Hess's Bakken Drilling Days & Well Costs Down

Hess Bakken Drilling By County
Hess Bakken Drilling By County

Hess is spending less in 2013, but it might simply be spending it smarter. The company only spent $535 million developing its Bakken acreage in the first quarter. Honestly, it's still a big investment, but down over $300 million from the first quarter of 2012 when Hess spent $852 million in the area.

The main reason for lower investment levels is improving costs. Hess can drill the average well in just 26 days compared to 32 days in the second quarter of 2012. That along with other costs savings measures has driven Bakken drilling & completion costs down from $13.4 million to $8.6 million over the past year.

Hess Bakken Map
Hess Bakken Map

Hess has also let a significant amount of acreage go over the past year. The company has an interest in 665,000 net acres compared to 833,000 net acres in Q1 2012.

Hess produced 65,000 boe/d in the first quarter of 2013 and just 11% of the company's production is operated by other companies. Hess has an average working interest of 84% in operated wells and 12% in non-operated wells.

With many corporate changes underway at Hess, it will be interesting to see if the company's strategy changes over the coming months. I can't imagine a scenario where the Bakken isn't core to the company's development plans.

Halcon Buying Resolute's Williams County Bakken Acreage For $75 Million

Resolute Energy Bakken Acreage Map
Resolute Energy Bakken Acreage Map

Resolute Energy has agreed to sell approximately 19,600 net acres in the Bakken to Halcon Resources for $75 million.

The deal includes 19,600 net acres in Williams County in what the company calls the New Home area. Production is estimated at a little less than 1,000 boe/d and Halcon already owns an interest in the acreage.

Halcon is gaining back an interest in acreage that was sold to Resolute from GeoResources in 2010. Halcon bought GeoResources in August of 2012. Resolute purchased a 47.5% interest in 42,000 gross acres for $20 million from GeoResources almost three years ago. Now, Resolute is the selling the acreage to Halcon for $75 million.

Resolute will retain approximately 9,400 net acres prospective for the Bakken in McKenzie County.

At the time of writing, neither company had issued a press release in regard to the deal. Only an 8-K detailing the PSA was recorded with the SEC.

Bakken Oil Continues Moving To The Pacific Northwest

Bakken Crude Rail Costs
Bakken Crude Rail Costs

We've noted Bakken Oil can get premium prices on the West Coast before and more crude is making its way that direction. Most of the oil is moving by rail, but it is not being railed all the way to California.

Most of the oil is unloaded at ports in the Pacific Northwest, put on barges, and sent south to refineries. Some is consumed locally.

There are other projects that might come to fruition as well. Oil moving west is likely going to be a mainstay in North Dakota and Montana.

In total, there are 10 rail terminals planned or under construction in Washington and Oregon. One Tesoro facility has been completed in Anacortes, WA. Others include:

  • 2 in Anacortes, WA
  • 2 in Ferndale, WA
  • 1 in Tacoma, WA
  • 3 in Hoquiam, WA
  • 1 in Vancouver
  • 1 in Clatskanie, OR

It's an interesting development to watch.

While pipelines are the cheapest, safest, and most efficient way to move crude, rail has become competitive due to price differences around the country and barriers to building pipelines. Pipelines face significant regulatory scrutiny and high initial capital costs.

Wet Weather Forcing Delays In North Dakota's Bakken Oilfield

North Dakota Bakken Region Precipitation Map May 2013
North Dakota Bakken Region Precipitation Map May 2013

It has been a tough couple of months for operators in the Bakken.

McKenzie County was forced to initiate a semi-truck ban on gravel roads this past weekend. The ban lasted from noon on Sunday through 6 am on Monday.

The past two months have been rough in North Dakota. Lynn Helms noted in his directors cut that April was the coldest month on record and May was the wettest. It hasn't let up much in June and McKenzie County estimates road damage from the past several weeks will cost the county as much as $50 million.

“Operators have not been able to catch a break.”
— Lynn Helms

Nine inches of rain fell over the past two weeks in McKenzie County alone. More than one-third, or 67 of the 188 rigs targeting the Bakken are active in McKenzie County.

Expect mention of delays to creep into earnings calls and operational updates over the coming weeks. A truck ban on a Sunday won't slow down the industry too much, but damaged roads and continued rain might.