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'Worst Drop Ever' in North Dakota Production, Helms Says

North Dakota's latest oil/natural gas production statistics include the "good, bad and ugly," but the state's chief oil/gas regulator, Lynn Helms, stressed the latter in pointing to a 70,400 b/d oil production drop month-to-month as the biggest decline the state has experienced.

The most recent month with complete statistics, April, showed total production at 31.2 million bbls (1.041 million/d), compared to 34.4 million bbls (1.111 million b/d) in March, said Helms, director of the state Department of Mineral Resources. Natural gas production also fell again for the first time since January of this year, totaling 48.5 Bcf (1.6 Bcf/d) in April, compared to 53 Bcf (1.7 Bcf/d) in March.

Although predicting now that Bakken oil production will dip below the 1 million b/d mark later this year if prices stay below $50/bbl -- they were $38.25/bbl on Wednesday -- Helms listed three strong weather-related reasons for the big April production drop.

April well completions were very low (44), state-imposed road restrictions were in force all month, cutting the volumes of water and oil that could be carried by trucks, and finally half of the days in April were too windy to complete wells, Helms said. The previous largest month-to-month drop in oil output was in December 2013 (50,000 b/d), and that was an unusually severe cold period, he said.

Calling it the "ugliest" of his ugly listing in the most recent statistics, Helms said the March-to-April production drop "can't be ignored; it is the largest production drop we have ever had in the state." He added that he doesn't see this as "normal" or a trend, based on the three weather-related factors in April, and "I don't expect another 70,000 b/d drop.

"It was the one we were expecting since we have seen the rig count drop below 30 and the well completions drop below 50 [per-month] for several months in a row, we were expecting a large production drop, and it arrived."

In the shorter term, Helms is now doubtful that the state will make it through the continuing low price environment without seeing production drop below the coveted 1 million b/d threshold.  "I think it is going to be very hard for industry with these kinds of drilling levels, and at prices below the $50/bbl mark, to say above a million barrels a day until the end of the year," he said, adding it would most likely come in the last three months of the year.

North Dakota's current estimates for revenue calculation purposes in fiscal year 2017 call for oil production to be in the 900,000 b/d range as an average. Helms said the estimates now call for rig counts to stay in the 30 range the rest of the year, and for the $60/bbl price range not to be sustained until sometime next year.

In the "bad" category, Helms said the fact that oil prices have not been able to sustain the $50/bbl level reached in late May does not bode well for the rest of the year.

In the April statistics the main positive that Helms identified was the continuation of gas capture at slightly above 90% and the rig count inching upward by one (28 as of Wednesday compared to 27 last month). "That was the first time since September 2014 that we actually saw the rig count increase," Helms said.

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