Tickers in this Article: HES, OKS, OXY, WMB
Hess Corporation (NYSE:HES) announced a large capital investment in 2011 to develop its acreage prospective for the Bakken formation, as the company starts to work on the properties it has assembled in that play over the last year.

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2011 Capital Budget
Hess Corporation established a $5.6 billion capital budget for 2011, and plans to spend a large portion of its funds on in the Bakken play. These funds will be used for various purposes, including drilling and completing wells and the costs of building infrastructure to handle the anticipated production in future years.

Bakken Frenzy
Hess Corporation spent 2010 adding to its large acreage position in North Dakota through a merger and an acquisition. In July 2010, the company announced the acquisition of American Oil and Gas, a smaller exploration and production company active in the Williston Basin. This deal closed in December, adding 85,000 net acres to its holdings.

Also in December 2010, Hess Corporation acquired 167,000 net acres from a private company for $1.05 billion. These two deals and its own leasing activities have increased the company's total position to 900,000 net acres prospective for the Bakken.

Other companies are also assembling properties in this oil play. Williams Cos. (NYSE:WMB) recently closed on a purchase of 86,000 net acres for $925 million, while Occidental Petroleum (NYSE:OXY) paid $1.4 billion for 180,000 net acres.

2011 Activity
Hess Corporation plans to operate 18 rigs on its acreage in 2011, and will employ single and dual lateral drilling to quickly convert its leases from term to held by production. This level of drilling will result in rapid production growth for the company. Hess Corporation exited 2010 producing 20,000 barrels of oil equivalent (BOE) per day from the Bakken, and expects to average 40,000 BOE per day in 2011. The company has a goal of 80,000 BOE per day by 2015.

These estimates exclude any production from the two recent deals that closed, and the company will most probably increase that production forecast once it can evaluate the newly acquired properties.

Hess Corporation will also spend part of the $1.8 billion to expand the processing capacity of its Tioga Gas plant from 100 million to 250 million cubic feet per day. The company will use funds to construct a crude oil rail loading facility to ship its oil out of the region.

Other companies making investments in infrastructure in the region include Oneok Partners (NYSE:OKS), which recently announced that the company would invest between $260 million and $305 million through 2014. The funds will be used to build a natural gas processing facility and gathering and compression equipment.

Eagle Ford Shale
Hess Corporation also has acreage in Texas prospective for the Eagle Ford Shale, and plans some limited development here in 2011. The company is drilling delineation wells and assembling more acreage here, and plans up to a dozen development wells in the play.

Bottom Line
Hess Corporation is already one of the bigger players in the Bakken, and plans to keep that title by spending billions in capital in 2011 and beyond. (The next hot spot for energy plays in North America is the Alberta Bakken. Check out The Alberta Bakken.)

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