crude oil prices

North Dakota posted the largest drop on record for oil and gas production in the month of April — a record North Dakota’s Department of Mineral Resources Director Lynn Helms said will be topped by even steeper drops in May.

North Dakota reported a 15 percent drop in crude oil production for April, going from 1.43 million barrels per day in March to 1.219 million in April. Gas production, too, posted a record 13 percent drop, going from 3.128 billion cubic feet per day in March to 2.712 billion cubic feet per day in April.

These numbers are well below what’s been forecast for state revenues. Crude oil was forecast at about 180,000 barrels higher per day for April, at 1.4 million barrels per day. Prices were projected to be around $48.50 per barrel for North Dakota crude in April, but were more like $9.54.

Production drops are not over yet, Helms added. May will have an even steeper 300,000 barrels per day drop, Helms said, and that means the state will fall below the magic one million barrel per day number.

There were some bright spot in the numbers. The state’s gas capture has finally met state targets. Statewide, gas capture was 88 percent, and the Bakken was 89 percent. Fort Berthold Trust Lands continued to lag the rest of the state, however, at 82 percent.

And production losses appear to have already turned a corner, Helms said. Based on data he sees on a week-to-week basis, the low point hit somewhere between May 16 to 23. Production numbers have already ticked up about 100,000 barrels per day from the lowest point.

“I was hoping the field inspectors would have a better report for me today,” Helms said. “But with all the volatility, everyone just sat still. So it doesn’t appear that anything really changed this week in terms of wells being brought back.”

Production losses may have turned a corner, but Helms said he is expecting the state to lose one or two more rigs and drop into single digits. The rig count was at 10 Friday, June 12. There is just one hydraulic fracturing working in the Bakken. It’ seems to be keeping up with all 10 rigs based on the month’s statistics, Helms said, with 58 completions in April.

That figure, however, is well below the 90 or so that the state would need to make its revenue forecast.

Another bright spot Helms pointed to are the stable numbers for wells permitted. There were 68 new permits in March, 62 in April and 59 in May.

In the past, new well permits have generally been an early indicator of how much oil and gas activity the state can look forward to during warmer months. In this case, it suggests a certain optimism for the future, Helms said.

“(The numbers) are below what we’d like to see, but it does indicate, as we have said before, that our operators believe in this resource,” Helms said. “And that they intend to stay, and that they intend to have a 12-month supply of permits so that when they decide it’s time to reactivate and get the economy going again, they have the permits in hand to make it happen.”

Among anomalies in the state’s monthly report is the inactive well count, which only went up by seven — much less than one might expect from the drastic production drop.

Helms believes that’s probably because of how operators are handling their shut-ins. Wells that are shut in for months at a time are expensive to return to production because mechanical things tend to start going wrong when machines aren’t used.

“So in many cases, they are pumping these wells an hour a day or every other day or taking turns on a multi-well pad,” Helms said.

That way, the well remains in good mechanical shape, but little to no oil is produced.

Many of the shut-ins during the pandemic have been conventional wells, Helms added. Those are down to 390.

“I’ve never seen a conventional well count below 1,000,” Helms said, noting that there were 3,000 of them when he first took the job with DMR many years ago. “That is a a record number in terms of conventional wells.”

Helms said the state’s oil and gas industry is at 9,000 or so unemployment claims to date, and he’s expecting that will go higher once the Paycheck Protection Program funding runs out. Before that happens, he’s hoping to have in place a plugging and reclamation campaign for wells orphaned during the COVID-19 epidemic, to help the state retain at least some of the labor that will be needed to restart the Bakken once the pandemic stops crushing demand.

How long the demand destruction will last is at this point anyone’s guess, but looking at what’s happening with supply stocks doesn’t indicate an ending any time soon. The stocks of crude oil, which are normally dropping at this time of year, are continuing to climb upwards. Price volatility is likely to continue as long as storage remains full.

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