Hess Corp.’s overall production in the second quarter increased by 23 percent to 391,000 barrels of oil equivalent per day (boe/d), thanks in part to the company’s substantial assets in the Bakken, reports Natural Gas Intelligence (NGI).
During a conference call on Wednesday addressing quarterly results, Hess CEO John Hess said operations were affected by high expenses and low oil prices. Due to these factors, the high sales volumes of crude and natural gas created less revenue than the company had hoped for. For the second quarter, the company reported an adjusted net loss of $147 million. For comparison, the company reported profits of $432 million during the same quarter the year prior.
Despite the losses, however, Hess is witnessing significant production gains and is seeing overall operating costs begin to drop, which prompted the company to increase production forecasts for the remainder of the year. During the call, Hess said, “In the second quarter, drilling and completion costs averaged $5.6 million [per well], down 24 percent from the previous year’s quarter. We are leveraging [our] expertise in lean manufacturing techniques from the Bakken to drive improvements in our joint venture operations in the Utica.”
In a statement, Hess COO Greg Hill said net production in the Bakken was 119,000 boe/d, which was comprised of 71 percent weighted oil, 19 percent natural gas liquids and 10 percent natural gas. Bakken production estimates for the rest of the year have been increased to approximately 110,000 boe/d. Hess said, “We have one of the strongest acreage positions in the Bakken with more drilling spacing units in the core of the play than any other operator.” As the company continues to utilize technological advances and witness supply chain cost reductions, its Bakken assets are becoming some of the lowest cost wells operating in the region.
Additionally, both Hess and Hill emphasized the long-term viability of the company’s Bakken assets. The 10-year inventory of drilling sites are producing average return rates of 15 percent, according to the company. Hill also noted the decrease in Bakken well completion costs. During the first quarter of this year, completion costs averaged $6.8 million. For the second quarter, these costs had dropped to $5.2 million per well. He said, “For all of 2015 we now expect completion costs to average $5.8 to $6 million, below our previous guidance of $6 to $6.5 million per well.”