Hess Corp said on Wednesday it would add drilling rigs in North Dakota's Bakken shale basin, its largest area of operations, if oil prices approach $60 per barrel, a level executives believe offers the best chance to return to profitability.
The update came after the U.S. oil producer reported a smaller-than-expected quarterly loss, with cost cuts helping offset more than 60 percent drop in crude prices in the past 18 months.
Hess, like other oil producers, has slashed its capital budget and trimmed production plans in the past year, although the company has stopped short of ending drilling and fracking altogether like rival Whiting Petroleum Corp.
Investors and analysts have been eager to learn from industry leaders at what level spending could resume. By saying $60 per barrel is that level, Hess is admitting costs in North Dakota for transportation
and other items are higher than other U.S. shale basins, where rivals operate.
Pioneer Natural Resources Co, a major producer in the Permian shale basin of West Texas, said on Tuesday that it would add rigs with oil prices above $50 per barrel.
By September, Hess plans to reduce its Bakken rig count to two from three today, keeping the pair of rigs operating largely to maintain its relationships with contractors.
"Our focus remains on value, not volume, and we do not believe that accelerating production in the current oil price environment makes sense," Chief Executive Officer John Hess told investors on a conference call.
In the first quarter, the net loss attributable to Hess widened to $509 million, or $1.72 per share, from $389 million, or $1.37 per share, a year earlier.
Analysts on average had expected a loss of $1.83 per share, according to Thomson Reuters
The company's oil and gas production inched slightly lower to 350,000 barrels of oil equivalent per day from 355,000 boepd.
Hess plans to cut output in the second quarter to a range of 320,000 to 325,000 boepd.
The company, which also produces oil in the Gulf of Mexico, said the average price for its crude fell 37 percent to $28.50 per barrel in the quarter.
Shares of Hess were down 3 percent in midday trading as oil prices fell from earlier highs.
(Reporting by Ernest Scheyder and Arathy S Nair; Editing by Savio D'Souza, Terry Wade and Lisa Von Ahn)