North Dakota production has continued its incremental rise for August production, with oil and gas companies continuing to put wells back into production that were shuttered due to a downturn sparked by both a pandemic and an international price war.
North Dakota reported 1.164 million barrels per day of production for August, a 12 percent increase month over month that is actually knocking once again on the door of production levels in the state’s revenue forecast, 1.25 million barrels per day. Gas production was 2.63 billion cubic feet per day, a 14 percent increase month over month.
The production bump is likely to be short-lived under the present circumstances, North Dakota Department of Mineral Resources Director Lynn Helms said.
Prices are hovering right at the $40 threshold, which is just barely economical for returning wells to production. To complete wells, it would take sustained prices at $45, and to drill more wells would require at least another $14 on top of that.
North Dakota has just 14 rigs drilling wells right now, Helms said, and at least three of those rigs are going only because the operators are worried about the aftermath of the upcoming November election.
Helms said the Bakken Restart Task Force has proposed a solution to the impending production decline that would repurpose some of the CARES Act funding that was designated for reclaiming plugged wells. The weather is turning, and about half of those sites will not be able to be reclaimed in time for CARES Act funding. They will still be reclaimed, just next year, with different funding sources.
In the meantime, he has developed another idea with the help of the Bakken Restart Task Force and the Williston API that would also create some jobs during the downturn and help stabilize production at the same time.
Helms said he got the idea after discussions with the Williston Basin Chapter of the American Petroleum Institute this month.
He had asked the API members what area could use a boost the most, and was told that many jobs could be created quickly, if there was a way to incentivize hydraulic fracturing crews to complete wells.
That conversation led Helms to propose that the Emergency Commission repurpose money left over from reclamations and use it to provide a grant of up to $200,000 per well to complete about 80 wells between now and the end of the year.
Absent some sort of stimulus like the completion grants he is proposing, that will mean flat production from October to November at best, and a downward dive thereafter. That will have a negative impact on state budgeting, which in many years has received about half of its revenue from oil production and prices.
North Dakota would need to complete about 70 wells per month to maintain flat production, Helms said. But industry didn’t do even a third of that in August, with just 19 completions. It has only about 100,000 barrels per day of production that’s still curtailed due to the pandemic.
“We have just about tapped out the return to production increases that we are going to see (from returning wells to production),” he said. “And we don’t have the kind of drilling and completion activity that will drive that number higher.”
In addition to keeping production steady for a longer period of time, the proposal will also keep 500 to 1,000 people working during the downturn, and will create 100 to 200 long-term jobs.
Natural gas capture figures, meanwhile, look good headed into November, when the requirements rise to 91 percent. Helms said that was thanks to $3 to $4 billion in infrastructure investments industry had made leading into the recent downturn.
“We are still hopeful about a couple of announcements before the end of the year about some new improved things to do with gas,” he said. “We will see how that goes.”