September 30, 2014

Study: McKenzie County could see 13,500 wells by 2027

By Neal A. Shipman
Farmer Editor

For those people who may think that drilling oil wells in McKenzie County could be slowing down in the near future, a new report released by the North Dakota Dept. of Mineral Resources shows another 10,844 wells could be drilled in the county in the next 13 years, which may give them cause to reconsider.
According to Lynn Helms, director of Mineral Resources, McKenzie County is projected to have 13,500 wells by 2027. To put that growth into perspective, McKenzie County had 2,656 in production in July of this year, while there are now 11,287 producing wells in all of North Dakota.
Speaking to the North Dakota Association of Oil and Gas Producing Counties (NDAOGPC) in Williston on Sept. 18, Helms said that projections show continued strong growth in the four core oil and gas-producing counties of Mountrail, McKenzie, Williams and Dunn. He also said that non-Bakken-producing counties like Bottineau and Bowman can also expect a continued slow growth of about one to five rigs during the next two years.
Based on Helms’ new well projections, McKenzie County will see oilfield jobs continue to grow and peak at around 20,000 by 2020.
And those projections, according to Watford City Mayor Brent Sanford and County Commission Chairman Ron Anderson, mean just one thing. And that is that there is not going to be any let-up for another 10 years.
“They (the Dept. of Mineral Resources) just doubled the numbers, just like that,” states Sanford. “We’re not going to see any decrease in oil activity until 2027.”
For Sanford, that means that every projection that the city had just went out the window.
“With those kind of well numbers and job numbers, everything is doubling for Watford City,” says Sanford. “We’re going to need more of everything and we’re going to need more money to get all of the work done.”
So why has the Dept. of Mineral Resources boosted the number of wells to be drilled in McKenzie County?
According to Anderson, it’s because McKenzie County is literally in the sweet spot of the Bakken and Three Forks formations and has the highest producing oil and gas wells.
“We’re in the sweet spot of the Bakken,” states Anderson. “That’s why the majority of the drilling activity is in McKenzie and Mountrail counties.”
Anderson also noted that according to Helms, because of the high production of the McKenzie County wells, the break-even point for oil companies is much lower.
“Helms said that the break-even point for wells in McKenzie County is $37 a barrel,” stated Anderson. “In other areas of the Bakken, the break-even point is closer to $70 per barrel.”
So with higher production and the chance of greater profitability in the event that oil prices should drop, there is going to be a hesitancy on the part of most oil companies to leave McKenzie County.
“We know that every time that we have seen well and job projections in the past, those numbers have been too conservative,” states Sanford. “One would assume that these new numbers could also be too low.”
Two other factors, according to Anderson, that could lead to more wells and jobs than what is now being projected, is improved drilling technology and the development of other formations.
“We know that technology is improving all the time when it comes to drilling wells,” states Anderson. “And the oil companies know that there are at least three other oil formations that are lying under the Bakken and Three Forks formations.”