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North Dakota Adds Rigs, But Drilling Slowdown Could Last Into 2Q2017

North Dakota recovered the two drilling rigs it lost since April, but oil prices are expected to remain weak through 3Q2016 and possibly extend into 2Q2017, Department of Mineral Resources (DMR) Director Lynn Helms said.

The number of rigs currently deployed in North Dakota totaled 29, the same as April, Helms said in his monthly "Director's Cut" report issued last Friday.

The state lost two rigs in May but had one return in June and another this month (see Shale Daily, June 17). Meanwhile, the number of well completions fell from a final total of 41 in April to a preliminary total of 37 in May.

Despite West Texas Intermediate crude oil prices stuck below $60/bbl, Helms said operators were continuing to run the minimum number of rigs possible. Since the last report, he said there was one significant precipitation event and 14 days where wind speeds were in excess of 35 mph, which is too fast to conduct completion work.

According to the DMR, natural gas production increased from 48.5 Mcf (1.62 Mcf/d) in April to a preliminary figure of 50.9 Mcf (1.64 Mcf/d) in May, a 5% increase. During the same time frame, oil production climbed from 31.3 million bbl (1.04 million b/d) to a preliminary total of 32.5 million bbl (1.05 million b/d) in May. The number of producing wells increased by 113 (0.8%), from 13,054 in April to a preliminary figure of 13,167 in May.

More than 98% of current drilling in North Dakota is now targeting the Bakken Shale and Three Forks formation, the DMR said. Helms estimates the number of wells awaiting completion services currently stands at 931 (up 39 from the end of April to the end of May), while the inactive well count is an estimated 1,584 (down six from the end of April to the end of May).

Permitting activity dropped from 66 in April to 42 in May, but rebounded to 65 in June, according to the DMR. "Drilling permit activity decreased from April to May increased sharply in June as operators begin to position themselves for higher oil prices in 2017," Helms said. "Operators have a significant permit inventory should a return to the drilling price point occur in the next 12 months."

Helms said crude oil takeaway capacity in North Dakota remains dependent on rail deliveries to coastal refineries to remain adequate. "Low oil price associated with lifting of sanctions on Iran and a weaker economy in China are expected to lead to continued low drilling rig count," he said, adding that the utilization rate for rigs capable of drilling more than 20,000 feet is 25-30%, and for shallow well rigs, or for 7,000 feet or less, is 15-20%.

The DMR said five drilling rigs are deployed at the Fort Berthold Indian Reservation (FBIR) in the western part of the state. Production totaled 164,553 b/d from 1,465 active wells. There are 143 wells awaiting completion on the reservation, as well as 539 approved drilling permits and 1,775 additional potential future wells.

The percentage of gas flared statewide increased slightly, to 11.5%, according to the DMR. Captured gas in the statewide Bakken and the non-FBIR Bakken both totaled 90% in May. The daily volume of gas flared from April to May increased 40.6 MMcf/d.

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