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Oil companies optimistic but still reserved

 

Posted 11/08/16 (Tue)

By Kevin Killough
At the close of the third quarter, the big oil operators in the area consistently look with a mixture of optimism and caution for the coming year.
The tone of executives’ remarks is next year will bring more activity but no one is expecting the Bakken to go boom again. 
Hess
John Hess, CEO of Hess, said the company is positioning itself for a “lower for longer” oil price environment.
The company posted a loss of $234 million in the third quarter, which is an increase of nearly $50 million over the third quarter last year. 
Last quarter, the company posted a loss of $328 million. 
Hess attributed these losses to low sales volumes and oil prices, which “more than offset the positive impacts of lower operating costs.” 
In total, the company produced 314,000 barrels of oil equivalent per day in the quarter. This figure includes all natural gas liquids and natural gas produced, as well as crude. 
Of that, 107,000 barrels per day came out of the Bakken, which is 6,000 barrels per day under the same quarter last year. 
The rig count in the Bakken remained at three, where it’s been since the second quarter. The company had reduced the count by one after the first quarter and they plan to go down to two this coming quarter.
The company drilled 21 wells this past quarter and completed 26. 
Costs continued their decline down to an average of $4.7 million per completed well. This is down from $4.8 million in the second quarter and down from $5.1 million in the first quarter. 
The company’s average completed well costs were $6.8 million in the first quarter of 2015. 
As with the other big players in the oil patch, Hess has been improving its drilling and completion technology, while reducing costs. 
With these improvements, the company could maintain production rates at their current level with only three rigs operating, said Greg Hill, Hess COO. 
“Our Bakken team continues to deliver excellent operating results and returns in the core of the play,” Hess said in the company’s quarterly webcast. 
He said the Bakken remains competitive with shale plays in Texas, and the company counted its Bakken assets as an integral part of the company’s financial health. 
Continental
As with Hess, Continental has been improving its techniques to improve well performance and reducing costs. 
The company posted a net loss of $109.6 million in the third quarter. This is up from a loss of $82.4 million in the same quarter of 2015.
In the third quarter, the company produced just under 108,000 barrels per day in the Bakken. This is down from 135,000 barrels per day in the same quarter last year. 
The company has maintained a steady level of activity throughout the slowdown. With increased well performance from improved technology and decreased costs, they didn’t expect a ramp-up in drilling activity in 2017.
Continental created a large inventory of uncompleted wells from previous year’s drilling activity, and it has been drawing upon this inventory with two stimulation crews operating in the Bakken currently. 
The company plans to increase this to four by the end of the year, and finish out 2016 with 175 uncompleted wells in its inventory. 
It operated four drilling rigs in the third quarter. 
Continental CEO Harold Hamm said oil prices were in line with expectations for the end of the year.
“Members of OPEC are now coming to the negotiating table as global supply and demand are rebalancing,” Hamm said. 
The company has been experimenting with enhanced completion techniques, and two of its wells in McKenzie County produced some of the most impressive 30-day initial production results in the company’s history. 
As prices improve somewhat going into 2017, there is growing concern service providers to the oil companies will increase prices. 
Hamm said he doesn’t believe this will have much of an impact on the company’s costs next year. With their steady levels of activity, they have established, lasting relationships with vendors, and much of their cost reductions have been structural. 
Whiting 
Whiting’s outlook is heavily focused on the Bakken and reported, with improved technology and reduced costs, the company could produce profitable wells at $50 per barrel oil.
The company had a net loss of $133.1 million in the third quarter, up from a loss of $35.4 million in the same quarter last year. 
From the Bakken, the company pulled just over 105,000 barrels per day in the third quarter. This is a decrease of nearly 26,000 from the same quarter last year. 
The company has four rigs currently operating in the Bakken, which is up from two last quarter. 
Whiting CEO Jim Volker said the company would not increase this amount unless oil hit $60 per barrel.
Whiting drilled test wells in McKenzie County using what it calls “super completions.” Volker said the results of these wells were “outstanding” for the company’s history. 
There were in the same area where Continental has been seeing impressive results from its enhanced completion techniques. 
 “We are the top performer in the Bakken,” Volker said, according to publicly available data from the Industrial Commission. 
Over the past year, the company sold off a lot of its acreage in the Permian Basin in Texas, with the aim of keeping its operations focused in North Dakota.
Volker said they found the results in the Bakken to be a lot more consistent.
“I’m not knocking what other people are doing. Some of them are having great results. I just think for us, we’re happy with our Bakken results,” Volker said.
Marathon
The third quarter of this year brought a net loss of $192 million for Marathon. The company produced 54,000 barrels per day in the Bakken, which is down by 6,000 barrels per day in the same quarter of last year. 
The company has focused much of its activity outside the Bakken as it waits for better commodity prices. 
The company had no rigs operating this past quarter, but it expects to start operating one by the end of the year, positioning itself for a better price environment in 2017.
As with the other big players, Marathon has been seeing some of the best results in its history from wells in the Bakken, with well completion costs lower than they are in Texas plays.
The company does not expect to bring any new wells online until next year.