Hess Corp (HES 0.43%) is a company in transition. While shedding assets and slashing 15% from its 2014 capital budget, the company is also focused on fueling future growth from shale. But how is Hess doing this when it's adding a mere 5% to develop its shale resources? The key is shale well costs are falling so rapidly that Hess really doesn't have to increase its shale-development budget by that much to really move the needle.

Shale costs falling
Hess is spending a total of $2.85 billion to develop its shale positions in the Bakken Shale and Utica Shale. That's just $150 million more than it spent last year on shale development. That might not seem like much of a boost for a company that is focusing its efforts on low-risk, high-growth shale development. But while the dollars aren't going up by much, the number of wells the company plans to drill will see a big boost.

In the Bakken, Hess plans to drill about 225 new wells this year. That's up from the 168 it drilled just last year. That's a third more wells without much of an increase in costs. It's the same story in the Utica Shale where the company plans to drill 21% more wells in 2014. So, for just 5% more money the company is drilling a whole lot more wells.

Big gains in the Bakken
Intense competition from oil-field service producers combined with multiwell pad drilling is having a real impact on shale drilling. Bakken Shale peers like Halcon Resources Corp (HK) are seeing stunning savings from these moves. The company can save $1.3 million and 25 drilling days on four wells thanks to the efficiencies of moving to a multiwell pad. At the same time it's seeing stunning increases in initial production-rate increases of an average of 140% as it finds the best formula to unlock the Bakken's oil.

It's a similar story at other Bakken Shale focused peers such as Oasis Petroleum (OAS). Its well costs have plunged from $10.5 million in the first half of 2012 to a very achievable target rate as low as $7.3 million in 2014. Because of this Oasis Petroleum can drill substantially more wells for the same amount of money.

Utica emerges
While the Bakken has fueled Hess for years, investors should keep an eye on the Utica going forward. About $550 million of its shale-development budget is earmarked for the play this year. From the looks of it, the Utica Shale appears to be a world-class, liquids-rich shale play.

Companies like Antero Resources Corp (AR 0.25%) are seeing unbelievable economic rates of return from the play. A single well in the highly rich gas/condensate window can earn the company a 220% rate of return, even with well costs of $11.3 million. At the same time even dry gas wells earn Antero Resources a 40% rate of return.

Other producers in the Utica Shale are seeing similarly high returns from the play, which is why Hess has coupled it with the Bakken as one of its five core-growth areas. While 2014 will be more focused on exploration of the play, the company sees it delivering material growth in 2015 and beyond.

Investor takeaway
Falling well costs are really enabling producers to do more with less. It's enabling Hess to drill 33% more wells in the Bakken and 21% more in the Utica for just 5% more money in 2014. Faster growth with less capital is a great number for Hess investors to see.