Posted 7/28/15 (Tue)
By Kevin Killough
First quarter earnings reports from the top oil producers in the Bakken coincide with projections from the Department of Mineral Resources. Operators are weathering low oil prices by focusing on rig efficiency and some reductions in activity.
Second quarter earnings reports are expected to be released in the next couple of weeks.
In its first quarter report, Hess reduced its rig count in the Bakken from 12 in the first quarter to eight. This is “where we expect to remain for the balance of the year,” said Hess COO Greg Hill, speaking in a conference call on the company’s first quarter earnings, held in April.
Continental Resources likewise reduced its activity in the region.
“Continental significantly reduced its completion crew count in the Bakken during the first quarter of 2015, as planned. The Company has three completion crews active, down from 10 at year-end 2014, and plans to maintain approximately three crews throughout 2015, based on current market conditions,” the company wrote in a press release on the first quarter earnings.
Marathon Oil has reduced its rig count in the area to one.
The companies are also focusing on the core areas of Williams, McKenzie, Montrail and Dunn Counties. In these areas, the initial well output is significantly higher than on outer regions.
Department of Mineral Resources Director Lynn Helms reported in his monthly address earlier this month initial production outputs of 3,000 barrels per day in some of the highest performing wells in the core area. In Divide County, these rates can be as low as 500 barrels per day.
As such, the department has seen most rigs operating in the core counties. Counties outside this area, such as Divide County, are seeing significant reductions in industry activity.
“Things outside the core, we’ll save for a later day. Our philosophy is where we have the good returns in the core of the core, we’re going to drill and complete those wells in the normal cycle,” said Hill.
The companies are also looking to reduce costs of the remaining operations. Continental reported reducing their costs from $9.6 million to $8.2 million per well. The company attributed a lot of the savings to reduced service costs, suggesting that support companies are lowering their prices.
Hess reported reducing drilling and completion costs from $7.3 million average in 2014 to $6.8 million in the first quarter of this year.
“By applying ‘lean manufacturing’ practices to our operations, we continue to drive down our Bakken drilling and completion costs,” Hill said.
This approach to production in the Bakken can be expected so long as oil prices maintain their current level.
In the earnings reports, companies cited a $65 to $70 price per barrel on oil as the point where a ramp-up beyond the current would begin. The average monthly West Texas Intermediate price for oil was $59.82 in June.
The last time oil prices exceeded $70 was last November.