oil price map feb 2019

Cold weather will be putting a whammy on monthly oil production, but December numbers don’t reflect that reality just yet. The state posted yet another record month of oil production for December, topping 1.401 million barrels per day in production. November’s total was 1.392 million.

The stat prompted a media release from the North Dakota Petroleum Council concurrent with the state’s monthly oil report. Ron Ness is president of NDPC.

“We have reached this milestone by utilizing new technology allowing us to recover more oil from each new Bakken well,” he said. “ We are proud of what we’ve done in North Dakota to help the United States become the largest crude oil producer in the world, and continue to push to become a net exporter of crude oil and petroleum products.”

Director of Mineral Resources Lynn Helms said the month over month increase in production was almost 25,000 barrels per day higher, or a 2 percent increase. It came, of course, with an even larger boost to natural gas production, to 2.650 million MCF per day, or 5 percent month over month. November’s total was 2.521 million MCF per day.

“We have returned to the days of more rapid gas production than oil,” Helms said. “That will be the challenge. Building infrastructure to keep up with that.”

Industry has already put $109 million into the Bakken since 2006, Helms added, not including midstream investments such as pipelines.

Helms estimated that industry imposed restrictions on itself of 35,000 barrels per day of production, which he said was based on numbers he has received, as well as anecdotal information and conversations with oil and gas companies.

Flaring decreased to 19 percent, giving the state an 81 percent capture rate. The goal, however, is 88 percent. The total amount of gas flared was 513 million cubic feet per day, a decrease of 15 million month over month.

Permitting jumped from 92 in December to 219 in January. That’s a seasonal increase. Operators don’t put in many permits during the holidays.

Rig counts have been steady, in the mid-60s. They were 64 on Friday. Well completions were slightly up for December, to 110, versus 85 for November.

Looking ahead, oil supplies are relatively high in terms of domestic storage, and the Energy Information Agency is predicting slight overproduction through 2020. Globally, the OPEC-Russia cartel has agreed to reduce production through the first half of 2019, and it appears to be complying with that. A high-demand season is ahead, with colder than usual temperatures, but there is plenty of surplus capacity to cover increasing demands.

All of which suggests only very slow increases to prices, Helms said.

Bakken break-evens have meanwhile continued to fall, thanks to better technology and better logistics. Williams County’s breakeven is now $20, according to a new analysis Helms has done, while McKenzie County’s is $13.

“Virtually any county you want to drill in the Bakken, Three Forks is economic,” he said.

While production for December reached an all-time high, Helms said the trend will be relatively short-lived, mainly due to weather.

“Short-term, January should be OK,” he said. “But February temperatures and snowfall have been really difficult for companies to work in.”

Helms added that a recent lay-off by EOG was related to adjusting workforce to actual production.

“Before the price collapse, they had tagged increased production to 107,000 barrels per day,” Helms said. “The highest they ever got to was 80,000 per day, and they have declined to 45,000. They just needed to adjust their staffing personnel levels to that.”

Helms said the companies projected capital expenditure reports suggest the company will grow production to the 60,000 range.

“There may be a few other companies that follow their lead,” Helms said. “But most of the major Bakken, Three Forks have a lot of drilling inventory and they will be growing their production, not holding steady or shrinking. So I don’t think it will be a widespread trend.”

Helms said he was told the layoff consisted of about 20 employees and 80-some contractors, representing a 25 percent reduction overall in staffing levels for the company.

“It is commensurate with where they think their production is going versus what they had staffed up to do. And, again, part of it is technological application. They have implemented a lot of automation on their well sites.”

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