Setbacks in several production regions, including the Bakken Shale, resulted in an overall decline in Hess Corp.’s 2Q2011 daily output, but those setbacks were mostly short-term, and the company was able to post a 62% earnings increase compared with 2Q2010.

In the Bakken, harsh winter weather and severe flooding in North Dakota resulted in a backlog of well completions, CEO John Hess said during a conference call with financial analysts.

“Net production from the Bakken average 25,000 boe/d in the second quarter, which was flat with the first quarter,” according to the CEO. “With improved weather conditions and our recent change to a 38-stage frack [hydraulic fracturing] design, we expect to close the gap against our production plan over the next six to nine months.” The company has completed nine wells with the 38-stage design and “initial results are encouraging,” according to Greg Hill, president of exploration and production.

Late last year Hess completed the acquisition of 167,000 net acres in the Bakken region from TRZ Energy LLC for $1.05 billion in cash (see Shale Daily, Dec. 30, 2010).

Hess has about 107,000 acres in the Eagle Ford Shale and plans to drill 25-30 wells there this year, according to Hill. And like the early results from the Bakken, initial production (IP) rates from the company’s first few Eagle Ford wells “are encouraging,” he said.

“Fifteen wells have been drilled so far, and three wells have been completed and brought on production. These three wells have delivered on average 30-day IP rates of approximately 650 boe/d, of which 80% was liquids.” While Hess has increased the number of Eagle Ford wells from its original budget, the company doesn’t yet have enough production under its belt to quote expected ultimate recoveries, according to Hill, who said well costs in the play currently average about $10 million.

“We expect that cost to come down with time because we’re early in the learning curve,” he said.

Hess expects production to be restored at its shut-in Llanos #3 well in the deepwater Gulf of Mexico in the first quarter of 2012. But the outcome of other issues that have hampered production — including civil war in Libya and a recent fire at the Valhall field offshore Norway — are not as clear. The company now forecasts 2011 production at 375,000-385,000 boe/d, down from the previous forecast of 385,000-395,000 boe/d.

Capital and exploratory expenditures in the first half of the year were about $2.7 billion, almost all of it related to exploration and production, and Hess now expects to devote $6.2 billion to 2011 capital and exploratory expenditures, an increase from the previously forecast $5.6 billion (see Shale Daily, Jan. 10). The increase is the result of additional investments in the Bakken and Eagle Ford, and a recently announced Kurdistan exploration agreement, Hess said.

Despite a decline in overall oil and gas production to 372,000 boe/d in 2Q2011 from 415,000 boe/d in 2Q2010, Hess reported net income of $607 million ($1.78/share) for 2Q2011, compared with $488 million ($1.15/share) in 2Q2010.