North Dakota’s oil production growth flatlined for the month of April, the victim of twin forces. Cold weather, for one, put a damper on oil and gas activity in general. The other, just as inescapable issue, however, was the industry’s lack of capacity to capture all the gas that comes with oil production.
North Dakota produced 1,391,188 barrels of crude oil per day in April, a dip of less than a few hundredths of a percent from March production of 1,391,760 barrels per day. Gas production, meanwhile, climbed yet another percentage point for a new record, to 2.862 million MCF per day in April. In March it was 2.837 million MCF per day.
Director of the North Dakota Department of Mineral Resources Lynn Helms said it’s hard to put a number to how much production the state is losing because it can’t capture more gas, but anecdotal information indicates the loss is substantial.
One operator told Helms that it has a massive well pad that is capable of producing 50,000 barrels per day based on tests, Helms said. The operator has curtailed its production to 17,000 barrels per day instead.
Others have delayed well completions to the latter quarter of 2019, awaiting the buildout of infrastructure coming online then. Helms suggested that could have added another 25,000 barrels per day to production statistics.
“There are definite impacts,” Helms said. “The midstream companies are really feeling the pressure. Their customers, the operators, are deeply unhappy with the infrastructure, so they are all hands on deck.”
Helms said the Elk Creek line, which ONEOK is building to take NGLs to market, is so far on schedule for operation toward the end of 2019. It is among key elements of infrastructure for gas capture.
“For example, the gas plant at Watford City is actually not able to come on at full capacity right away,” Helms said. “It is going to have to stage its increase in capacity because of the lack of natural gas liquids takeaway capacity and that kind of thing. So it really is inserting itself into the Oil Patch in many, many ways in terms of reduced desire for drilling rigs, drilling crews, delayed completion, and wells being tested and then chocked back. Production could be substantially higher if we had the gas capture capacity.”
Gas capture did improve slightly for the month, up 1 percent. That translates to an additional 44 million per day of captured gas.
“We will gladly take these incremental improvements in 2019 as we expect the buildout of infrastructure to get us back into compliance by the end of the year,” Helms said.
Meanwhile, oil prices are beginning to cast a long shadow on future plans, a resulted of anticipated oversupply.
Helms has recently returned from Denver, where he visited with a number of CEOs whose companies operate in the Bakken.
“Their feeling is they will stay at the same number of drilling rigs, drilling crews, and completions as we look forward,” Helms said.
That may not mean production loss in and of itself, however, Helms said. Several of the companies are also reporting continued gains in efficiencies.
“One company has seen a 20 percent improvement in drilling efficiencies. They have reduced the number of rigs from five to four, but drill the same number of wells,” Helms said. “They are drilling three wells per month with the rig counts they have.”
Similar gains in efficiency for well completion have allowed the company to reduce the number of its hydraulic fracturing crews from three to two.
“We continue to improve in terms of efficiencies,” Helms said. “That is good news for state revenue and production, so even in a somewhat squeezed price environment, (oil companies) can maintain completions and oil production.”
State revenues, meanwhile, continue to be on track, thanks to a healthy cushion in March, April and May, when both production and prices were ahead of forecasts. Now, however, the numbers are right at forecast, Helms said, indicating that is something that will be watched closely.