, is now fully operational, and the plant is currently processing about 120-million standard cubic feet of gas per day (MMSCFD). The company expects the plant will soon process at least 250 MMSCFD with the potential to increase beyond 300 MMSCFD.

Read more: Hess to Begin Selling Bakken Natural Gas from Tioga Plant

Hess' First Quarter 2014 Operations Update

Hess brought 30-operated wells online during the first quarter, with drilling and well completions averaging $7.5 million. The company's net Bakken production during the quarter averaged 63,000 boe/d, and net oil production was 58,000 b/d. Total capital expenditures in the Bakken for the quarter were $451-million. That's a 21% decrease from $571-million in the fourth-quarter.

Since 2010, Hess company officials say they have invested more than $10 billion in North Dakota. Currently, the oil giant has a 17 rig drilling program in the Bakken with 2014 net production expected to average 80,000 to 90,000 boe/d.

Hess Capital Budget for 2014 Flat in Bakken at $2.2 Billion

Hess' Bakken Acreage Map
Hess' Bakken Acreage Map

Hess plans on committing nearly half of its $5.8 billion capital budget to unconventional shale resources in 2014, with $2.2 billion slated for development of the Bakken. That's the same figure Hess earmarked for development spending in the formation for 2013, but the company's strategic focus is slightly different this year as shale costs shrink.

Although overall investments in infrastructure are down slightly, Hess still plans on allotting $350 million for completing the expansion of the Tioga Gas Plant and associated pipeline and compression projects.

Also read:Alliance Pipeline's Tioga Lateral Is Online & Moving Gas Onto Its Mainline System

Greg Hill, President and COO, said, “as a result of lower well costs and decreased investments in infrastructure projects we plan to operate 17 rigs versus 14 last year and to bring 225 new operated wells online in 2014 compared to 168 in 2013.

The other nearly 10% of Hess's capital budget for unconventional shale resources will be in the Utica Shale in Ohio, with $550 million for drilling approximately 35 wells targeting the wet gas window. That's up $95 million from the company's investment in the area last year, but that does not necessarily mean that the company's focus is shifting away from the Bakken. It does indicate however that Hess is diversifying its interests in unconventional shale resources.

Read the full release at hess.com

Tioga Pipeline Gets Regulatory Approval - 2013 In-Service

Tioga Pipeline Map
Tioga Pipeline Map

The Tioga Pipeline received regulatory approval on October 1st. Alliance Pipeline has proposed the 12-inch, 79.3 mile lateral from Tioga, ND, to an intersection with the Alliance mainline near Sherwood, ND. From Sherwood, natural gas will be delivered to the Chicago market.

The pipeline has the potential to be expanded, but has been initially approved to transport a little more than 106 mmcfd. The pipeline is supported by a ten-year, 61.5 mmcfd agreement with Hess.

The new lateral will run through Williams, Mountrail, Burke, and Renville counties.

This is a good step toward marketing Bakken Shale gas production. Much of the gas produced to date has been flared due to limited pipeline capacity in the region.

Construction is expected to start immediately with the pipeline being completed in February of 2013. Additional facilities required before the pipeline is placed in service have a target completion of May 2013

Tioga Pipeline Construction Timeline
Tioga Pipeline Construction Timeline