With the number of uncompleted wells continuing to rise in the Bakken Shale, it is doubtful the 1 million b/d production level can be maintained into next year, North Dakota chief oil/natural gas official Lynn Helms said Thursday in releasing the state’s latest production statistics.
Noting that he expected a bigger drop than 10,000 b/d in the latest statistics for March, Helms, director of the state’s Department of Mineral Resources, said he expects future months to show reductions in the 30,000-35,000 b/d range.
Given the continuing low commodity prices, “I keep expecting the kinds of [oil] production declines we saw in December and January,” Helms said. “Perhaps the small increases we have seen in oil prices and the problems with Canadian oilsands production has strengthened people’s resolve a little bit, because we’re still seeing ever-higher inactive and uncompleted well counts.
“We should start seeing drops of 30,000 b/d to 35,000 b/d. I continue to wait for that shoe to drop. You can’t have too many months at 27 rigs and less than 60 completions a month and maintain production, so I still think we are looking at 1 million b/d or slightly below that by the end of the year.”
Overall oil production was 34.38 million bbl (1.10 million b/d) in March, compared to 32.4 million bbls (1.11 million b/d) in February. The Bakken’s all-time monthly high was 1.22 million b/d in December 2014.
Conversely in March, natural gas production was up about 1% at 53 Bcf (1.7 Bcf/d), compared to 48.9 Bcf (1.68 Bcf/d) in February. Helms attributes the increasing gas production as oil production drops to the fact that low prices have forced producers to focus only on the Bakken core area or sweet spot for all 27 rigs still operating.
“That area has the highest gas-to-oil ratio,” Helms said. “The wells there also are the most productive [3,000 b/d], and the gas-to-oil ratios are two to four times what they are in other areas.
“Gas production continues to increase, and, fortunately, the operators have invested in a lot of gathering and processing infrastructure in the core, so that is why you see the enormous amounts of gas now being captured [90% for most recent month]. I think you have to credit 100% of the increased capture to increased investment in infrastructure and technology,” he said.
Another offshoot of the continuing low commodity prices is that the cost of drilling wells has been reduced dramatically, Helms said, adding that this in turn has increased the number of counties now in which it is economic to drill new wells. In some cases the new economic favorability is only found in certain parts of the county.
“Drilling and operating costs combined have dropped about 65%,” Helms said. “So this makes the economics a little bit better, and it speaks to what the industry has been saying — above $60/bbl WTI, the Bakken is the best place to spend money.”
Bakken natural gas prices were $1.57/Mcf in March for deliveries into the Northern Border Pipeline at Watford, ND, an 11-cent/Mcf increase.
Rigs dropped from 40 in February to 29 in April and 27 on Thursday, the lowest North Dakota rig count since July 2005. There were 13,024 producing wells in March, up by seven from February and 920 wells were awaiting completion at the end of the month in which 1,523 wells were inactive, an increase of 84 since February.
rockman on Mon, 16th May 2016 6:23 am
Interesting they emphasize the number of drilled yet uncompleted wells considering those wells will account for a smaller fraction of the declining production then the drop in rig count. First, in most cases a well isn’t completed because it’s not an economic investment. There may be some exceptions but in his 40 years the Rockman has never seen an operator delay completion just to hold out for higher prices. In fact he has seen many wells completed that overall will lose money but by not taking in the sunk costs the completion capex does make a profit.
Regardless the biggest factor in declining production will be the 85% drop in drilling activity since July 2012. Currently 26 rigs are drilling and some of those include injection wells. With 190 less rigs drilling that about 170 new wells not completed every month. Or a loss of 2,000 new wells per year. IOW in 2012 about 2,000 wells were completed. If every well drilled in 2016 is completed that will add 300 new producers. Given the high decline rates decreasing new wells by 85% will eventually have a huge impact. The 900 DUC’s have already had the impact since they are essentially the same as wells that were never drilled. But those numbers are already cooked into the books. The 2,000+ wells not drilled in the next 12 months will have a much greater impact even if higher oil prices allow SOME of the DUC’s to be completed.
As pointed out many times there’s a time lag of 6 months or more between thee rig count and new production added. Additionally the older wells, while still depleting, have seen their declines rates decrease significantly. Nothing wrong with predicting some future production model. But in the end, as always, data trumps theory.
joelund on Mon, 16th May 2016 8:42 am
An operator in ND has to complete a well within a year of TD. ND has extended this requirement by 2 years due to the pricing collapse.
Believe he is telling operators they have to begin working off this inventory of DUCs or ND will not be so generous next time.
He and the operators have another problem: the service industry including frack crews has been decimated.
http://www.reuters.com/article/north-dakota-wells-idUSL1N12M38B20151022
Boat on Mon, 16th May 2016 9:00 am
joelund,
Excellent informative link. There will have to be new thinking and new rules to fit the new landscape of fracked oil.
Kenz300 on Mon, 16th May 2016 9:13 am
Canada’s Oil Price Recovery Could Take Longer Than Previously Thought: BoC
http://www.huffingtonpost.ca/2016/04/20/canada-oil-price-recovery-boc_n_9743744.html?utm_hp_ref=green&ir=Green
Climate Change is real….. we will all be impacted by it.
Oil Giants Spend $115 Million A Year To Oppose Climate Policy
http://www.huffingtonpost.com/entry/oil-companies-climate-policy_us_570bb841e4b0142232496d97
Stock holders of fossil fuel companies should be up in arms………… their investments are worth less now ………..
Fossil fuels companies should have begun transforming their companies into”ENERGY” companies by embracing alternative energy sources like wind and solar….. they could have started doing this 30 years ago and reduced the loss to their stock holders. Lying to investors is illegal………
BP was on that path years ago and then a change in management moved them away from transforming (BEYOND PETROLEUM) and they sold off their alternative energy investments………
Flash Brasbo on Mon, 16th May 2016 2:57 pm
“Climate change is real….. we will all be impacted by it.”
a more precise statement would be:
The ambiguity of the definition of “climate change” is real. The resulting political decisions are real. And the blind acceptance of an unproven, ambiguous theory is real. And Yes, we will all be impacted by the fall out.
“The hypothesis of anthropogenic (man-made) global warming, began with
Roger Revelle and Hans E. Sues in an article in, Tellus, Vol 9, No. 1 18-27 (1957). The article suggested the growing quantity of CO2 resulting from burning fossil fuel might cause global warming.
No one can claim that Revelle thought we should spend hundreds of billions of dollars on reducing climate change. He did not believe that. He did not believe that the science was resolved.
The man who developed the computer models that all the other computer models are based on, Syukuro Manabe, doesn’t believe the models are useful for predicting climate warming.
One of the most eminent scientists alive, Freeman Dyson, does not believe we
should be taking any action to reduce carbon emission, because we don’t know if the carbon we are producing is a net good, or a net bad.”
onlooker on Mon, 16th May 2016 3:09 pm
You and those those who pretend to be scientists are increasingly looking like retards and clowns. The last few years has seen dramatic climatic events already happening before our eyes. If your purpose is to safeguard the continued use of fossil fuels as least argue that civilization needs fossil fuels to function and keep people alive. But to write outrageous spurious comments that has no basis in reality and contradicts the science and the overwhelming consensus of the scientists is a waste of time for everyone on this board.
Apneaman on Mon, 16th May 2016 3:21 pm
Flash Brasbo we don’t come to our conclusions based someones “opinion”even if they are a scientist. Science is based on empirical evidence – not opinions, but nice try with a lame “argument from authority” fallacy. Even if we were going to argue that way there are thousands of other more qualified eminent scientists who are of the opinion that you’re a retard. Are you worried that the humans will stop burning fossil fuels? Relax, economics and extinction are the only things that will stop that. It’s a race to see which comes first. Even after the “oil age” and industrial civilization are over the humans will still be burning some oil and coal and rendered human body fat. Maybe yours.
rockman on Tue, 17th May 2016 6:18 am
Flash – “…doesn’t believe the models are useful for predicting climate warming.” Nor does the Rockman put much faith in any model yet he has used them countless time in his search for the grease. The real value of a model (if designed properly) is identifying the significant factors. IOW if one varies Factor X from one extreme possibility to the other and it produces minimal changes in the end result you’ve learned a valuable lesson…stop worrying about X. OTOH if X cause significant variations in the model one can then focus on it.
IOW if valid models indicate that certain changes in atmospheric CO2 levels cause significant changes in our long term climate then one might want to consider altering the path we’re on. And if not altering that path for any number of reasons at least we can better prepare for those changes.
Boat on Tue, 17th May 2016 8:53 am
rock,
” The 2,000+ wells not drilled in the next 12 months will have a much greater impact even if higher oil prices allow SOME of the DUC’s to be completed”.
It’s reported the DUCT’s count is around 4,000. 2 years of oil at 500,000 bpd. The new storage system. I wonder how the costs compare with the oil sitting in tanks.