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First quarter results show reduced activity, production in the Bakken

 

Posted 5/10/16 (Tue)

By Kevin Killough
Oil prices are up 40 percent from the dismal lows of February. It’s good news, but it’s too soon for a ramp up of oil activity in the Bakken.
The first quarter results of the big players in the Bakken show a continuing focus on keeping rig counts just high enough to maintain production with only slight decreases. 
And there’s no expectation of a price recovery high enough and long enough for companies to increase capital expenditures until 2017.
Hess
Hess posted a $509 million loss in the first quarter of 2016, which it attributed to low oil prices. 
“Our strategy is lower for longer,” said CEO John Hess.
The company has been reducing well costs and its rig count in the Bakken down to three. Hess also plans to take another rig out of the game by the third quarter. 
“We don’t believe accelerating production in the current low-price environment makes sense,” Hess said. 
The company will maintain this level until WTI price hits $60 a barrel. As of last week, the price was in the mid-$40s. 
In the first quarter of this year, the company drilled 19 wells and brought 31 new wells online. The same quarter last year, Hess drilled 60 wells and brought 70 wells online. 
For the full-year 2016, the company projects a total of 62 wells drilled and 87 new wells brought online. In 2015, Hess had 182 wells drilled and 219 brought online.
Despite the decrease, the company does foresee a recovery at some point. Greg Hill, COO, said operating the two rigs leaves them with a crew ready when the recovery starts.
Continental
Continental CEO Harold Hamm continued to predict rising oil prices towards the end of 2016 and the expectation they would expand operations at $60 per barrel. 
The company is operating four rigs in the Bakken and plans to maintain this level through the end of the year. The company had no stimulation crews in the Bakken during first quarter 2016. 
It brought online 12 wells that it had drilled and completed in 2015. 
According to COO Jack Stark, the company has an inventory of uncompleted wells that could last 10 years with a rig count of 15.  
At their current operation rates, the company projected production declines through the end of the year.
Despite a lean 2016, Hamm boasted the company had not enacted any layoffs.
“Instead we kept our teams together. We maintained our culture of loyalty and trust, uplifting the morale and spirit of our people,” Hamm said.
Marathon
Marathon’s presentation on its first-quarter results had little to say about the Bakken. The company released its only Bakken rig and is focusing on Oklahoma, where two rigs operate. 
Marathon CFO Lee Tillman said when prices improve, the Oklahoma resource plays are going to be where the operations will be first ramped up.
Whiting
Whiting reported it had entered into a wellbore participation agreement with a private party who will pay 65 percent of drilling and completion costs to earn a 50 working interest in 44 gross Williston Basin wells.
This agreement set forth the companies’ activity for the rest of the year, which means if there were to be a drop in oil prices, the company’s activity would be less likely to change. 
Whiting continued to operate two rigs in the Bakken, and it added a completion crew.
The agreement is expected to result in an increase in production rates. 
By year end, the company expects to have 30 uncompleted wells in the oil patch. 
The company is also experimenting with refracks, which is taking previously producing wells and stimulating them again, which increases the well’s life. 
Whiting will be doing these operations this summer.
“We’ve identified about 40 candidates so far that are going to be good opportunities for us,” said Mark Williams, senior vice-president of exploration and production.