A significant amount of oil production has come back online in the months of July and August, but, with drilling rigs still hanging at 11, the gain is only temporary.
North Dakota reported a 3.6 percent increase in oil production for June in its August report, landing at 890,109 barrels per day. Prices, meanwhile, were around $35.27 for the month, versus the forecast average of $48.50.
Both figures put the state’s revenue estimates for oil tax revenue far below expectations, though Helms said sales tax revenues appear to have taken some of the edge off that shortfall.
Gas production, meanwhile, went up slightly month over month, rising from 1.928 billion cubic feet per day in May to 1.973 billion in June. Gas capture rates were 90 percent for the Bakken, and 89 percent statewide.
Fort Berthold has been a focal point for operators still actively drilling wells in the Bakken, largely, Helms said, due to uncertainties over the November election.
“If people have a federal permit or federal right of way in hand, they are acting on it, even if it is expensive to do at this point and time,” Helms said, suggesting that is a reaction to campaign rhetoric people have interpreted to mean Biden will cancel existing permits for drilling on federal lands.
Biden’s platform does propose a ban on new oil and gas permits on public lands and waters. It’s not clear that he could retroactively cancel existing permits, but the candidate has said he doesn’t want to allow any new hydraulic fracturing on federally held land.
North Dakota has 11 drilling rigs active right now, one-third of them operating on Fort Berthold, where production increased 120 to 130 percent to 38,000 barrels per day.
That’s one area where at least some oil and gas activity is keeping some of the industry employed. The Bakken’s major producers are also trying to make sure their drilling and land departments remain active, Helms said, even if at a reduced rate, throughout the pandemic.
“(That way) when prices recover, they actually have people who are regularly processing permits and leases and rights of ways, things like that, who can move quickly to bring rigs back,” he said.
Rigs aren’t expected to return until sometime next year, at best, depending on price recovery for a barrel of oil.
North Dakota has somewhere between one to three completion crews running, and Helms said they have kept up with the 11 rigs that are operating.
“Waiting on completion numbers have actually dropped,” Helms said.
The inactive well count has also dropped, to 4,200 — though that is still the second highest that number has been.
“We think at these prices, much of the shut-in and curtailed production is coming back online,” Helms said, putting that figure between 150,000 to 200,000 for July and another 200,000 to 300,000 for August, which means the state has likely already passed the threshold of 1 million barrels per day.
Those gains will be temporary, however.
“This is flush production,” Helms said.
That happens when a well has been shut-in. It temporarily produces more than it was before shut-in. The gain doesn’t last long, however, before the natural decline curve for Bakken-type wells kicks in. Unless there is new drilling to compensate, production will soon begin to fall again.
North Dakota oil and gas needs to complete 50 to 60 wells to maintain steady production, and 70 to 80 to grow.
Three completion crews are not enough to accomplish either of those figures, Helms said. The state would need at least 15 to 20 crews working, not to mention more rigs.
Unemployment in the oil and gas sector is still in the neighborhood of 10,500 people, Helms said. The pandemic has kept people home and crushed demand for fuel. The resurgence of coronavirus cases elsewhere in the nation is dragging out the recovery period.
Meanwhile, North Dakota’s plugging and reclamation project has begun and is moving westward. About 400 people are being employed by that effort, Helms said, and that number is expected to rise to 600 by the end of next week.
Reclamation crews will be following the plugging, and bids for that work will be opened this week or next, he added.
Reclamation and plugging will continue until hard freeze-up. In October, Helms said they will review what remains to be done, and assess whether some of the CARES Act funding dedicated to the Bakken Restart should be returned for use in other purposes.