Oil output in North Dakota’s Bakken shale field may increase slightly due to Chevron’s (CVX.N) acquisition of Hess (HES.N), one of the biggest operators in the region. Still, analysts do not anticipate a return to the region’s pre-pandemic high.

Between 2012 and 2020, North Dakota became the second-largest producer of crude oil in the United States because of advancements in drilling technology during the so-called Bakken Boom. New Mexico moved to the No. 2 position after the COVID-19 outbreak reduced drilling activity and oil consumption.

Oil output in North Dakota’s Bakken shale field may increase slightly due to Chevron’s (CVX.N) acquisition of Hess (HES.N), one of the biggest operators in the region. Still, analysts do not anticipate a return to the region’s pre-pandemic high.

Between 2012 and 2020, North Dakota became the second-largest producer of crude oil in the United States because of advancements in drilling technology during the so-called Bakken Boom. New Mexico moved to the No. 2 position after the COVID-19 outbreak reduced drilling activity and oil consumption.

In the third quarter of this year, Hess produced 190,000 barrels of oil equivalent per day (boepd), as the firm reported in its financial statement on Wednesday. It now has 465,000 net acres (1,882 sq km) of production in the area thanks to Chevron’s acquisition, which it referred to as “long-duration inventory” when it announced. Analysts predicted that Chevron will mostly follow Hess’s plans for the Bakken, which included increasing its net output there to around 200,000 boepd in 2025.

When the acquisition was announced, Chevron CEO Mike Wirth stated that the company would have around 15 years’ worth of inventory in the area if it employed the same number of rigs that Hess had. “This is a beautiful asset that can deliver a kind of plateau production and strong cash flow for many, many years to come,” Wirth stated.

He also stated that Chevron plans to extract more from the Bakken in the future, thanks to new technologies it is developing in the other shale locations where it operates. “This sale is a big deal in North Dakota,” stated Ron Ness, the executive director of the trade association for the sector, the North Dakota Petroleum Council.

“Bringing Chevron’s expertise to the state is most welcome.” The arrival of Chevron also signifies a shift in the state’s energy industry’s culture. Hess has worked in North Dakota’s energy sector since 1951 and has contributed to the state’s rise to prominence as a producer of shale gas and oil.

“There’s a sentimentality to this sale,” said Kathy Neset, who represents Hess as one of her biggest customers and operates a well-known North Dakota oil industry consulting business.

DOWNSIDE?

In the future, Chevron may raise Bakken production over Hess’s intended output, according to Matthew Bernstein, a senior analyst at Rystad Energy. Larger integrated businesses, like Chevron, are less pressured than shale producers to adhere to modest goal increases in every place they operate because of the scope of their operations, Bernstein said, as long as they continue to provide returns for shareholders.

According to Jessie Jones of Energy Aspects, there is less room for activity growth in the Bakken since it is smaller and more concentrated than areas like the Permian, the top oilfield in the United States.

Since 2019, the Bakken’s break-even prices have often been higher than those of other shale basins. According to Rystad Energy statistics, the average Bakken half-cycle break-even pricing, which considers price differentials, income taxes, and transportation expenses, is predicted to be $58.86 per barrel in 2023. This is much less than the $50.69 per barrel in the Midland section of the Permian basin.

According to data from the Energy Information Administration, the Permian basin in Texas and New Mexico has exceeded its prior peaks and reached a record high of around 6 million bpd this year.

Jones predicts that this year’s Bakken output will reach 1.3 million barrels, a far cry from the 1.54 million bre-pandemic high. Whether fresh funding or a technological advance can stop a longer-term drop in Bakken output remains to be determined.

According to Wood Mackenzie principal analyst Nathan Nemeth, Bakken oil output might bell gradually as inventory exhaustion sets in, eventually leveling off at 1.15 million barrels per day starting in 2026 and declining steadily through 2030.