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Bakken Breakevens Improving, But Permian Tough to Beat, North Dakota's Helms Says

North Dakota faces increasingly stiff competition for investment capital from the burgeoning exploration/production activity in West Texas unfolding in the Permian Basin, according to North Dakota's chief oil/natural gas regulator, Lynn Helms.

Speaking on a monthly webinar to report the state's latest oil/gas production statistics, Helms identified competition with the Permian as the latest in a series of economic and regulatory hurdles that are causing Bakken producers to hold off greatly ramping up production next year. He now thinks the big push may be put off until 2018.

"Like it has since the 1930s, the Permian appears to be the best place in the U.S. to produce oil," said Helms, director of the state Department of Mineral Resources.

Breakeven price points have become more favorable in nearly all of the Bakken producing counties, prompting a prediction that a dozen rigs will be added to the state's current 38 next year, Helms said.

"That's great news on the break-evens, but the unfortunate thing is that those price levels are now competing with not just the Eagle Ford, but also with SCOOP/STACK (Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, and South Central Oklahoma Oil Province) and the Permian Basin." He said North Dakota is going to continue to compete with the Permian seriously for capital and infrastructure investment.

Helms characterized the prospects for next year as "slow growth," even with the expected 12 additional drilling rigs. "We really don't know what 2018 holds, but if OPEC's projection is accurate that global prices only rise by $5/bbl next year, there won't be a lot of rigs added in 2018," he said.

On the improvement in break-even prices, Helms called out one county, Dunn, for "rising to the top" with help from the recent additions of gas processing and gathering infrastructure. That allowed ConocoPhillips and XTO crews to start a new high-volume, slickwater hydraulic fracturing (fracking) rig with what Helms described as 40 to 50 stages.

"Those rig results were fantastic with the wells coming in at 200-300 b/d better than other county wells, and they have a lower gas load ratio, so the Dunn County economics were given a real boost," Helms said.

Prospects under the President-elect Trump's administration are likely to be another stimulus to production, but that is counterproductive to prices being increased, according to Helms who noted that to get sustained $60/bbl prices U.S. oil production needs to drop by 1.5 million b/d. "We're not likely to see a million-and-a-half drop in production with 5,000 uncompleted wells in the U.S. inventory and the new administration committed to making it easier to drill and frack new wells."

New pipelines, such as Dakota Access, will also help stimulate production, but all of that will tend to keep prices down, so Helms is convinced the nation is facing a situation he calls "lower for longer" time periods in terms of commodity prices.

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