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North Dakota: 'Slow to No Activity,' But Production Holds

Given a landscape that he described as "slow to no activity," North Dakota's chief oil/natural gas regulator Lynn Helms said Friday he is surprised that oil production dropped less than 1% on a daily basis for the most recent month with complete statistics, February.

Total oil production was 32.4 million bbl (1.11 million b/d) for the month, compared to 34.7 million bbl (1.12 million b/d) in January. Natural gas production on a daily basis was actually up -- 49 Bcf in total, or 1.69 Bcf/d, in February, compared to 50.8 Bcf (1.64 Bcf/d) in the previous month.

"I'd call the February production numbers a pleasant surprise since production was anticipated to drop significantly," said Helms, director of the state Department of Mineral Resources, which includes the oil/gas division. "It dropped only a half-of-one-percent, or about 4,000 b/d, and gas production actually increased 3%."

Helms attributed the statistics to "tighter focus" on only the core area of the Bakken with little or not drilling activity outside of those sweet spot areas concentrated in parts of three or four counties. "It is very noticeable [in the outlying areas], the slow to no activity," he said based on a recent tour he made throughout the Bakken.

The number of uncompleted wells has dropped by 38 and gas capture has risen to 89% with the percentage of flared gas at 11% in February, its lowest level in years. "The over side of the coin is that we have seen more than 700 wells go inactive since December, but the bulk of them are of the conventional variety producing from legacy formations," Helms said.

Even though prices have made a modest recovery in March and early April, permitting has "really slowed down" to a level not seen since 2009, Helms said. March turned up 56 drilling and four seismic permits, compared to a drilling permit total of 370 in October 2012, an all-time high for the state.

With five consecutive days of WTI oil prices above $40/bbl, Helms said there has been "a little improvement" in commodity prices, which for North Dakota sweet crude were at $31.25/bbl on Friday, after averaging $26.62/bbl in March, up from the year's low of $18.07/bbl in February. Nevertheless, Helms predicts "another difficult time for the industry" in the second quarter with the current rig count down to 29 (32 in March) and the possibility of another one to four rigs being idled.

North Dakota's rig count has not been as low as it now is since October 2005; its all-time high was reached at the end of May 2012 when it hit 218. Prices are expected to stay low, Helms said.

Among the largest 15 oil and gas producers operating in North Dakota, only four made money in 4Q2015, according to Helms. The rest all lost money in the quarter. "What we're looking at is a lot of economic stress out there," he said. "And that is why it is becoming really hard on a month-to-month basis to predict what is going to happen to production.

"We would expect at today's prices that production would continue to decline pretty rapidly and uncompleted wells would continue to go up significantly; however, under the economic stresses the companies are experiencing, sometimes they do things to increase the rate of production on core wells to stabilize cash flows." That and mild weather contributed to the February production totals, he said.

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