North Dakota oil production fell to just over 1.15 million b/d in
December, down 75,203 b/d from a year earlier when state production
hit an all-time high, state Department of Mineral Resources data
showed Wednesday.
December production fell by 29,507 b/d from November, as prices for
North Dakota sweet crude and the number of drilling permits
continued to freefall.
Lynn Helms, the state's top oil and gas regulator, called the
December data "the first real production decline" the state has seen
as producers curtail drilling efforts amid the ongoing price
collapse.
While production did decline late last year, those dips were often
blamed on flaring restrictions, gas capture goals and new oil
conditioning rules. December's drop, it appears, was strictly a
function of price, Helms said.
"This looks like it's a real number, based on real activity," he
said.
Based on the breakeven prices released by the state Wednesday, only
two North Dakota counties, Dunn and McLean, remain economic to drill
amid current prices. Dunn, where the state estimates breakeven
prices average $22/b, had seven active rigs Wednesday, while McLean,
where breakevens average $25/b, had just one.
McKenzie County, which leads the state with 20 active rigs, has an
average breakeven of $31/b. The statewide breakeven average is
$40/b.
Platts on Tuesday assessed Bakken ex-Clearbook at $30.70/b, down
from $49.34/b at the same time a year earlier.
The state uses a combination of WTI spot prices, calculating Bakken
at roughly 85% of the WTI price, and pricing from Flint Hills
Resources. On Tuesday, Flint Hills estimated North Dakota's sweet
crude price at $16.50/b, its lowest price since February 2002.
The statewide rig count held steady at 64 from November to December,
but has since dropped significantly to an average of 52 in January,
then slid further to land at 40 on Wednesday. The all-time high was
218 in May 2012.
"Operators are now even more committed to running fewer rigs as oil
prices remain at very low levels," Helms said. "Oil price weakness
is now anticipated to last into at least the third quarter of this
year and is the main reason for the continued slowdown."
Helms said with breakeven prices exceeding current crude prices in
all but two counties, he expects the rig count to fall by another 10
to 11 rigs in the near term.
Helms said he expects statewide production to remain above 1 million
b/d into early 2017, but added that without an increase in prices,
it would then fall to about 900,000 b/d by late next year.
He estimated that WTI spot prices need to average roughly $45/b in
order for statewide production to stay above 1 million beyond early
next year.
"That stimulates enough drilling and enough completions that we
don't see the [supply] decline," he said.
There were 95 drilling permits in December, down from 125 in
November and the all-time high of 370 in October 2012. Permitting
fell to 78 in January, according to the state agency.
"Drilling permit activity declined November to December, then fell
further in January as operators continue to position themselves for
low 2016 price scenarios," Helms said. "Operators have a significant
permit inventory, should a return to the drilling price point occur
in the next 12 months."
North Dakota natural gas production fell slightly from November,
when production hit a record high of nearly 1.68 Bcf/d, to 1.67
Bcf/d in December.
In addition, the number of producing wells actually climbed from
13,100 in November to 13,119 in December. The high of 13,190 was set
in October.
--Brian Scheid,
brian.scheid@platts.com
--Edited by Lisa Miller,
lisa.miller@platts.com
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