July 25, 2012 / 5:12 PM / 5 years ago

Hess increases drilling in Bakken shale

NEW YORK, July 25 (Reuters) - Hess Corp said it will increase oil drilling in North Dakota's Bakken prospect this year despite increased costs in the play and the recent fall in world crude prices.

The New York-based company increased its 2012 Bakken capital budget by $1 billion to $3 billion dollars as it eyed ramped up drilling in areas where it has a high working interest in wells.

Hess expects to spend an average $11 million on every Bakken well this year, much higher than its previous estimates of $8.5 million per well after a white sand shortage earlier in the year forced the company to use more expensive ceramic proppants, materials used in hydraulic fracturing.

The company's slower-than-expected transition to the less expensive "sliding sleeve" hydraulic fracturing technology also pushed costs higher.

Nonetheless, Hess reduced its average Bakken well cost to $11.6 million a well in the second quarter, down from $13.4 million per well in the first quarter, Greg Hill, president of worldwide exploration and production, said during the company's second-quarter earnings call.

Hess also plans to spend more on infrastructure projects in North Dakota and foresees higher costs from wells that it has interests in but does not operate.

Hess' production came in better than expected in the second quarter thanks to production from its Bakken properties, where output rose to 55,000 barrels of oil equivalent (BOE) a day in the second quarter, up from 25,000 BOE a day last year.

Oil production in the Bakken prospect rose above 574,000 barrels-per-day in May, according to data from the state Industrial Commission.

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