Record-setting production in recent years in North Dakota's Bakken Shale play will peak in the third quarter and decline by 5% by the end of next year, according to a Raymond James & Associates' (RJ) summary of the Hart Energy DUG Bakken and Niobrara conference in Denver earlier this month.
This was the meat among several takeaways that analysts J. Marshall Adkins and Andrew Coleman cited in an industry brief last Monday. Another was a prediction that future production will concentrate on the wells and areas with the highest EUR (estimated ultimate recovery) rates, focusing on those EURs of 20% or more.
ITG Investment Research assumed a 48% decline in the Bakken rig count (RJ uses 61%) to project production peaking in July this year, declining roughly 5% by the end of 2016. "This decline will be impacted by longer spud-to-sales times (now five months) and the timing of well completions," Adkins and Coleman said.
"We estimate that Bakken production will peak in March," they said, noting that because the state statistics lag, that won't be known until June at the earliest. Based on the RJ model, they see production peaking at 1.55 million boe/d in March, and declining 5% to 1.48 million boe/d in November.
Citing various completion specialists at Whiting Petroleum Corp., Halliburton and Schlumberger, who spoke at the conference, the RJ analysts said productivity improvements (per-well) are "expected to steepen on the back of high-grading," and drilling efficiencies will continue this year.
Since producers are indicating they will concentrate 2015 activities on the most potentially lucrative areas of the Bakken, the so-called "fairway" acreage, they will be "high-grading," according to the RJ report. "The high-grading efficiency gains will be on top of the learning curve gains [made in 2013-14]," Adkins and Coleman said.
"As the cost of drilling new wells becomes uneconomic [which RJ sees happening], well maintenance opportunities may gain some traction," said the analysts. Refracking tests are picking up, but they don't see them as having a significant impact. "According to Schlumberger, refrackings are being sparsely tested in the Bakken now, however the pool of available candidates is expected to number only around 500, and in our view will have a de minimis impact on total production."
Regarding future acquisitions and divestitures activity, RJ concludes from the Bakken conference that a "bearish commodity environment" will continue to dampen prospects for new deals.