Hess Production To Soar in Bakken By the End of 2014

May 21, 2014 Kirk Eggleston

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.

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.

AFPM Study Finds Bakken Crude Meets Current Safety Standards for Rail Car Design

May 16, 2014 Kirk Eggleston

In May of 2014, The American Fuel & Petrochemical Manufacturers (AFPM) released findings from a study that examined the characteristics of Bakken crude oil and the standards required to transport by rail. In their report, the AFPM claims Bakken crude is within the safety standards for current rail car designs, and is comparable to other light crudes. In particular, the AFPM said the study found Bakken crudes are within the regulatory limits for pressure, flashpoint, boiling point and corrosivity for use in Department of Transportation (DOT) approved railcars.

“This report was aimed at specifically addressing the characteristics of Bakken crude and concludes that its characteristics are no different than other light crude oils,” said AFPM President, Charles Drevna. “We believe this data will help better inform the government as it reviews all aspects of the safe transportation of crude by rail.”

The study comes on the heels of a number of U.S. elected officials asking for more railway safety measures, following multiple train derailments and explosions involving Bakken crude. In early April of 2014, a Senate Appropriations Subcommittee hearing was held to examine the level of federal resources that should be allotted for railway safety.

Bakken Crude DOT Classification

Bakken crude oil is designated as a flammable liquid under the Hazardous Materials Regulations (HMR), and therefore is subject to evaluation of its flashpoint and initial boiling point for classification purposes. The study found while Bakken crude and other light crudes may contain higher amounts of dissolved flammable gases compared to some heavy crude oils, the percentage of dissolved gases would not cause Bakken crude to be transported under a DOT hazard class other than Class 3 Flammable Liquid. AFPM's conclusion for the study is there is no need to create a new DOT classification for crude oil transportation.

Magnum Hunter Resources Bakken First Quarter Update

May 14, 2014 Kirk Eggleston

During the first quarter of 2014, Magnum Hunter Resources participated in the drilling of 4 gross (0.7 net) non-operated wells in the Bakken/Three Forks Sanish formations in North Dakota. At the end of the quarter, 4 gross (1.0 net) wells were drilling or waiting on fracture stimulation. Capital expenditures since the first of the year in the Bakken amounted to $11.6 million.

Across the company's portfolio, oil and gas production increased 102% for the quarter to 14,796 boe/d, compared to the same time period last year.

Magnum Hunter First Quarter Bakken Operations Update

Magnum Hunter Resources reported one operated one-mile lateral well was completed in the Middle Bakken formation, with an average initial production (IP) 24-hour rate of 223 boe/d at a 35% water cut. Four non-operated two-mile lateral wells were completed in the Middle Bakken formation, with an average IP 24-hour rate of 534 boe/d. One non-operated, three-mile lateral well, was completed in the Middle Bakken formation, with an average IP 24-hour rate of 949 Boe/d, and seven non-operated two-mile lateral wells were completed in the Three Forks Sanish formation with an average IP 24-hour rate of 544 boe/d.

Magnum Hunter Bakken Midstream Update

In May of 2014, Magnum Hunter revealed it will begin transporting oil from some of its non-operated wells in Divide County, North Dakota, through a third-party, to the Colt Hub in Epping, North Dakota. The company expects ~51 existing wells, combined with 18 wells scheduled under the 2014 drilling program, to be connected to the gathering system, which is slated to be fully operational by September 2014. A truck terminal will also be constructed and connected to the gathering system to minimize oil hauling costs from wells not connected to the gathering system.

Furthermore, ~125 gross wells have now been connected into the Oneok gas gathering system in North Dakota. The company estimates current net throughput volumes on this system at approximately 1,000 Mcf/d and 170 barrels of NGLs, or 340 boe/d.

Halcón Resources Sets New Operations Records in the Williston Basin

May 9, 2014 Kirk Eggleston

During the first quarter of 2014, Halcón Resources (HK) set new company operations records in the Williston Basin for drilling and production.

A major focus for Halcón is on improving efficiencies, particularly those associated with pad drilling. Currently, Halcón is in the process of putting six new wells online in the Fort Berthold area that were drilled from a single pad and spaced 660' apart. The initial production (IP) rate for one of these wells during the quarter was a record breaking 4,225 boe/d.

The company also recorded its fastest drilling times to date during the first-quarter. A Bakken well in the Fort Berthold area was drilled in 12 days (spud to total depth). Another Three Forks well in the Fort Berthold area was drilled in 17 days (spud to total depth).

Halcón Williston Basin First Quarter Operations Update

Halcón operated an average of four rigs in the Williston Basin during the first quarter, and the company plans to keep an average of three to four rigs active for the remainder of the year. Average production for the quarter was 23,313 boe/d. That's a 73% increase compared to the same period in 2013.

Weather-related issues slowed down drilling and completion that were begun late in the fourth quarter of 2013. Despite the weather-related impacts and delays, Halcon saw average initial and 30 day production rates improve during the quarter. Company officials say activity in the Williston Basin has since returned to normal, and current production is approximately 25,000 Boe/d.

Halcón Non-Operated Interests in the Williston Basin

Halcón participated in 72 non-operated wells during the quarter with an average working interest of approximately 6%. Current production from non-operated wells is approximately 3,500 boe/d.

By contrast, there are currently 144 Bakken wells producing, 11 Bakken wells being completed or waiting on completion and 2 Bakken wells being drilled on Halcón's operated acreage.

Similarly, there are currently 44 Three Forks wells producing, 5 Three Forks wells being completed or waiting on completion and 2 Three Forks wells being drilled on the Company's operated acreage.

Lynchburg, VA Train Derailment Sparks Increased Scrutiny of Bakken Crude Oil

May 7, 2014 Kirk Eggleston

In late April of 2014, a train carrying Bakken crude derailed and burst into flames in Lynchburg, VA. No one was injured, but the incident has once again raised safety concerns about the transportation of crude by rail.

Currently, the U.S. Department of Transportation (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) is conducting tests of Bakken crude. In February of 2014, PHMSA announced it would pursue fines against Hess, Marthon Oil, and Whiting for failing to properly classify their oil. PHMSA requires the use of nine hazardous materials classifications.

In a May 2014 Wall Street Journal Report, the publication cited the DOT's claim that most energy companies operating in the Bakken haven't provided the requested testing data on crude they ship by rail. Exxon Mobil Corp., Continental Resource and Savage Services Corp. have voluntarily provided the data. A statement released by the U.S. DOT suggested it may take steps to force companies to submit data.

Is Bakken Crude More Flammable?

Bakken oil is produced at a high quality that makes it easier to refine into commercial products and makes it easier to ignite. Light oil production growth in the Bakken isn’t something the industry has never handled before, but the Bakken boom is bigger than anyone expected. As a result of lack of pipelines and additional infrastructure, nearly 70% of all Bakken crude is transported by rail.

Read more: Is Bakken Oil More Flammable?

History of Bakken Crude Oil Train Derailments and Explosions

The incident in Lynchburg, VA is the most recent in a chain of train derailments and explosions connected to Bakken crude. In July 2013, a train derailed and exploded in LacMegantic, Quebec, killing 47 people. The most recent incident, prior to the Lynchburg, VA, incident, occurred when two BNSF operated trains carrying Bakken crude collided and derailed near Casselton, ND, in late December 2013.

In early April of 2014, a Senate Appropriations Subcommittee hearing was held to examine the level of federal resources that should be allotted for railway safety. Multiple U.S. Senators appealed to the committee for more railway safety funding, including Senators John Hoeven (R) and Heidi Heitkamp (D) of North Dakota.