Hess' Bakken Shale production jumped 39% year on year in the second quarter, and the potential shutdown of a major pipeline that takes oil from the North Dakota field to the Gulf Coast likely won't prevent the company from getting all its output to market, its top executive said July 29.
CEO John Hess said his company continues to transport oil on the 570,000 b/d Dakota Access Pipeline, while it waits for a decision after a US District Court of Appeals issued a stay earlier in July on a lower court's recent ruling to empty and shut the line.
"If DAPL is shut in, we have the capacity to move all of our Bakken production because of the flexibility provided by our marketing capability; our Hess Midstream infrastructure and long-term commitments to multiple markets," John Hess said during a second-quarter earnings call.
"And specifically, if DAPL were interrupted, rail would feature [in the company's transportation options], plus other pipeline systems that we move oil on currently," he said. "So it would not have a major impact on moving all of our production if DAPL were shut in, and the cost to us would be a few dollars per barrel."
Hess has 55,000 b/d of firm transportation on DAPL, or about half its Q2 volumes.
The crude pipeline has been allowed to continue to operate pending a more thorough environmental review.
Hess' Bakken production averaged 194,000 boe/d in the second quarter, with the large year-on-year increase attributable to more wells and better well performance, COO Greg Hill said. The company's net oil production from the Bakken was up 24% in Q2 year on year to 108,000 b/d.
"Following the transition to 'plug and perf' completions, further efficiency gains coupled with cost reductions across our supply chain, allowed us to have an average [Bakken] completion cost per well of $6 million in the second quarter," Hill said. "We believe through the application of technology and lean manufacturing techniques, we can continue to push drilling and completion costs even lower."
Running one rig in Bakken
Since May Hess has operated one rig in the Bakken, down from six rigs earlier in the year. It released the other five rigs as part of cost-cutting moves in light of abnormally low crude prices and low oil demand owing to the coronavirus pandemic.
In July, the Bakken was estimated as the third-largest oil play in the US, with production of 1.095 million b/d, exceeded by the Eagle Ford Shale at 1.129 million b/d, according to US Energy Information Administration data.
But by next month the Bakken is expected to be the second-highest producing oil play at about 1.113 million b/d, with the Eagle Ford in South Texas falling to 1.106 million b/d, the EIA said.
Hess' total net oil and gas production rose 22% in Q2 year on year, excluding Libya, averaging 334,000 boe/d, while oil-only output was 183,000 b/d in the same period, up 14% year on year. Higher output came from increased Bakken output and the debut of production from the Liza Field offshore Guyana in December 2019.
The company expects to produce about 330,000 boe/d net for full-year 2020, excluding Libya, up from previous guidance of 320,000 boe/d, and 185,000 boe/d in the Bakken, an increase from previous guidance of 175,000 boe/d.
Owing to a declaration of force majeure by the Libyan National Oil Corporation, Hess had no net output for Libya in Q2. In Q2 2019, its net output from Libya was 20,000 boe/d.
