The Bakken is a notoriously tough area for producers to drill, which is why the play has some of the highest well completion costs in the U.S. Producers can spend $10 million or more to drill a single well, which in many cases has to be drilled to depths in excess of two miles. Companies must also deal with harsh winters and limited infrastructure which can add to the cost. Despite all of this, the Bakken is producing some incredible numbers.
Because it costs so much to drill a well, producers have been looking at every option to get those well costs down. Costs vary across the industry, with top producer Continental Resources, Inc. (NYSE:CLR)‘ leading the way in becoming a low-cost operator. Last year it cost the company an average of $9.2 million to drill a well. As of this April, the company had those costs down to about $8.3 million. It’s done so due to drilling and completion efficiencies as well as moving to multi-well pads. Continental Resources, Inc. (NYSE:CLR) is looking to shave its completed well costs to $8.2 million by the end of the year.
Continental Resources, Inc. (NYSE:CLR) is comfortably ahead of many of its peers in terms of keeping its well costs down. For example, when the company participated in a non-operated well, the cost last year was a staggering $11.3 million. Other producers such as Kodiak Oil & Gas Corp (USA) (NYSE:KOG) pay about $10 million per well. The difference here is pretty staggering as Kodiak Oil & Gas Corp (USA) (NYSE:KOG) could drill 14 more wells this year if it had Continental Resources, Inc. (NYSE:CLR)’s well costs. That would represent a near 20% increase in the number of wells the company could be drilling.
Kodiak Oil & Gas Corp (USA) (NYSE:KOG) has been working hard to get its well costs down, but it still has a long way to go. What’s important for Kodiak investors to realize is that it’s not an impossible task. For example, over the past year Newfield Exploration Co. (NYSE:NFX) has been able to improve its well costs significantly. While its average well cost in the first quarter of this year was $9.8 million, more recent wells have been drilled for around $8.3 million.
Another company that has done a much better job at keeping costs down over the past year is Oasis Petroleum Inc. (NYSE:OAS). The company was spending about $10.5 million per well early last year; however, it has worked to get those costs down to about $8.4 million as of last quarter. That 23% reduction was made possible through a combination of lower service costs, efficiency gains, optimized designs, and pad drilling.
Oasis Petroleum Inc. (NYSE:OAS) actually has some of the lowest costs when you consider the effect of its well services business. The company began investing to build its own well services business to further drive down costs which cut its well costs last quarter all the way down to $8.1 million. The company believes that including the impact of well services it can get its well costs down to $7.8 million by the end of the year. For perspective, by cutting its costs so significantly over early last year the company can drill 20% more wells for the same amount of capital.