U.S. shale producer Continental Resources has filed a lawsuit against Hess Corp alleging that it was defrauded out of up to $69 million through a series of deals the well operator conducted with its subsidiaries.
Continental said that Hess, which operates hundreds of wells in North Dakota, artificially inflated midstream service fees by entering into agreements with its own subsidiaries. Net revenues for hydrocarbons from the wells, in which Continental holds a non-operating working interest, were far below market value due to excessive service fees paid to Hess Midstream Partners, the lawsuit said.
“Hess Corp has transferred value from its upstream assets to its midstream assets rather than operate with the best interests of non-operating working interest owners in mind,” said the lawsuit filed in a federal court in Houston.
Hess Bakken Investments, a Hess subsidiary, operates about 483 producing wells in the Williston Basin in which Continental owns a working interest. Continental is based in Oklahoma City, Oklahoma.
Hess Corp has a 38% interest in Hess Midstream, which owns oil, gas and produced water handling assets primarily in the Bakken and Three Forks shale plays, Continental said. As a result, Continental said, it and other non-operating working interest owners in those wells bear a larger financial burden than Hess for midstream fees.
Continental has been deprived of about $34 million to $69 million of revenue for oil and gas production, the filing said.
Hess Midstream’s throughput volumes rose 8% for gas processing, 7% for oil terminaling and 9% for water gathering in the first quarter, compared with the year-ago period, mainly due to higher production, the company said in its earnings report last month.
Continental Resources said it does not comment on pending litigation.
Hess did not immediately respond to requests for comment.
(Reporting by Georgina McCartney in Houston; Editing by Richard Chang)