Hess Corp. has been talking about testing downspacing over the last year, and now North Dakota’s second largest oil producer is planning to move that testing idea forward.

In an Oct. 30 earnings conference call, Hess President Gregory Hill said the company believes it is economically attractive to increase well density in the majority of its middle Bakken acreage from five wells to seven per 1,280-acre unit, and from four to six wells in the areas where the Three Forks is prospective.

Hill said the company’s base design of five Bakken and four Three Forks wells per 1,280-acre unit has yielded effective well spacings of 250 acres for middle Bakken wells and 320 acres for Three Forks wells. The company’s infill pilot program will reduce those well spacings to approximately 180 acres for Bakken wells and approximately 210 acres for Three Forks wells.

In the infill testing, Hess plans to install 17 well pads with the new spacing configuration over the next 12 months and then evaluate results. Hill said the company will then use those results to determine whether to move forward with the tighter spacing on a larger scale.

Three Fork testing

Hess has been delineating the Three Forks since 2012, Hill said, and by the end of 2013 he expects the company to have about 140 Three Forks wells drilled and on production. That, he said, has “proved up” some 40 percent of the company’s 550,000 to 600,000 core Bakken acres. Ultimately, Hill expects that some 60 to 65 percent of Hess’s core acreage will be economic for Three Forks production.

Results on Three Forks testing have exceeded company expectations, Hill continued. “And in fact, our well results coupled with the publicly available production data show that our Three Forks acreage is among the best in the play.” Hess’s acreage blocks are concentrated in McKenzie, Mountrail and Williams counties.

The Three Forks testing, according to Hill, will also look at some of the deeper benches. “Regarding the benches, we do see several discrete thicker packages in certain areas of the field where we will plan to test whether or not more than one well in the Three Forks actually can deliver superior returns.”

Hill said the existing well spacing configuration yields about 2,500 future drilling locations and an estimated recoverable resource of about 1 billion barrels. With the positive Three Forks results, Hill said the long-term guidance will go up and could go up further from infilling.

2014 Capex

Hill said while the company has not yet finalized its 2014 budget, this year Hess is running 14 rigs in the basin and is planning to increase that count to 17 in 2014, “and then if the seven and six works, assuming it does and we’re confident it will, then you’ll see us step the rig count up to 20 rigs the year after and potentially higher after that.”

Hess Chief Financial Officer John Riley also cautioned that the company’s 2014 budget is yet to be finalized, but said the capital expenditure for the Bakken will somewhere between $500 million and $600 million.

Third quarter results

Hess’s third quarter Bakken production averaged 71,000 barrels of oil equivalent per day, an increase of 14 percent over the second quarter production. Hill said Hess’s Bakken production is ramping up in the second half of 2013 as the company completes its transition to pad drilling.

However, Hill said the company will experience some downtime in the fourth quarter as it completes the expansion of its Tioga gas plant. That downtime is incorporated in the company’s 2013 guidance of 64,000 to 70,000 boepd.

Hess brought 50 operated wells on production in the third quarter, 30 Middle Bakken and 20 Three Forks wells. Hill said Hess expects to bring 170 wells on production this year, two-thirds of which will be Middle Bakken wells and the other third targeting the Three Forks.

Hess’s Tioga gas plant expansion is on schedule to begin commissioning at the end of 2013. That expansion will increase wet gas capacity 120 million to 220 million cubic feet per day (see related stories on page 1).