Chevron is adding a new foundational U.S. onshore asset in the Bakken after closing its Hess Corp. acquisition.
Much of the attention concerning the $53 billion oil and gas megadeal focused on Hess’ legal dispute over its ownership interests offshore Guyana. Hess owns a 30% stake in the prolific Stabroek Block, alongside operator Exxon Mobil (45% stake) and minority owner China National Offshore Oil Corp (CNOOC) (25%).
Chevron prevailed in international arbitration to gain control of the Stabroek Block stake, but the Hess deal also adds plays in the Bakken and Gulf of America and natural gas assets in Southeast Asia.
Hess has operated in North Dakota for almost 75 years, beginning with Amerada Petroleum Corp.’s first discovery well in the Williston Basin in 1951.
Amerada later merged with Hess, creating Amerada Hess, a name that became familiar to North Dakota communities and generations of workers. Now, that legacy enters a new chapter as Hess transfers its roughly 43,000 net acres to Chevron, a move that will shape the Bakken’s future development.
In the first quarter, Hess’ Bakken production averaged 195,000 boe/d.
The Bakken represents a significant new asset for Chevron, and questions remain about how it will align with the company’s broader onshore portfolio. Hart Energy has reached out to Chevron for comment on its new Bakken assets.
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Chevron’s U.S. onshore portfolio
Production from Chevron’s flagship U.S. asset in the Permian Basin is nearing 1 MMbbl/d. The company plans to maintain production around that level.
With its contiguous position in the Denver-Julesburg (D-J) Basin, Chevron is Colorado’s top oil and gas producer. Chevron also has a smaller footprint in Colorado’s gassy Piceance Basin.
With existing investments competing for capital, the Williston Basin is unlikely to be a core focus for Chevron, said Andrew Dittmar, principal M&A analyst for Enverus Intelligence Research.
Most other major U.S. producers have pivoted from the Bakken to invest in other oil plays like the Permian. Devon Energy, for its part, doubled down on the Bakken with a $5 billion acquisition of private E&P Grayson Mill Energy last year.
Exxon Mobil, ConocoPhillips and EOG Resources still operate in the Williston, though on a smaller scale than in decades past. Exxon Mobil was reportedly seeking a buyer for some of its Bakken assets last year.
Chevron could take a similar approach, potentially selling legacy Bakken holdings as it works to raise $10 billion to $15 billion through non-core asset sales following the Hess acquisition.
Dittmar noted, however, that Chevron has several compelling reasons to keep the Bakken in its portfolio.
“The company likely keeps it as a large, relatively low-decline oily production wedge in its portfolio while maintaining a limited development plan,” Dittmar told Hart Energy.
According to Enverus data, Hess’ Bakken inventory trails other public operators in the basin, partially due to rock quality. Hess also has “above average gathering and transport costs” associated with Hess Midstream LP.
Hess’ best remaining Bakken inventory is in the Nesson Anticline in northwest North Dakota, but it has limited runway in the area, according to Enverus data.
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Longer laterals, new exploration
The Bakken horizontal boom breathed new life into the Williston Basin over 25 years ago. After a quarter century of continuous development, the maturing basin still has oil and gas yet to give.
Operators like Hess, Continental Resources and Chord Energy are drilling longer 3- and 4-mile laterals from single pads to reduce D&C costs.
Hess claims to have drilled the first 4-mile laterals in the Bakken. The two 4-mile wells run parallel, north to south, in the Beaver Lodge Field northeast of Williston, North Dakota.
The company said it also drilled a 2-mile observation lateral “overlapping the last 2 miles of the producing laterals between the two 4-mile wells.” Outfitted with fiber and pressure gauges, the observation well aims to document depletion and recoveries from the 4-mile wells over time, Hess said.
Williston producers are also reportedly seeking new drilling locations outside of the middle Bakken Formation.
The middle Bakken has accounted for most of the Williston Basin’s oil production to date, particularly since the proliferation of horizontal drilling after 2000.
But the Williston holds several other layers of oily stacked pay. Other top producing zones include the Madison, Red River, Sanish and Devonian formations, according to North Dakota state data.
Operators are revisiting legacy zones, leveraging modern horizontal drilling techniques to tap previously overlooked potential.
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