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Page added on June 16, 2015
North Dakota’s Oil Production Has Peaked
North Dakota’s crude oil output has peaked, according to the latest production data published by the state government, as the slump in prices takes its toll.
The state produced 1.17 million barrels per day (bpd) in April, down from a peak of 1.23 million in December, the Department of Mineral Resources (DMR) reported on Friday.
The former rapid growth in production has stalled and current output is no higher than it was in September 2014 (http://link.reuters.com/zeb94w).
In the seven months between February and September 2014, output increased by 233,000 bpd, while in the seven months from September 2014 to April 2015, output actually edged down 18,000 bpd.
Prices are by far the most important cause of the downturn, according to state regulators, followed by tax changes, tougher flaring rules and new regulations on oil conditioning to remove the most volatile components from the crude and make it safer to transport (“Director’s Cut” June 2015).
Real Time Numbers
Falling production comes as no surprise: the number of rigs drilling for oil in the state has declined by more than 60 percent since September.
Unlike production numbers published by the U.S. Energy Information Administration and the Railroad Commission of Texas, North Dakota’s figures are based on well records rather than estimates and are subject to only small revisions in subsequent months.
North Dakota’s monthly production numbers provide the most useful snapshot into nationwide production trends.
They confirm that U.S. shale output is levelling off and even falling as the industry scales back drilling and completions in response to lower prices which are still 45 percent lower than this time last year.
The flattening of U.S. production represents an enormous change from 2014 and 2013, when output grew by 1.2 million bpd and 800,000 bpd respectively.
During 2013 and 2014, the United States provided almost all the marginal growth in global oil production, now the marginal barrels are coming from Saudi Arabia, Iraq and other Middle East producers.
No Rig Return Yet
U.S. shale producers have responded to the downturn by squeezing their suppliers: costs have fallen by 20 to 30 percent since the start of the year, according to the Federal Reserve Bank of Dallas.
Some shale executives and market analysts are optimistic about the industry’s ability to maintain and increase production at lower prices.
Continental Resources’ Chief Executive Harold Hamm has said that $70 per barrel is a price “that turns it on for us”.
So far, however, U.S. oil futures have been capped at around $60 and prices at the wellhead are generally a few dollars lower.
There are no signs of significant rig reactivations despite the $18 (40 percent) increase in prices since the middle of March.
The number of rigs drilling for oil across the United States continues to fall, according to oilfield services company Baker Hughes, though the decline has slowed from the plunge between December and April (http://link.reuters.com/gub94w).
In North Dakota, the number of active rigs fell to a new recent low of just 76 on Tuesday, according to the DMR, and has shown no sign of increasing.
The shale wells of North Dakota and Texas have become the marginal suppliers to the global oil market so it is unsurprising prices have been capped (at least temporarily) just below the level at which the industry might start adding production again.
There is an element of bravado in some of the predictions about a new surge in shale production. The same industry leaders insisted last September and October they would not cut drilling despite the drop in prices and would stare down OPEC.
In the short term, production from both North Dakota and Texas will probably continue falling for the next few months as natural decline rates on the wells and the slowdown in drilling and completions during the spring continues to filter through.
64 Comments on "North Dakota’s Oil Production Has Peaked"
Nony on Tue, 16th Jun 2015 11:33 am
Cue peakers trying to claim this is a geology-induced peak rather than an economics dictated one in 3, 2, 1…
rockman on Tue, 16th Jun 2015 11:43 am
…0! LOL.
The geologic viability of every hydrocarbon play is dictated by the economics. Always has been…always will be. They cannot be viewed separately…just like the two sides of a coin. Trying to treat them as separate dynamics is purely spinning.
BTW from the current TRRC numbers: From the recent high of 82.73 million bbls in August 2014 the latest monthly number is 71.59 million bbls in March 2015. Some even from before the price and rig count collapse Texas production has declined 13.5% in the last 7 months. IMHO that, combined with the news from ND, gives a pretty good snapshot of where US oil production is heading.
Aire on Tue, 16th Jun 2015 11:53 am
And this comes one of the top pro-0il sites there are. That’s when you know we are in trouble lol
Nony on Tue, 16th Jun 2015 12:11 pm
Rock:
1. I give (and have given) you credit for mentioning the impact of price on supply.
2. Your Texas estimates are wrong, because Texas has a revision of the numbers upwards over the course of 2 years.
http://peakoilbarrel.com/texas-rrc-production-data/
If you looked at their numbers back in August 2014, you’d see that. FWIW, you should be able to figure that, given this has been explained to you (and you made a fool of yourself) previously. Plus, it makes no sense, especially given a lag in response to price for August to be the peak. DEC is much more likely.
P.s. Don’t look for Texas to explain the nation, because the data is so lagging. ND is a much better bellwether.
Speculawyer on Tue, 16th Jun 2015 12:12 pm
It has peaked for now due to lowered prices. But it could eventually hit a higher peak if prices go back up to the $90 or greater range.
rockman on Tue, 16th Jun 2015 12:15 pm
Aire – Remember the primary RIGZONE audience is the oil patch. Try pissing down our leg and calling it rain is a sure-fired way to lose advertisers. And also remember: the vast majority of companies in the US not operating in ND would like to see the Bakken play crash into non-existence. Hearing about the decline in their production brings smiles to a great many of us. In particular the conventional oil players like the Rockman.
Plantagenet on Tue, 16th Jun 2015 12:47 pm
The Bakken is like a big oil factory. When the operators want more oil, they hire more rigs and drill more holes and more oil comes out. Now that we are in an oil glut, they want less oil, so they are making less hole. But when they want more oil they will gear back up and produce more oil.
Joe Clarkson on Tue, 16th Jun 2015 1:19 pm
Plant,
There is just one problem with your outlook. When oil companies are drilling and fracking less, huge amounts of expensive machinery are sitting idle, but the meter on the debt used to purchase that equipment keeps on ticking. Eventually, after the company that owns the equipment goes under or downsizes, those rigs go to boneyards somewhere and gradually deteriorate.
When the price goes up again, there is a lot of surplus equipment available cheap, but getting it going again is not a quick process, especially if the lenders who were burned the last time shy away from what has been shown to be a volatile business sector.
Oil extraction by fracking is not something that can be turned on and off without severe economic consequences. Just like a factory, it needs to be run continuously at a steady rate to stay available. How many factories can shut down for a year or two, send all the workers to other jobs, and then start up again like nothing had happened?
Northwest Resident on Tue, 16th Jun 2015 1:46 pm
“But when they want more oil they will gear back up and produce more oil.”
Sure. No problem. Piece of cake. Snap of the fingers.
Just so long as we understand that “gearing back up” involves:
1) Finding suckers with lots of money to throw away to fund the fracking (or just have the government print up a new batch of a few billion or so and fund it that way)
2) Price of oil rises to a level that enables the frackers to at least pretend they are making money
3) The economy hasn’t already crashed
4) There is sufficient demand at the price that the frackers will have to sell to justify firing up the extraction again
But all of that is simple. In fact, according to Plant, fracking has been such a huge success in America that of course all the other countries around the world are just chomping at the bit to get fracking going wherever they can.
Nony on Tue, 16th Jun 2015 2:09 pm
Joe:
That’s a sunk cost.
Plus, rigs don’t decay immediately. And common sense would explain that it is easier (read “cheaper”) to get new rigs going from 800 than from 1600.
Sure, there is some loss of talent and machines when we go through a bust. But it’s not so much to worry about when you are just looking to ramp up moderately rather than full bore.
And for that matter, there are also assets like pads, gathering systems etc. that are leverageble in the future booms but which had to be built the first time recently.
Nony on Tue, 16th Jun 2015 2:12 pm
NWR:
1. Capital is always available for returns.
2. Well, of course.
3. Irrelevant. (What matters is specific demand for oil and supply of rigs, etc. that make oil. Not the general macroeconomy.)
4. Redundant with (2).
4.
shortonoil on Tue, 16th Jun 2015 2:24 pm
“2) Price of oil rises to a level that enables the frackers to at least pretend they are making money”
Although production is slipping, and prices are down significantly world inventories are still increasing. 40% declines in the price of oil has not convinced the consumer to increase demand enough to absorb all of the present production. So how could prices increase? How far will prices have to fall to balance supply, and demand. A 60% decline in price, 70 or 80. We are in at a critical junction in the history of oil. Stay tuned!
http://www.thehillsgroup.org/
Northwest Resident on Tue, 16th Jun 2015 2:27 pm
Nony — So we agree to totally 100% disagree. Crashed economy is irrelevant? Really??? (queue Twilight Zone theme music…)
That makes two “of course’s” and one highly suspect “Irrelevant” — three out of four — not bad!
But isn’t it interesting how for a while, investors in shale were getting “returns” even while the same shale companies paying those returns were racking of billions in debt?
Robbing Peter to pay Paul? Typical Ponzi scheme economics. And you’re PROUD of that? Do you think it is sustainable and duplicatable? Do you have any sense at all? Or do you realize that you’re merely bluffing and spreading false info?
Nony on Tue, 16th Jun 2015 2:41 pm
Short says, “How far will prices have to fall to balance supply, and demand. A 60% decline in price, 70 or 80. We are in at a critical junction in the history of oil. Stay tuned!”
———
1. The futures spread is still in slight contango. IOW, the betting money thinks prices will go up, not down.
2. Rigs have already dropped by 60% in the USA. US production has peaked (not fallen off a cliff, but basically stabilized at something in the low 9 MM bpd.)
3. We are at quasi-equilibrium. Unless something radical happens to raise supplies (Iran deal, Libya control of territory) or lower supplies (SA or Iraq war) than we should expect to stay in this 60-70 band for price.
P.s. And note the ability of shale to turn on/off reasonably rapidly actually helps to moderate supply increase or decreases from the rest of the world. 65 is the new normal. James Hamilton was wrong, wrong, wrongitty wrong on the 100+ prediction.
beammeup on Tue, 16th Jun 2015 2:42 pm
“Cue peakers trying to claim this is a geology-induced peak rather than an economics dictated one in 3, 2, 1…”
Nony – That’s a strawman. I’ve been following these forums for several years, and it has always been understood that there is a difference between OIP and economically recoverable reserves, and price is what separates the two. Even when people write about geologic constraints to oil production, price is implicit in that discussion.
Nony on Tue, 16th Jun 2015 2:43 pm
[And the above wrt moderating role of shale also has same implications wrt demand fluctuations.]
Nony on Tue, 16th Jun 2015 2:45 pm
beammeup: some do, for sure.
rockman on Tue, 16th Jun 2015 3:36 pm
“Your Texas estimates are wrong”. Not my “estimates”…data directly from the Texas Rail Road Commission. Data that they apply an adjustment factor to take into account their historic corrections. Got a problem with that. Give the TRRC a call and explain their incompetence to them. I’m sure they’ll appreciate the advice. LOL.
rockman on Tue, 16th Jun 2015 4:00 pm
Nony – “Joe:That’s a sunk cost.”
I think you missed Joe’s point: yes…sunk cost. But the interest payment on the loans for the infrastructure build out is alive a floating quit well thank you.
But you are correct: if maintained properly the equipment doesn’t really deteriorate at all. But it can be cannibalized, sold or scrapped very quickly depending on the specific financial condition of each company.
Quintard on Tue, 16th Jun 2015 4:05 pm
Rockman , you’re a liar
August 2014
preliminary production : 69 204 407 mbd
finale production : 81 453 587 mbd
March 2015 :
preliminary production : 71 586 361 mbd
finale production : 84 879 948 mbd
Quintard on Tue, 16th Jun 2015 4:11 pm
PS : Preliminary prod x ajustement factor = finale production
82,73 mdb is a finale production for August 2014, 71,59 mdb is a preliminary production for March 2015 nothing a ajustement factor Lol
Quintard on Tue, 16th Jun 2015 4:15 pm
Source :http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/production-adjustment-factor/ and, rock i’m a peaker i’m not a liar
Plantagenet on Tue, 16th Jun 2015 4:19 pm
The people who are saying it will be impossible for Bakken producers to ramp production back up when this oil glut is over are the same people who said the Bakken would never produce significant amounts of oil.
Wrong then, wrong now.
shortonoil on Tue, 16th Jun 2015 4:19 pm
“1. The futures spread is still in slight contango. IOW, the betting money thinks prices will go up, not down.”
As of today, August 2015 – $60.45, February 2019 – $38.85. Contango??? Prices are all over the board. No one has a clue as to where prices are going. Short term looks like $60, or so. Long term everywhere. Your BS just goes on , and on, and on. Why make stupid statements that anyone can check in 3 seconds. “The smart money” ??? Do you mean the pensioners who invested in shale for their retirement? Hope they like Cheese Doodles!
This is were prices are going:
http://www.thehillsgroup.org/depletion2_022.htm
Our Model has had a 4.5% margin of error for the last 55 years. How is yours doing? Lost all your darts yet?
Northwest Resident on Tue, 16th Jun 2015 4:34 pm
Nony is a rascal, we all know that. His modus operandi is “baffle ’em with bullshit”. That’s how he amuses himself — pure entertainment. He’s always got a quick come-back, which might be an actual fact but might also be as in this case a totally fabricated lie. Nony is here because he enjoys the testy back-and-forth, he likes to argue, and he doesn’t care what is right or wrong as long as he appears to be the “winner”. That’s my psychoanalysis of the character who goes by Nony, or marmico, previously as Papa Smurf, now perhaps as Quintard also.
Joe Clarkson on Tue, 16th Jun 2015 4:44 pm
The people who are saying it will be impossible for Bakken producers to ramp production back up when this oil glut is over are the same people who said the Bakken would never produce significant amounts of oil.
Plant, I have never said that the Bakken couldn’t produce oil. I am only saying that when plays like the Bakken are being touted as the world’s swing producer, it’s not as easy to ramp production up and down to respond to and affect the market (as for Saudi Arabia, say).
If the tight oil industry truly becomes the swing producer, I expect to see more volatile price swings due to the increased lag time between price signals and production from tight oil.
GregT on Tue, 16th Jun 2015 4:46 pm
“the same people who said the Bakken would never produce significant amounts of oil.
Wrong then, wrong now.”
The Bakken has produced just over a billion barrels of oil planter, and according to the USGS: “up to 7.4 billion barrels of oil COULD be recovered from the Bakken and the underlying Three Forks using current technology.”
I know that these are BIG numbers planter, and I can understand how you mistakenly consider these numbers to be “significant”, but to put things into perspective, 1 billion barrels of oil would supply the planet for 11 days, and the entire 7.4 billion barrels would supply the planet for 2 1/2 months.
When somebody starts talking about supplies that can keep us going for several more decades, then we will be talking about ‘significant’. The Bakken is a small drop in the bucket.
Brent on Tue, 16th Jun 2015 5:00 pm
Planet all I have to say is show me the money.
Northwest Resident on Tue, 16th Jun 2015 5:03 pm
The current slump in oil prices has many believing that supply will continue to be ample in the long run. But, we ought to consider that the rate of oil production in the United States may be nearing its peak and that all of the production growth in oil worldwide since 2005 has come from just two countries, the United States and Canada.
Global Oil Production Substantially Lower Than Believed
http://finance.yahoo.com/news/global-oil-production-substantially-lower-175257546.html
Peak Oil — Going mainstream!
But who will understand the implications? Before it is too late?
GregT on Tue, 16th Jun 2015 5:22 pm
Alberta can’t avoid a recession this year, says conference board
“Alberta’s economic performance will be underwhelming this year and next, especially compared with recent years,” Marie-Christine Bernard, associate director of the provincial forecast, said in a news release. “Oil prices remain well below break-even levels for most new projects in the oilpatch, and conditions are not expected to turn around until sometime next year.”
http://calgaryherald.com/business/energy/alberta-cant-avoid-a-recession-this-year-says-conference-board
Apneaman on Tue, 16th Jun 2015 5:31 pm
And just what are those expectations based on?
GregT on Tue, 16th Jun 2015 5:34 pm
“And just what are those expectations based on?”
Well, economic growth of course!
Plantagenet on Tue, 16th Jun 2015 5:37 pm
@Joe
Your suggestion that “the Bakken is the world’s swing producer” doesn’t make any sense. The Bakken can’t rapidly ramp their oil production up and down the way Saudi Arabia does.
The Bakken (and the EF and PB in Texas) are more like a factory—they can all produce signifiant amounts of oil, but it will take time and money to ramp production back up after this oil glut ends.
GregT on Tue, 16th Jun 2015 5:38 pm
Now, if we could only figure out a way to get people to consume more stuff!
I know, let’s lower interest rates!
GregT on Tue, 16th Jun 2015 5:41 pm
Give it up planter.
You’re already in way over your head.
Beery on Wed, 17th Jun 2015 2:17 am
Naturally, Nony is in full scale denial mode. When the Bakken is back to producing under 1000 barrels per day, as it was in the 1970s, he’ll still be telling us the sky’s the limit and that it’s merely an economics-dictated peak, LOL.
Nony on Wed, 17th Jun 2015 3:29 am
Rock, you’re still wrong. the RRC adjustments do not adequately correct. this has been well discussed by both peakers and cornies. You are just two steps behind.
rockman on Wed, 17th Jun 2015 7:41 am
Nony – I actually cut you a bit of slack. While the March 2015 production number from the TRRC is just an estimate they actually show the Feb number even lower: 70.02 million bbls.
http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/
So once again if you have a more authoritative number then the current TRRC number please share that source.
BTW according to the TRRC production has been below the Aug 2014 level for the last half year except for Dec. You can try to split hairs about exact numbers but the trend isn’t debatable.
Quintard on Wed, 17th Jun 2015 8:20 am
Rockman
Bullshit,
A March 2015 production number with your source has not a TRRC adjustement factor : preliminary production.
PS
http://peakoilbarrel.com/texas-rrc-production-data/ (real data)
Listen
Quintard on Wed, 17th Jun 2015 8:28 am
And Rock
Preliminary prod x adjustement factor = finale production ( state Texas method )
Your source has preliminary numbers and finale numbers
http://peakoilbarrel.com/wp-content/uploads/2015/05/Dean-1.gif for thé road
GregT on Wed, 17th Jun 2015 8:38 am
What’s with the sock puppets Nony?
Typical trollish behaviour.
Quintard on Wed, 17th Jun 2015 8:47 am
I’m not Nony, i’m not marmico gregt i’m not a troll i’m not a liar.
I’m a peaker and i hate a pseudo experts with a lies
Quintard on Wed, 17th Jun 2015 8:49 am
And gregt you’re a crap
Davy on Wed, 17th Jun 2015 8:52 am
Greg, the NOo feels lonely and in a minority so he creates sock puppets to make him feel more supported. It is pretty obvious when the NOo speaks because it is NOo language and mannerisms. Marm is the evil side of the NOo. I am still trying figure out which aspect of the NOo Quin the dumbass is. Time will tell.
shallow sand on Wed, 17th Jun 2015 9:02 am
The Texas RRC production reporting issue has been hashed and rehashed on peakoilbarrel.com. There is a poster over there (Dean) who seems to be pretty good at predicting what the final production number will be.
If $65 WTI is the new normal, we can kiss most US oil shale companies bye bye. That only works in a few select places. Otherwise, the cash flow is not enough to service the debt at $65 WTI and $3 natural gas. Just look at the numbers in the 10K and 10Q. Not hard to do.
The longer the oil price stays down, the higher the spike will be later. See the period from 1986 to 1999 and the result thereafter.
Davy on Wed, 17th Jun 2015 9:06 am
Then act like it Quin.
Quintard on Wed, 17th Jun 2015 9:08 am
Davy,
I do not care nony or marmico I do not know them. I can not stand that quelqun know who says it like rockman cites figures cans and when I put the TRRC links and methods davy know him a asshole whaa
Quintard on Wed, 17th Jun 2015 9:08 am
I’m a peaker i’m not a liar
Davy on Wed, 17th Jun 2015 9:24 am
SS, I accept a possible price spike because oil is part of markets and economies. My question to all you oil boys is degree and duration. If the economy is hollow then it will not be long lived spike. I feel we have a hollow economy surviving on a debt driven bubbles in multiple areas along with unfunded liabilities everywhere one looks. These bubbles are hitting diminishing returns and limits and debts and liabilities coming due.
The economy can only continue so long with lackluster growth. This global system needs robust growth or it will be overwhelmed by multiple predicaments, problems, debt obligations, and unfunded liabilities all the while population grows by 80MIL/yr. My guess is a cycle of demand and supply destruction with social unrest and conflict awaits us. I hope this is not so because my life is so friggen good I can’t stand it but I know it will be tougher than a pine knot soon.
Davy on Wed, 17th Jun 2015 9:27 am
Quin, tell me the language you speak so I can attempt some translations. Maybe NOo pig latin or just plain old dumbass?