Hess sees Bakken crude output rising to 2021, then steadying

Houston — Hess plans to boost its Bakken shale crude production in North Dakota to 200,000 barrels of oil equivalent per day by 2021, up from at expected 180,000 boe/d in 2020 and 154,000 boe/d in 2019, then hold output steady for five years, the company said Tuesday.

The company will drop two of its current six drilling rigs once output reaches its target, CEO John Hess said at the Argus Americas Crude Summit 2020.

"That's the optimum return for shareholders and for our investment," Hess said. "We currently have some free cash flow, and it will be optimized once we get to 200,000 boe/d in 2021."

US shale production from the Bakken and other unconventional plays, including the Eagle Ford Shale in South Texas and the Permian Basin in West Texas and eastern New Mexico, has skyrocketed from about 5.5 million b/d in 2010 to over 13 million b/d.

However, growth is now slowing, with the US rig count is down more than 30% since its peak in November 2018. Hess said 500,000 b/d of US output growth year over year would be a "more sustainable rate." Others have put the number at around 600,000-700,000 b/d.

Natural factors are at work that will naturally chip away at US production, Hess said. Besides high decline rates in shale wells, top Tier 1 acreage is starting to become exhausted.

Hess sees the Eagle Ford Shale oil production, now at 1.3 million b/d, starting to pull back slightly and potentially plateauing. The Bakken will likely plateau in the next few years, Hess said, and the Permian will flatten "probably by mid-decade."

US GULF EXPANSION

Hess also has an operation in the Gulf of Mexico, which it is expanding. The company made its first Gulf deepwater discovery in years last October at the Esox-1 well, which is slated to come on stream this month and produce into its Tubular Bells facility. The company has 60 blocks in that arena it acquired for $120 million over the last five years, Hess said. It plans to drill tiebacks on many of those leases that can bring any discoveries on production quickly and cheaply.

Hess' tieback wells will largely be in the Miocene geological horizon, which is a proven US Gulf play with many industry finds on production.

Costs in the US Gulf have dropped about 40%, while the US price tag to lease a deepwater drilling rig are currently about $150,000-$200,000/day, against $600,000/d pre-2014, Hess said.

Many oil companies exited the offshore segment when costs were high pre-2014. In 2004, roughly 8,800 US Gulf blocks were under lease; today that figure is about 2,500. Even so, production in that region is currently around 2 million b/d, mainly from large, remote deepwater discoveries made years ago and sanctioned a few years back.