Hess reduces 2016 budget by 40% to 2.4 billion

Hess Corp. is planning a 2016 capital and exploratory budget of $2.4 billion, a 40% reduction from its 2015 actual spend of $4 billion and 20% below its preliminary 2016 guidance of $2.9-3.1 billion provided in October.

Of the total budget, $470 million is for unconventional shale resources, $610 million for production, $820 for developments, and $500 million for exploration and appraisal activities.

Net production is forecast to average 330,000-350,000 boe/d in 2016, with Bakken shale net production in North Dakota averaging 95,000-105,000 boe/d. These production forecasts are unchanged from preliminary guidance provided in October.

“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,” said Greg Hill, Hess president and chief operating officer.

“However, in response to the current low oil price environment, we have significantly decreased our 2016 capital and exploratory expenditures and we plan to reduce activity at all of our producing assets,” Hill said. “Moreover, we will continue to pursue further cost reductions and efficiency gains across our portfolio.”

Budget breakdown

In its unconventional assets, Hess plans to allocate $425 million to operate two rigs and bring online 80 new wells in the Bakken; and $45 million to drill five wells and bring 14 new wells online in the Utica shale in Ohio during the first quarter, after which the rig will be released.

Production spending is slated to involve $375 million for activities in the deepwater Gulf of Mexico, including the drilling and completion of a production well and completion of a water injection well at Tubular Bells field (OGJ Online, Nov. 17, 2014); a production well at Conger field; and a water injection well at Shenzi field.

Hess also will spend $140 million to complete the current stage of the Phase 3 drilling campaign at South Arne field in Denmark by the end of the first quarter, and for operations at Valhall field in Norway; and $50 million to complete the Booster Compression project and processing of new broadband seismic data in the Joint Development Area in the Gulf of Thailand.

Development spending includes $375 million to progress full field development of the North Malay basin project in Malaysia; $325 million to integrate hull and topsides, install subsea umbilicals, risers, and flowlines, and commence drilling at Stampede field in the deepwater gulf (OGJ Online, Oct. 29, 2014); and $70 million for predevelopment activities at Liza field in Guyana.

Exploration and appraisal spending includes $250 million to drill as many as four wells on Stabroek block offshore Guyana that include evaluating the significant Liza discovery (OGJ Online, May 20, 2015), a drill stem test, and additional exploration activities; and $175 million for drilling in the gulf including an appraisal well to delineate the Sicily discovery and an exploration well at the Melmar prospect, a large Paleogene four way structure in the Perdido fold belt in the gulf.

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