Halcon Resources (HK) recently provided investors with an important operational update detailing its drilling progress. This is a big year for the company as its investing heavily to grow its production which is being fueled by $1.2 billion in planned capital spending. The biggest news from the update is what the company was saying about its investments in the Bakken. Let's take a closer look at how the company is doing so far this year in that key play.

Bakken's big well
The Bakken is a big part of Halcon's plans as it's spending nearly 40% of its capital on the play this year. It has eight rigs running right now while also working hard to implement drilling and completion modifications to improve its performance in the play. Recent results have been impressive to say the least.

The company's latest well produced an average initial production rate of 3,060 barrels of oil equivalent per day, or Boe/d. Overall, its three most recently drilled and completed wells produced an average initial production rate of 2,648 Boe/d which represented a 38% improvement over all its previous wells drilled in the first quarter using its previous completion method.

In addition to the wells targeting the Bakken formation, the company also saw solid production from its last four wells drilled that were targeting the Three Forks formation. Those wells had an average initial production rate of 2,094 Boe/d, which represented a 77% improvement over all the other Three Forks wells the company drilled last quarter. Halcon's investments in the Bakken, as well as its work on its well designs and completions, have clearly paid off for the company.

Keeping well costs down
Looking ahead, the company expects these new designs to increase production as well as increase the overall estimated economic recovery of its wells. What's really important to see is that Halcon is producing these exceptional results even as well costs are coming down as it focuses on cost. The company expects to see its well costs drop by 10% this year to about $9 million per well.

I've mentioned this before, but it bears mentioning again. Well costs are an important area to watch for Bakken operators. It costs Kodiak Oil & Gas (NYSE: KOG) about $10 million per well while Continental Resources' (CLR) wells costs are about $8.3 million per well. That means Continental can drill 17% more wells than Kodiak for the same amount of money. Overall, the industry is really honing in on the right formula to get costs down and increase returns, though some companies are doing a much better job and therefore reaping higher returns.

Halcon's plan is to drop its Bakken well costs to the $9 million range by the end of the year. This will really help it improve its overall rate of return on the play. Further, it also means that the company can drill a couple extra wells per year with the same amount of capital, which will add up significantly over time. Halcon investors have to like what they are seeing in the company's ability to cut its well costs while simultaneously improving its operations. 

The proppant gets the props
One area that's really helping Halcon improve its Bakken well production is the company's decision to change to a ceramic proppant while increasing the proppant volume per lateral foot. If the ceramic proppants prove to be the best option for Bakken drillers it could prove to be a big boost for a company like CARBO Ceramics (CRR). The company's proppants cost more than raw frac sand but can increase both production rates and estimated ultimate recovery rates by more than 20%. This leads to high return on investments and faster payouts for producers.

Halcon's numbers really seem to confirm the value of ceramic proppants. Not only did the company see tremendous increases in average initial production rates, but Halcon also sees the estimated ultimate recovery from its wells increasing as well. Two wells in the Marmon area saw average initial production 91% higher than previously drilled wells and it's attributing this to the modified design change and use of ceramic proppants. Further, the company estimates that the ultimate recovery of these two wells will be 462,000 barrels of oil equivalent which is 40% higher than the wells drilled under its previous methods. Halcon sees its modifications as a "game changer" to that area of the Bakken.

Foolish bottom line
When you combine lower costs with higher production and higher ultimate recoveries you have a recipe for solid returns. That's exactly what Halcon is seeing from its Bakken wells, which speaks very well of its future in the play. The company's investments and hard work in modifying its well designs really seems to be paying off.