Rigs have expanded their footprint to a wider area of the Bakken, and the trend is already showing up in the changing ratio of oil and gas numbers.
Crude oil production went up 3.5 percent from July to August to 1.084 million barrels per day, while gas production went up 2.5 percent to 1.943 million cubic feet per day for the same period, according to October’s statewide oil production report. The latter is a new high for gas production — but the shifting ratio was what interested North Dakota Department of Mineral Resources Director Lynn Helms more.
“That is the first time in a while that oil has increased more than natural gas,” he said. “Any time the numbers are out of sync, it means something is happening. It means you should dig a little deeper.”
The state’s rig map now shows 10 rigs working in either the outside edges of the Bakken core or even further afield. One was as far away as Billings County.
“There is some expansion of activity outside the really gassy core area, and that is bringing the gas to oil ratio down some,” he said. “That’s a positive thing in the long-term.”
The recent hurricanes in the lower half of the United States had caused a temporary spike in inventories, but that trend has now reversed, strengthening prices. OPEC, meanwhile, is continuing production cuts in October — though some countries are not adhering 100 percent to that. The association of oil and gas producing countries is expected to consider extending production cuts again in November. All of that combined is giving Bakken crude a little more price strength.
“In particular, Bakken crude is selling pretty well,” Helms said. “It’s not enough to stimulate a major increase in drilling or completions, and you saw that in the small decrease in wells waiting on completion.”
Uncompleted wells dropped by just 26 to 863 from the end of July to the end of August.
Fort Berthold continues to show high activity, but at the same time, bottlenecks continue to hamper pipeline infrastructure. That’s causing some flaring issues, and they are big enough to affect the state’s overall gas capture percentage.
“We have 13 rigs running there,” Helms said. “That’s quite a bit of activity, and we really saw that showing up in the flaring numbers. Statewide, we lost some ground on gas capture. I think we fell from 88 to 86 percent if you include confidential wells, and you can take a look and see it was in the trust lands of Fort Berthold.”
One of Fort Berthold’s pipeline projects has finally made it through the process, Helms said, which should improve September numbers. But another in the northwest corner of the reservation is still working its way through the process. It has waited for BIA approval for three years now, Helms said.
Mergers and acquisitions, meanwhile, have increased well transfers five-fold. The transfers reflect a re-evaluation of business models and decisions on where to focus capital, Helms said, though not all of them represent shifts out of the Bakken.
In all, 681 wells have been sold, 500 of them in Fort Berthold.
Four hundred of the Fort Berthold wells changing hands are going from Halcon Resources Corporation to Bruin E&P Partners, the latter of which is a portfolio company of Arclight Capital Partners. The assets produce about 29,000 boe/day net, and sold for about $1.4 billion.
Another 100 or so are headed to Rimrock from Whiting. That sale included both operating and non-operating units. The sale was about $500 million.
Rimrock intends to be a pure Fort Berthold play, Helms said.
“They’ve been to Newtown to talk with Chairman Fox, and they appear to know what they are getting into and what they are doing he added.
The remaining wells are transferring from Petro Harvester to a new operator Helms identified as 31 Operating.
Companies are refocusing capital to their most profitable opportunities, he said.
In HRC’s case, it does mean capital shifting from the Bakken to the Permian and the Eagle Ford tight oil plays, but in Whiting and Petro Harvester’s case, they are looking at other areas still in the Bakken.
The operation of Dakota Access is already showing a positive effect on price differentials for Bakken crude. Bakken oil has generally faced steep discounts due to geographic constraints. Those have eased by $2, which is going to bring in more tax revenue, since those are based on wellhead prices.
North Dakota Pipeline Authority Justin Kringstad said the improvement will generate an estimated $18 million in additional tax revenue for the past three months.