Oil Prices And Future Well Counts

By Luke Geiver | January 16, 2015

We call it the oil price coma. It’s a state of mind and singular focus caused by the low crude price environment that forces us to check—and then recheck—the price of oil in between calls to analysts and experts about impacts and future price climbs. Our team has experienced this phenomenon, losing several productive hours to reading reports and stories about oil prices. Eventually, we reanalyzed and reviewed the numbers behind the Bakken shale play to help us exit that oil price coma. If you, or someone you know, has experienced this or is currently grappling with the price of oil and how it relates to the Bakken, consider the numeric facts used to describe the current state of the Bakken.

To date, the Bakken pool (which includes the Three Forks formation) has roughly 8,500 wells producing. To fully realize the Bakken pool resources, state experts and oil firms alike believe another 60,000-plus wells will be needed. Next, consider the disconnect between oil prices and rig counts and the reality that we cannot fully gauge the prominence of the Bakken by the number of rigs operating.  In January 2010, the price of oil was near $77 per barrel and the rig count was 163. One year later, oil was at $86 b/o and the rig count was 200. Think this is a trend? In January 2013, the drilling rig count dropped to 185, but the price per barrel was actually higher than the same time a year previous, trading at $87 b/o.  And, to fully highlight the partial disconnect one might see between the drilling rig count and the price of oil, in January 2014, the rig count was 188 but the price of oil was $74 b/o.

During this time of oil price speculation and talk of slowdowns, remember what prominent Bakken-area city leaders and the state’s top regulators say. The Bakken is a long-term play and there will be commodity price fluctuations that disrupt the all-out pace without stopping the majority of the activity happening in the play.    

In this issue, we have a great example of a Bakken business sector that helps show that the industry is not drastically slowing down, but rather adapting. Staff writer Emily Aasand explains, in “Transloading Needed Now,” the mindset of several transload operators, each of whose idea of growth is linked to efficiency. They spoke of their goals of offering efficient operations for moving crude by rail out of the state and bringing supplies like sand and tubular goods into the region in a fast, cost-saving manner. They know that doing so will maximize the bottom line for their main clients and secure their future opportunities to service the Bakken’s energy service firms and oil producers.

Mastering Bakken product movement isn’t only about rail and trucking operations. Patrick C. Miller highlights this fact in “Electrifying The Bakken.” For his in-depth look at the state of the area’s power supply, Miller spoke with Basin Electric and the McKenzie County Co-op, the two main power entities in the heart of the Bakken. Their stories help illuminate topics in the Bakken that are worth talking and reading about even at a time when all we may be thinking about is oil prices. If their stories aren’t enough, just remember that well-count number of 60,000-plus.

Luke Geiver
Editor
The Bakken magazine
lgeiver@bbiinternational.com