DENVER—Few remember that it was a Hess Corp. well that discovered the prolific Bakken oil play—in 1951.

That conventional well, drilled on the farm of namesake Henry Bakken, “flowed at the rate of 300 barrels per day [bbl/d] for 42 hours, then went to zero,” Hess COO Greg Hill told Hart Energy’s DUG Bakken and Niobrara Conference and Exhibition in Denver.

The industry’s technology had not solved the challenge of drilling and producing a shale play 64 years ago, Hill added, and the real action in the Williston Basin in those days was conventional producing zones like the Lodge Pole and Red River.

But in one form or another, Hess has been in the Williston ever since and creative management techniques offer it strong returns in the future, he said. “We’re still learning a lot” about the Bakken and Three Rivers shales. “There are more opportunities and more excitement than ever in the Williston—we’re not done yet,” he said.

As with most U.S. producers, Hess had turned its focus abroad in the 1990s. That focus changed rapidly in 2010 as the Bakken emerged as one of North America’s leading shale plays.

“Hess had really become an offshore company by then,” although it retained a sizeable leasehold in North Dakota. The company still “has half its production outside the U.S., which is a little different for this crowd” of mostly domestic operators, Hill said with a chuckle. Hess also has far smaller interests in Ohio’s Utica unconventional play. It remains a major North Sea producer and is exploring a major concession offshore Ghana.

Hess holds 615,000 net acres in the Bakken/Three Forks plays and serves as operator for most of that acreage. A plus it enjoys is the bulk of that acreage lies in the core of the plays’ most-productive areas. Hess has some 1,200 potential well locations identified. Net North Dakota production for this year should be 95,000 to 105,000 bbl/d, equivalent. The company’s target is 175,000 bbl/d, equivalent, by 2020, Hill said.

The Williston now accounts for 26% of production and 33% of proved reserves for the New York-based firm, he said.

Despite the potential of the Bakken, Hess must deal with the reality of current low crude prices. The producer has cut its 2015 capex to $1.8 billion in the play, down from $2.2 billion in 2014, according to Hill. It plans to place 210 wells on production this year, compared with 238 wells last year. It plans to reduce its Bakken rig count to eight during the second quarter, less than half of its peak of 17 active rigs last year.

Midstream Assets

Hess has invested considerable capital in the midstream infrastructure needed to handle that swelling production. Hill noted Hess has plans underway to make an IPO for a midstream MLP unit this year.

Its Tioga gas plant was recently expanded to 250 million cubic feet per day (MMcf/d) and future debottlenecking could lift the processing plant’s capacity to 300 MMcf/d. Hill said the plant sells its ethane under a long-term contract rather than rejecting it back into the gas stream. The company’s Mentor LPG terminal has a capacity of 328,000 bbl “and we sell that propane into seasonal demand” of the upper Midwest, Hill said.

Hess’ Tioga rail terminal can load 140,000 bbl/d of crude oil and 30,000 bbl/d of gas liquids. The terminal has 287,000 bbl of crude storage available.

Lean Manufacturing

Hill credited the much-publicized lean manufacturing techniques of automaker Toyota for the company’s continuing improvement in drilling costs of well production. He said the techniques can be applied to most industries and added he learned the lean manufacturing concept while with another firm before joining Hess in 2009.

“Lean manufacturing is a proven methodology pioneered by Toyota,” Hill explained. “It has all sorts of cool Japanese terms but that’s a very small part of it. The important thing is the culture within the company and its suppliers. It involves the entire supply chain and turns the [corporate] structure upside down.”

The continuous improvement effort emphasizes the contributions of those closest to a given function and their ideas on how to remove unneeded effort and costs, he added. That differs from the top-down management style of most companies. The process has yielded substantial improvements for Hess operations in the Williston Basin, Hill said.

As an example, he noted a better than 50% reduction in drilling time for the firm’s Bakken wells since first-quarter 2011, from 45 days to 22 days. That has contributed to a related reduction in drilling and completion costs per well, from $13.4 million to $7.1 million, in the same period.

“We think we can take another $400,000 out, compared to where we were in late 2014,” he added.

Meanwhile, Hess wells rank among the best in initial Bakken production rates—and those rates continue to rise, he noted.

“This stuff is really good,” he said of the lean manufacturing concept, “it’s powerful and it really works.”

Contact the author, Paul Hart, at pdhart@hartenergy.com.