Hitting nearly 100,000 b/d of production, or about one-third of its global total, Hess Corp.'s Bakken Shale oil production in North Dakota is poised for more rigs and substantial growth to kick in late this year, said CEO John Hess, who outlined 1Q2017 results during a conference call Wednesday.
Along with its global and Gulf of Mexico holdings, assets in the Bakken are underpinning what the CEO predicted would be strong production growth in the second half of this year. Cash flow and liquidity at the end of 1Q2017 form a strong balance sheet, despite reporting more red ink for the quarter, he said.
A third and fourth rig were added to the Bakken in March and April, with two more rigs expected by the end of the year to bring it to six going into 2018. COO Greg Hill said the third quarter should be "a major inflection point for production as positive momentum returns to our portfolio,” which is leveraged to oil.
The company averaged 99,000 b/d in the Bakken in 1Q2017, exceeding its guidance for the period, Hill said.
"We brought online some of the highest IP [initial production] rates we have seen to date," he said. The well rates and improved results came from using more 50-stage fracture (frack) completions, up from 35 stages. "We have seen a consistent 15-20% of improved well productivity."
Besides the shift to more stages, which have in some cases reached 60 stages, a key to better Bakken results is drilling in what Hill called the "core-of-the-core" in the Keene, ND, area of oil-rich McKenzie County. "It is really a function of where we are drilling and the use of the 50-stage hydraulic fracturing]," he said.
“A good majority" of the more than 80 wells that will be drilled with the additional rigs are to be in the Keene area.
Hess has a number of 60-stage frack completions in the ground, but it wants to get a few more done before deciding whether or not to move to 60 as its standard job, Hill said. "We want to make sure it is reliable and that we understand the performance of those.”
Regarding the outlook for prices, the CEO said that the industry is "entering a new chapter" in which prices will begin increasing to attract more investment but "we're still in a volatile period and with the increase in activity we plan to have, we thought having some insurance [through hedging] was a wise idea."
For 1Q2017, Hess reported a net loss of $324 million (minus $1.07/share), compared with a net loss of $509 million (minus $1.72) for the same period last year. During 1Q2017, Hess realized nearly a $20/bbl increase in crude oil prices, averaging $48.58/bbl from $28.50/bbl in the year-ago quarter.