The cost of drilling new oil and gas wells in the Bakken region of North Dakota and Montana is dropping and the work is going faster, allowing crude oil to reach the market sooner, a Minnesota-based oil company said Friday.
Northern Oil and Gas of Wayzata added the equivalent of 48 Bakken wells in 2012, and expects to complete almost that many in 2013. In a major shift, multiple wells are being drilled in different directions from a single location, avoiding the need to move equipment as often.
“It is very simple math; if you are drilling four wells on one pad, you are going to get those wells drilled more efficiently,” CEO Mike Reger said on a conference call with analysts as the company beat Wall Street estimates with $19.5 million in net income for the quarter ending in December.
The company, which buys oil leases and finances drilling but relies on other companies to do the work, reported net production of 3.7 million barrels of petroleum products last year, and projected growth of 1 million or more barrels this year.
Reger and other executives said drilling times also are dropping — to about 90 days from when the bit first hits the ground to initial oil and gas production. In early 2012, it took twice as much time because oil field services such as hydraulic fracturing teams were in short supply.
One well now can be drilled for $8.4 million to $8.8 million, and company officials see that dropping to $8 million on average by the end of the year. Some wells in Montana, because of the drilling circumstances, have cost under $5 million, the company said. Other wells, including some the company decided not to invest in, have cost $10 million or more.
Northern Oil, which also reported full-year results, said revenues more than doubled in 2012 to $311 million and net income climbed 78 percent to $72 million. Its proven reserves rose 44 percent last year to 67.6 million barrels.
The company owns a share in 1,227 wells, which is equivalent to 106 net wells. Northern Oil said it expects to add 44 net wells in 2013, spending up to $390 million to drill and complete them. Northern Oil’s shares closed Friday at $14.13, up 42 cents, or 3 percent.