Hess president: we take long-term view, will continue investments

By Luke Geiver | January 27, 2016

Greg Hill, president and chief operating officer for Hess Corp., said the company had an extraordinary year for its operational efficiency in 2015. While oil prices will impact the amount and type of work the company performs across its global operations, Hill provided a clear message to investors in a 2016 guidance note and during the company’s 2015 fourth quarter review.  “We take a long-term view to managing our business and we will continue to invest in our growth projects and prospects, including exploration and appraisal activities,” Hill said.

John Hess, CEO of Hess Corp., said the global exploration and production company is currently guided by three principles in the low oil price environment. During the company’s 2015 fourth quarter update, he explained that the oil and gas production corporation is working to preserve the strength of its balance sheet, maintain operational flexibility and preserve its long-term growth options.

This year, Hess intends to operate two drilling rigs in what it believes is the core of the Bakken. The two-rig program will commence in February. For the year, Hess will invest $425 million to bring 80 new wells online. The focus, Hess said, is “on value, not volume.” With oil prices trading in the $30/b range, the company doesn’t believe it makes sense to accelerate production. While it produced roughly 112,000 barrels of oil equivalent per day in 2015, Hess’ 2016 Bakken production will range from 95,000 boepd to 105,000 boepd.

Despite the plan to run fewer rigs and complete fewer rigs, Hess will continue to keep production relatively flat. Hill said the Bakken continues to deliver outstanding performance and offers high-upside. On its Bakken-focused well drilling spacing units, it has been placing 13 wells, but in 2016 that will change. Hill said the company has completed a pilot test that has yielded an additional 200 new drilling locations. Infill testing revealed that the company should now be placing 17 wells per DSU, an increase of 4 wells per DSU.

Completion analysis and testing in 2015 will also bring change to the way Hess completes its Bakken wells this year. Previously, the company was completing wells with 36-stage fracks. This year, the company will be fracking most wells with a sliding-sleeve technology that will frack every wellbore roughly 50 times. The process has improved the initial production rates on Hess’ 30-, 60- and 90-day production periods, Hill said.

In 2015, Hess drilled and completed 219 wells, 34 of which were brought on production in Q4 2015. Drilling and completion costs were roughly $5.1 million for 2015. Hill believes those costs, which are 28 percent less than those incurred in 2014, will remain steady in 2016.

In total, Hess will spend roughly $2.4 billion in 2016 for operations across the globe. Operations in the Bakken will receive the most investment, followed by $375 million for work in Malaysia and the Gulf of Mexico. The Utica shale in Ohio will only receive $45 million for the drilling of 5 new wells and to bring 14 other wells online.