Oil and natural gas production in North Dakota rebounded in June, with both commodities reaching new output highs in the state.
June crude production reached 1.42 million b/d, up by roughly 2% from May production volumes and up by 16% year/year.
Gas production, the vast majority of which is associated with crude production, reached 2.88 Bcf/d, also up by 2% on the month and up by 25% on the year.
North Dakota added one rig during June, bringing the total rig count to 61. The new rig was added on the Fort Berthold Reservation, a production hotbed where gathering infrastructure is particularly tight.
The jump in production coincided with a drop in breakeven prices by $1-2/bbl in the month, leaving the general breakeven price at $12/bbl for the state, excluding Burke County where it’s a bit higher, said Department of Mineral Resources (DMR) director Lynn Helms. The improved breakeven price stems from the transition to upgraded completion technology, referred to as generation four and five, which resulted in a 30-70% increase in initial production rates.
Operators produced record output despite voluntary curtailments amounting to roughly 53,000 b/d. The production caps were a response to gas pipeline and gas processing plant maintenance that was unexpected, limiting gas capture capacity.
The North Dakota Industrial Commission sets statewide gas capture targets over time, with the current target at 88%. If producers see the potential to miss that target, they might rein in their crude oil output to reduce flaring volumes from associated gas production.
Statewide gas capture performance in June rang it at 76%, down from 81% in May, thanks in large part to the extended maintenance issues on Alliance Pipeline and at multiple processing plants.
If operators miss targets, the commission may mandate involuntary production limits for individual producers. Based on June’s flaring volumes, there are 13 operators in the state that could see production caps going forward, said Helms. The June plant and pipeline maintenance would give operators some leeway as the state would factor in force majeure issues when analyzing gas capture data, he said.
Self-restricted oil and gas production, as well as state-mandated restrictions, should ease at the end of the year as Tulsa-based Oneok Inc.’s Elk Creek natural gas liquids (NGL) pipeline comes online in late December, Helms said. The NGL pipeline should be at full capacity by January.
In addition, as operators move out of the traditional production core in North Dakota, thanks to the new completion technology, the oil-to-gas ratio improves, which means operators can produce more crude without producing more gas, said Helms.