ND production unexpectedly tops 1 million barrels per day again

By Patrick C. Miller | April 19, 2017

North Dakota’s oil production for February made an unexpected upswing to 1.03 million barrels per day (bpd), thanks to good weather and higher oil prices.

“I don’t think anyone expected production to go up 53,000 barrels a day,” said Lynn Helms, director of the state’s Division of Mineral Resources while delivering his monthly report. “That was really anticipated much later this year.”

However, Helms said that while he expects production to remain steady during March, he anticipates it falling back to around 950,000 bpd the next two months. The annual spring thaw in April and early May means load restrictions on roads will limit trucking and oilfield activity, he said.

Contributing to February’s increase was good weather, enabling the deployment of more completion crews. Helms said the number of uncompleted wells in North Dakota fell to below 800 wells, the lowest it’s been since December 2014. In September 2015, the state reached a high of nearly 1,100 uncompleted wells.

February also saw 74 new Bakken wells added and 93 conventional wells returned to production. More drilling rigs have been added since February and Helms said there are now 50 operating in the state.

North Dakota’s natural gas production also increased, reaching 148 million cubic feet per day—a 9.5 percent increase over the previous month. Despite that, Helms said producers continued to stay well within the flaring goals set by the North Dakota Industrial Commission with a statewide gas capture rate of 89 percent.

Helms noted that another factor that could affect North Dakota’s future production are international events involving OPEC, Russia, Syria and North Korea. OPEC will meet at the end of May to decide whether to continue its production cuts. But if the U.S. and Russia aren’t cooperating on issues in Syria, he said the organization could decide to scrap the production cuts.

If that happens, Helms said, “We could see a downturn in oil prices for the second half of this year.”

Looking at forecasts from the Energy Information Administration, he expects the global supply and demand for oil to be more balanced by early 2018, creating greater market support for oil price.  

The completion of the Dakota Access Pipeline, which is expected to begin transporting Bakken crude to Gulf Coast markets by the middle of May, bodes well for future North Dakota oil production, according to Helms. It will create lower and more stable transportation costs for operators.

“As they look into the future, they have a known transportation cost,” he said. “It’s not going to be highly variable depending on rail transportation to a coastal market somewhere. That results in a lot more confidence in making investments.”

Helms noted that one oil company CEO told him the Dakota Access Pipeline helps level the playing field with the Permian Basin in Texas where extraction taxes and transportation costs are lower, but royalty payments are higher.

“It takes the transportation cost difference out of the equation,” Helms explained. “Now we’re just talking state tax rates and royalty rates, and they’re pretty much equal. So in the long run, it will be very beneficial to our producers because they can have a stable, confident transportation cost that’s lower than it’s been.”