ND Bakken rewrites oil, gas production record books in September

By Luke Geiver | November 20, 2018

North Dakota’s oil and gas industry broke nearly every major production record for the month of September. That state added nearly 70,000 barrels of oil to production totals for the month to reach a record 1,359,256 barrels of oil per day for the month of September. The number of producing wells in the state rose by 160 wells putting the state record at 15,287 wells. And, 87 wells were also taken off the inactive well count list in September, according to Lynn Helms, director of the North Dakota Department of Mineral Resources Oil and Gas Division. Helms provides a director’s cut of information on the state’s oil and gas industry every month using data provided from producers that is for the two months prior to the conference call.

For the first time in several months, oil production numbers are increasing faster than gas production numbers, he said. The change is related to the amount of production activity that is now taking place outside of the core areas in the Williston Basin. Within the core, gas-to-oil ratios are the highest, but outside the core—where more production is once again taking place—gas-to-oil ratios are more moderate.

The state’s gas industry also broke records for September. “We managed to capture a record amount of natural gas,” Helms said. Gas production capture numbers came in at 2,532,018 Mcf/d. The gas capture numbers, however, cloud the future of gas capture regulatory policy and goals.

The state is currently capturing less gas than it had intended too based on previously set capture targets. Before the Thanksgiving holiday, state leaders are set to meet and discuss new flaring and capture policies for the future. Previous policies called for production curtailments should capture goals fail. But, with a recent visit from the U.S. Bureau of Land Management, the state will have more to think about with its flaring and gas capture stance.

According to Helms, the BLM told state leaders that moving forward, the BLM will defer to state and tribal governments on flaring rules. The move would put state and tribal regulators in charge of creating and monitoring flaring regulations on land they are currently in charge of. The BLM will now want to know when a federally-linked well is in non-compliance with pre-established flaring regulations. When a well is flaring in avoidable circumstances, the BLM will required that gas royalties be paid.

“Everything is going to change about how gas capture is regulated in the state of North Dakota,” Helms said.

In the coming weeks, state leaders and tribal leaders will need to come to an understanding of flaring regulations. The Three Affiliated Tribes will regulate trust lands and the state will regulate everything outside of trust lands. Any lands that have federal mineral-linked wells (which is roughly one-third of all wells in the state) will have to monitored for avoidable versus unavoidable flaring situations. In the avoidable situations, the BLM will expect royalties on the flared gas to be paid. Helms said the flaring policy and situation with the BLM will be difficult for all parties to come to consensus on and could create issues from unintended consequences from the enforcement of the BLM’s gas royalty expectations.

Apart from his updates on North Dakota’s record breaking oil and gas production levels for September, Helms also provided updated information on breakeven numbers for new wells in the state. Nearly every county in North Dakota is now in a positive breakeven position and nearly any new well drilled and completed at current oil prices would be economical. He did note that the state’s breakeven numbers are pure breakeven numbers and don’t account for the traditional 20 percent initial rate of return most oil and gas producers look for to make the risks of production worth the venture.

New completion techniques and long, three-mile laterals are pushing new rigs to areas outside of the core of the Bakken. The northern portion of the North Dakota Bakken has gained drilling rigs because of the completion and drilling technologies that are now being applied there.

In the coming months, activity in the Bakken will remain the same with no real possibility for growth as oil prices remain at a level that doesn’t promote adding rigs or completing more wells. And, the colder operating conditions and road restrictions will make it difficult for new growth, Helms said.