State’s oil production continues downward slide
By Neal A. Shipman
While oil prices started showing signs of a minor rebound in March, low oil prices in January continued to have a downward effect on the state’s oil production according to Lynn Helms, North Dakota Department of Mineral Resources director.
“We saw a drop in oil production of 30,000 barrels in December,” stated Helms. “And in January, the state’s production dropped another 30,000 barrels a day.
During January of 2016, the state produced 34,785,094 barrels of oil or roughly 1.122 million barrels per day compared to 35,733,569 barrels in December of 2015. The state set its all-time monthly production high of 1.227 million barrels in December of 2014.
“We are really seeing the impact of reduced activity as a result of the low oil prices,” stated Helms, during his monthly Director’s Cut on Friday, March 11.
According to Helms, as a result of oil prices in the $30 a barrel range, the state saw its rig count drop to 32, the lowest level since March of 2007.
“Based on what I’m hearing from operators, I would guess that we will see the number of rigs drop below 30,” stated Helms.
While Helms noted that the recent strengthening of oil prices is good news, he is not confident that the price improvement will hold.
“There is nothing in the fundamentals that have changed that would indicate that we can expect high sustained oil prices,” stated Helms. “The agreement to freeze production is still waiting on Iran. And the fundamentals of supply and demand haven’t come into balance yet as we continue to see a worldwide increase of oil in storage.”
Based on the state’s declining oil production numbers, Helms estimates that North Dakota will drop below one million barrels of oil being produced a day next year.
“From discussions we’ve had with producers, we expect to see February and March production numbers to continue to decline,” states Helms. “We’re losing altitude pretty rapidly.”
But according to Helms, there is a price of oil when the number of rigs will begin to come back into operation.
“The inactive wells in the state are relatively inexpensive for companies to put into production,” states Helms. “We will need to see oil in the $40 to $45 WTI price range for that to happen. But the state will need to see much higher prices for other wells to go online or for new wells to be drilled.”
According to Helms, the per barrel price of oil will need to be in the $50 to $55 range for non-completed wells to be put into production.
“We’re a long way from working our way into where we will see the non-completed wells being put into production,” states Helms.
As for new drilling rigs beginning to operate again in the state, Helms estimates that per barrel oil price will need to be above $60 WTI.
“And even if prices do go above that $60 point, they will need to stay at that level for a full quarter before companies begin to feel confident that prices are going to hold,” states Helms.
McKenzie County’s Oil
Production Numbers Decline
McKenzie County, which leads the state in both oil and gas production saw its number of producing rigs increase from December to January, but saw its production numbers decline slightly.
In January, the 3,414 wells producing in the county produced 12,763,090 barrels of oil and 23,458,030 MCF of natural gas. In December of 2015, the county had 3,383 producing wells, which produced 12,934,719 barrels of oil and 23,757,843 MCF of natural gas.
McKenzie County’s oil production represented 37 percent of the state’s production totals, while the county’s natural gas production represents 46 percent of the state’s total production.