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State’s oil production hurt by low prices

Posted 10/27/15 (Tue)

By Kate Ruggles
Farmer Staff Writer

During the month of August North Dakota’s oil production dropped by 20,000 barrels per day. And with oil price weakness predicted to last  into 2016, state officials predict that North Dakota’s production decline is not likely to change for some time.
In August, North Dakota produced 1,186,444 barrels of oil per day, which is not too far off the state production high of over 1.2 million barrels of oil per day. The state also produced 1,644,034 MCF per day of natural gas.
In August, McKenzie County produced 13,026,616 barrels of oil and 22,516,365 MCF of natural gas. While August’s numbers are a  slightly lower contribution than what McKenzie County produced in July, those production numbers far exceed any other oil-producing county in North Dakota.
McKenzie County is currently producing 35 percent of the state’s oil and 44 percent of the state’s natural gas, while Mountrail County produced 20 percent of the state’s total with 7,696,756 barrels of oil. The next highest natural gas producer, Williams County, contributed 19 percent of the state’s total natural gas production with 9,992,588 MCF of natural gas.
According to Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission, what is currently happening with the North Dakota oil production industry is similar to what a sailor does in a severe storm - they cling to their ship’s sails and brace for rough seas.
“Operators realize that this is the long haul,” states Helms. “Therefore producers are having more of an attitude of leaving oil in the ground, leaving wells uncompleted and keeping the rig count low.”
Helms reports that the August rig count was up one from July, but fell three in the month of September and four more in October.
Though operators predicted higher rig counts for 2015, drill times and efficiencies continue to improve and oil prices continue to fall. So operators are now committed to running fewer rigs than their planned 2015 minimum.
“This has resulted in a current active drilling rig count of 10 to 15 rigs below what operators indicated would be their 2015 fall average if oil prices remained below $65 per barrel,” states Helms.
Additionally, the number of well completions fell from 119 in July to 115 in the month of August, creating an estimated 993 wells waiting on completion services at the end of August.
“This is historically the highest amount of uncompleted wells ever in the state,” states Helms.
Finally, the price of Sweet Crude, though down from July, is actually up from what it was in August. In July, the price of North Dakota Sweet Crude was $39.41 per barrel. In August, that price dropped to $29.52 per barrel before rising to $35 per barrel in October.
“Oil price weakness is now anticipated to last well into next year,” states Helms. “And the low price of oil is the main reason for the production slowdown.”
Operators, according to Helms, are not eager to grow production until the West Texas Intermediate (WTI) posted price reaches $60 per barrel. And, they are prepared to let production decline while the price remains below $50.
However, while the current WTI posted price is below $50, Helms feels that operators could be set to produce if that changes and the price rises above $50.
“They do not want to grow production until WTI reaches $60,” states Helms. “But they may be set to go at $50.”