Hess says Bakken growth slowing

Hess Corp. warned that its production from North Dakota’s Bakken region would not hit a previous production target as the company drills in less-productive areas of the booming oil resource to hold on to leases.

Shares of Hess, which will be the third-largest U.S. company that both refines and produces oil once Conocophillips completes its split next week, fell more than 7 per cent.

“The Bakken is Hess’s premier resource play,” said Raymond James analyst Pavel Molchanov. “Hess is one of the largest acreage holders there — nearly a million acres — so its production is scrutinized.”

North Dakota is poised to overtake Alaska as the second-largest U.S. oil producer this year, extending an unexpected oil rush that has already upended the global crude market and clipped U.S. oil imports.

Having earlier posted slightly higher-than-expected quarterly earnings, Hess said on Wednesday its net Bakken production averaged 47,000 barrels of oil equivalent a day (bpd) in April, up from 42,000 bpd in the first quarter and 25,000 bpd in the first quarter of last year.

“While we expect the monthly average to continue to increase throughout the rest of the year, we now expect the average for the full year may come in somewhat lower than our original estimate of 60,000 (bpd),” the company said on a conference call to discuss the first-quarter results.

Molchanov said the lower projected volumes did not indicate a major production problem for Hess since the company, to hold some of its acreage leases there, needed to drill in some of the less lucrative areas.

Hess’s net income in the quarter was $545 million, or $1.60 per share, versus $929 million, or $2.74 per share, in the year-ago quarter. Excluding one-time items, earnings of $1.53 per share were slightly above the $1.52 that analysts had forecast, according to Thomson Reuters I/B/E/S.

Revenue fell 5 per cent to $9.75 billion.

Its average sales price during the quarter rose $2.70 from the year-ago quarter to $89.92 per barrel, while its output dipped slightly to 397,000 barrels of oil equivalent per day compared from 399,000.

Profit from its marketing and refining arm fell to $11 million in the first quarter from $39 million a year before.

Shares in the company gave up an early gain to drop more than 7 per cent to $51.14 following the clipped Bakken forecast.