Prices have been steadily climbing and that has many people wondering when oil and gas activity is going to return to normal.
That’s a question that relies on several factors, many of them global in nature, and beyond the control of any one nation or group.
While prices have reached the $70 range of late, this doesn’t automatically prompt immediate activity by oil and gas companies. They want to see that the rise in prices is a sustainable condition, before boosting rigs and well completions by any great amount.
They also want to see that world supply and demand curves are balancing out as well, so that the market has room for their product. Otherwise, additional production risks lowering prices to levels not economic for shale oil.
One wrinkle in all this that the world is acutely aware of is the fact that OPEC and its allies are not unwilling to flood markets to drive out competition, as they did during the pandemic. That has deepened what was already a deep recession, and lengthened the expected recovery time substantially.
In its latest forecast, the EIA estimates that U.S. shale output will climb by 38,000 barrels per day in July to a total of about 7.8 million bpd. That’s the highest level since November.
Most of that increase is expected to come from the Permian, which is forecast to rise by 56,000 barrels per day to 4.66 million barrels per day.
The Bakken, meanwhile, is forecast by EIA to decline 4,000 barrels per day to 1.1 million barrels per day.
North Dakota posted 1.108 million barrels per day in March, which ticked up to 1.121 million barrels per day in April. Rigs have ticked up from 15 since then to 20, but hydraulic fracturing crews have ticked down one from nine to eight.
That has drilled but uncompleted wells rising by about 100 to now 731.
It’s unlikely North Dakota’s oil production will rise by much given these circumstances, and indeed, the CEOs of most Bakken oil companies have outlined modest plans in recent earnings calls that keep production flat through the rest of 2021 into the early part of 2022.
After that, if market conditions warrant, they have suggested they will consider picking up the pace — but always with the word discipline in mind.
Continental’s founder, Harold Hamm, has been among those urging disciplined, conservative growth in oil production for American shale.
“One thing we learned is not to oversupply the market,” Hamm said during the Williston Basin Petroleum Conference. “By going in and oversupplying the market and commodity prices fall, nobody gets paid. (Investors) don’t get paid. So there’s a lot of good discipline that’s happening today.”
Hamm also said the demise of oil and gas, much like Mark Twain’s death, has been greatly exaggerated. World estimates of supply-demand have shown oil and gas will be more than 40 percent of the energy mix in 2050, even if all commitments of the Paris accord are met.
“We’re gonna be around 40 years,” Hamm said, and suggested it is time to change the narrative to reflect the continued necessity of a clean and well-run oil and gas industry in the global marketplace.
Continental is generally the Bakken’s largest producer. It’s running seven rigs in the Bakken right now, and has said it will complete 65 wells this year.