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‘Bouncing along bottom,’ oil production sees resistance

Posted 7/19/16 (Tue)

‘Bouncing along bottom,’ oil production sees resistance

By Jack Dura
Farmer Staff Writer

North Dakota is living in interesting times, or so says the state’s director of mineral resources.
“There’s an ancient Chinese curse that says ‘May you live in interesting times,’ and we certainly are,” Lynn Helms said Friday, July 15. “Every time it appears that we’re going to get the price increases that will result in increased activity and increased production, something new comes along.”
In addition to persisting low oil prices and rig counts, the effects of the Brexit vote have rippled through world currencies and economies, Helms added.
He added the state has “hit bottom,” but is “bouncing along” following May’s small production recovery of 4,000 barrels a day since April’s all-time drop of 70,400 daily barrels.
“That just shows the resistance of an enormous industry or machine like North Dakota oil production to even low rig counts and low completion counts,” Helms said. “There is so much inertia when you’re at or around 1 million barrels a day, that production typically doesn’t drop real rapidly.”
The director added that the state’s daily production of 1 million barrels is expected to drop by the end of the year, prodded by price resistance and low well completions.
“It’s not really enough to maintain production so it points to a gradual decline in production by the fourth quarter of this year, probably below a million barrels a day,” Helms said.
Increasing production will see resistance as declining production has, Helms added. The state stood at 29 active drilling rigs Monday, including 10 in McKenzie County, the core of the Bakken region.
Prices are staying between $40-45, Helms said, and the state needs to maintain prices above $50 a barrel for 90 days in order for increased activity.
“There’s a lot of resistance in the world markets to crude price increases,” Helms said, adding events like the Iran deal and the Brexit vote have dealt their own effects.
McKenzie County produced 11.8 million barrels in May, the Department of Mineral Resources reported, while the state nabbed about 1.04 million barrels a day that month.
North Dakota light sweet crude stood at $36.25 a barrel as of Friday.