Hess cuts capital budget by 16% to $4.7 billion

Hess Corp. has set a capital budget of $4.7 billion for 2015, down 16% from $5.6 billion spent last year. The company at the beginning of 2014 reported a $5.8 billion budget for the year (OGJ Online, Jan. 24, 2014).

Of that total, $2.1 billion is slated for unconventional shale resources, $1.2 billion for production, $1 billion for developments, and $400 million for exploration.

Spending in the Bakken shale will be reduced to $1.8 billion from $2.2 billion last year. Drilling and completion activities, pad level facilities, and low pressure gathering lines will require $1.45 billion; and major infrastructure projects will require $350 million.

The company plans to operate an average of 9.5 rigs in the Bakken and bring 210 operated wells online, compared with 17 rigs and 238 operated wells brought online last year.

“Hess has some of the best acreage in the Bakken, and we will continue to drill in the core of the play which offers the most attractive returns,” explained Greg Hill, Hess president and chief operating officer.

“Substantially all our core acreage is held by production, which allows us to defer investment in the short term while maintaining the long term value and optionality of this important asset. As oil prices recover we will increase activity and production accordingly.”

The Bakken represented 24% of the company’s production in 2013, and the company reported in November, when crude prices were higher, that peak production is expected to reach 175,000 boe/d by 2020 (OGJ Online, Nov. 11, 2014).

In the Utica shale, meanwhile, Hess is budgeting $290 million, down from $500 million last year, to drill 20-25 wells in the core of the wet gas window. Hill said the company is transitioning “to early development at a measured pace in this price environment and as infrastructure builds out.”

Hill said, “Over 2015, our joint venture with Consol [Energy Inc., Pittsburgh,] intends to execute a two-rig program focused in the core of the wet gas window and bring 25-30 new wells online, compared with four rigs and 39 new wells in 2014.”

E&D, production plans

Hess plans to spend $300 million to drill four production wells and begin one water-injection well in South Arne field in Denmark, where the company holds 62% interest as operator; and to bring three production wells online and drill one new well in Valhall field in Norway, where Hess holds 64% interest and BP PLC is operator (OGJ Online, Jan. 29, 2013).

Drilling of one production well and one water-injection well, along with continued facilities work in Tubular Bells field, where Hess operates with 57.1% interest, in the deepwater Gulf of Mexico will receive $250 million. Production from the field started in November (OGJ Online, Nov. 17, 2014).

Drilling of two production wells in Equatorial Guinea will receive $220 million. Hess has 85% interest as operator. Drilling of production, appraisal, and water injection wells in Shenzi field and small-scale well-related activity elsewhere in the deepwater Gulf of Mexico will receive $200 million. Hess holds 28% of the BHP Billiton Ltd.-operated Shenzi field.

The ongoing booster compression project in the joint development area in the Gulf of Thailand, where Hess holds 50% interest, will get $175 million to drill 8-10 wells.

The installation of three wellhead platform jackets, progress fabrication, and commence Phase 1 drilling for the North Malay basin full field development project in Malaysia, where Hess operates with 50% interest, will receive $600 million (OGJ Online, Dec. 10, 2013).

Hull and topsides fabrication and the launch of drilling at Stampede field in the deepwater Gulf of Mexico, where Hess has 25% as operator, will get $300 million. The company recently signed a contract with Diamond Offshore Drilling Inc. for deployment of two rigs. Production is expected to start in 2018, with capacity eventually reaching 80,000 b/d of oil (OGJ Online, Oct. 29, 2014).

Hess also plans to budget for the drilling of the Sicily well in the deepwater Gulf of Mexico and the Liza well offshore Guyana; and to complete drilling operations on Dinarta block in Kurdistan.

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