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North Dakota Surprises: Production Increases, Flaring Curbed

North Dakota's veteran oil/natural gas regulator, Lynn Helms, said Wednesday that he was surprised by increases in oil and gas production in his state, along with continuing progress in reducing flared gas, all in the midst of oil prices below $40/bbl for Bakken sweet crude supplies.

Helms outlined the latest statewide production numbers, noting the most recent complete statistics are for March, in which oil production hit 36.9 million bbls (1.19 million b/d), compared to 32.9 million bbls (1.17 million b./d) in February, a 1% tick upward. Gas production grew 3%, hitting 47.1 Bcf (1.52 Bcf/d), compared to 41.3 Bcf (1.47 Bcf/d) for the previous month.

The production is still below last December's all-time high figures in the state, and Helms said he and his colleagues in the Department of Mineral Resources (DMR) are "scratching their heads" related to the most recent monthly data in terms of "what all happened and why it happened."

"We did not anticipated a 1% rise in crude oil production," said Helms, noting that last month he had predicted that February through May would most likely be months of slow declines in production. "Contrary to that, we had a four-fold increase in well completions, and a 3% increase in gas production."

Some of the increase, he said, may be attributable to a small, temporary state tax incentive trigger for producers due to the sustained oil prices below $50/bbl. "That and the need for many operators to maintain cash flow [by completing wells on the economic margin] were in back of the increase," said Helms, DMR director.

Helms called it "good news" that gas capture was 81% even with a gas production increase. "Gas capture remained good statewide at 80% and 81% in the Bakken," he said, adding that on the Fort Berthold Reservation federal lands there continued to be significant improvement.

The rig count in the state continued to go down, decreasing 10%, from 108 in March to 91 in April, and sat at 83 on Wednesday as Helms gave his report on a monthly webcast. "We think we are at or near the bottom," he said. Among 17 operators he polls frequently, there was only one more rig cited as being a possible lay down, according to Helms.

Helms said that oil prices increased significantly ($46/bbl) compared to April ($38.33) and March $31.47), and state Tax Commissioner Randy Rauschenberger joined the report webinar to report that it was likely that the big trigger tax incentive for producers is now unlikely to kick in on June 30. Rauschenberger also noted that a new state law will establish a flat extraction tax of 5% for production in the state, starting next year (see Shale Daily, April 30).

Citing projections from Nymex and Saudi oil sources that Bakken crude prices won't see a return to $65/bbl prices until late 2016, Helms said prices in the state may stay "flat for a significant period of time, with 80 to 100 rigs operating and not enough wells being completed to sustain production monthly. It looks like a pretty flat picture projecting out until this time next year."

In March, there were 189 wells completed, compared to 42 in February with four companies responsible for almost all of them (XTO Energy, Hess Corp., Continental Resources and Burlington Resources), Helms said. He contrasted that with EOG Resources and Marathon Energy that have both said they are unsure they will complete any wells in the Bakken this year.

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