Chevron’s recent deal to acquire Hess, a major operator in North Dakota’s Bakken shale play, has sparked industry interest, although analysts are cautious about expecting a return to the region’s pre-pandemic oil boom days.
The acquisition, announced last week, could potentially marginally increase oil output in Bakken, but it is not anticipated to match the peak production levels witnessed before the COVID-19 pandemic, according to Reuters.
During the Bakken Boom, innovative drilling technologies transformed North Dakota into the United States’ second-largest crude oil-producing state from 2012 to 2020. However, the pandemic-induced drop in oil demand and drilling activity led to a shift in rankings, with New Mexico taking over as the second-largest producer after the pandemic.
The Bakken formation’s geographical distance from export terminals and refineries results in higher transportation fees and comparatively smaller profits for producers. This contrasts with competitors in the vast Texan and New Mexican shale areas, closer to the main refining and export hubs on the Gulf Coast.
Currently, production in the higher-cost Bakken region hovers around 1.27 million barrels per day (bpd), nearly 18% below the late 2019 peak, as per U.S. government data. Hess, one of the key players in the Bakken, reported a production of 190,000 barrels of oil equivalent per day (boepd) in the region during the third quarter of this year.
With Chevron’s acquisition, the company gains access to this production and secures 465,000 net acres (1,882 sq km) in the region, described as “long-duration inventory.” Chevron intends to align its plans with Hess’s strategy for the Bakken, aiming to grow net production to approximately 200,000 boepd by 2025. Chevron CEO Mike Wirth emphasized the region’s potential, stating, “This is a very attractive asset that can deliver plateau production, strong cash flow for many, many years to come.” He also hinted at Chevron’s plans to leverage new technologies to maximize output from the Bakken.
