McKenzie County Farmer - Latest News

By M.K. French
Farmer Staff Writer

North Dakota’s oil and gas industry demonstrated a robust rebound in March, according to the latest Director’s Cut Report from the Department of Mineral Resources (DMR). Following a colder February that impacted production, March saw a significant upswing in both oil and natural gas output, offering a positive snapshot of the state’s energy sector. DMR Director Nathan Anderson highlighted the strong performance, stating, “March was a good month,” as the state’s oil production reached 36,987,000 barrels, averaging 1.19 million barrels per day. This figure not only surpassed revenue forecasts by a healthy 8.5 percent but also represented a 2.4 percent increase compared to the prior month.

The natural gas sector mirrored this positive trend, with production climbing to 106.6 billion cubic feet (BCF) for March, translating to 3.4 BCF per day. This marked a notable 5.15 percent increase from February, further underscoring the energy industry’s recovery. However, despite these encouraging production numbers, the report also signaled potential headwinds for future drilling activity. Director Anderson cautioned about anticipated reductions in the rig count, noting, “The DMR does have indication from a few operators to plan to drop a rig over the coming months,” primarily in response to softening crude oil prices. He estimated that approximately four to five operators were contemplating reducing their rig fleet, and around two frac crews might also see idled equipment.

Adding context to the pricing environment, Justin Kringstad, Executive Director of the North Dakota Pipeline Authority, emphasized the ongoing volatility within the energy market. He pointed out that West Texas Intermediate (WTI) crude oil was currently trading around $62 a barrel. Furthermore, the average price for North Dakota crude in March reflected a $7.39 discount compared to the WTI benchmark. Amidst these pricing concerns, Kringstad offered a bright spot regarding environmental efforts, noting, “We saw a 1 percent increase in gas capture,” reaching an impressive 95.8 percent, a development he lauded as “a great signal” for the state’s commitment to reducing flaring.

The report also addressed a recent legislative discussion concerning potential production cuts by oil companies seeking tax benefits associated with stripper well status. Director Anderson firmly refuted this notion, drawing upon his extensive industry experience to assert, “In my professional opinion based on years of doing this, no operator would do that. They would almost always optimize the resource, optimize the production, and go that route. It just makes way more sense financially to them.” He cited data indicating minimal financial incentive for such a strategy. Looking ahead, Anderson also touched upon a potential “non-completion waiver” under consideration, which would grant operators the flexibility to drill wells but defer their completion for a certain period, potentially until oil prices exhibit greater stability. The primary objective of this measure, he explained, would be to “hopefully keep rigs in the air and activity levels a little bit higher than maybe they would otherwise be.”

Regarding the anticipated timeline for these potential rig and frac crew reductions, Anderson indicated that the changes could occur “anywhere from [now] through August at this point.” Finally, in response to inquiries about the legislature’s recently introduced incentives for drilling in areas outside the Bakken formation, Anderson mentioned receiving initial interest from an operator in a non-Bakken region, suggesting a potential early uptake of the new program. While March’s production figures painted a positive picture, the report underscored the industry’s sensitivity to price fluctuations and the potential for adjustments in drilling activity in the coming months.

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