NEW YORK Oct 31 Well costs in North Dakota's Bakken shale may be declining more quickly than expected if an 18 percent drop reported by top driller Hess Corp this week is any indication.
Hess, which has long been criticized for the highest well costs in the Bakken, said spending dropped to an average of $7.8 million per well in the third quarter, down from $9.5 million a well a year ago and $8.4 million in the second quarter.
It is not yet clear whether the steep decline is the result of Hess catching up with improving efficiencies already in place for other Bakken producers, or a broader signal that overall costs in the country's biggest shale oil patch are in a deepening decline.
Hess' well costs dropped when it cut the number of days it took to drill a well from 27 to 24 and spent less on hydraulic fracturing or fracking, a spokesman said on Thursday.
With its wells now closer together, Hess also spent less hauling water and other materials needed for fracking, the spokesman said.
Still, the New York-based company's ebbing costs show Hess is emerging as an efficient producer in the Bakken with slightly better results than peers.
Although cost comparisons are fraught with inaccuracies because of differences in well location, fracking and drilling methods used, other major Bakken producers have reported slightly higher costs.
Continental Resources Inc, the largest producer in the Bakken, spends an average $8.2 million on its Bakken wells, while Whiting Petroleum Corp said it spent $7 million to $8.5 million on Bakken wells in October.
"The Bakken data was good, both in terms of volume growth and cost performance," Deutsche Bank analysts said in a note, adding that the results bolster hedge fund Elliott Management's desire to spin off the company's Bakken assets.
Hess produced an average 71,000 barrels of oil equivalent from the Bakken in the third quarter, a 14 percent increase from a year earlier. It expects to continue producing from 64,000 to 70,000 boepd through the end of the year.
Total output from the Bakken and Three Forks shale play averaged at more than 847,000 bpd in August, according to data from state regulators.