Mixed with the solid reviews about all-time record highs for monthly natural gas and oil production in North Dakota’s Bakken Shale and Williston Basin region, the director of the state’s Department of Mineral Resources (DMR) sounded words of caution that the drilling boom is showing signs of easing, but not because production has slowed much.
DMR Director Lynn Helms’ comments appeared to contrast the state’s latest production report, which indicated that producing wells at the end of July reached an all-time high (7,467) as did new drilling permits issued (266, plus one seismic).
However, even with “great weather for drilling and hydraulic fracturing [fracking],” Helms said the production increase from June to July was 1.4%, the lowest month-over-month increase since April 2011. A declining rig count — now in the 190-195 range — is one major reason for the slowdown.
“The combined effect of several factors [including the rig count decline] has led to a noticeable slowing of activity and production growth,” said Helms. Operators are transitioning to higher efficiency rigs and implementing cost-cutting programs. “The idle well count increased significantly,” with an estimated 394 wells waiting on fracking services.
With more than 95% of the drilling targeted on the Bakken and Three Forks formations, rapidly rising costs have “consumed” most operators’ capital budgets for the year, he said. This has happened faster than companies anticipated and further hurts future plans given the uncertainty surrounding future federal policies on fracking, he said.
Helms confirmed that daily natural gas production is increasing at a “slightly faster” pace than oil production, something that has already been identified as putting more pressure on the industry to step up the development of takeaway pipeline capacity and processing facilities, as well as the statewide efforts to cut the percentage of associated natural gas that is being flared (see Shale Daily, Sept. 10).
DMR’s latest statistics indicated that the rig count is falling throughout the multi-state Williston Basin, although the rig count in neighboring Montana has been “steady” while the numbers in North Dakota have dropped 11% after reaching a high in May.
The utilization rate for rigs capable of 20,000-foot well depths has fallen to 90%, but for shallow-well rigs drilling to only 7,000 feet the utilization has increase to 60%, according to DMR. Even the steady increase in drilling permits is explained by Helms as tied to the fact that more multi-well pads are being drilled and locations need to be built before the upcoming winter weather sets in (see Shale Daily, Sept. 19).
Production-wise, the state’s all-time record numbers for gas and oil continued to flow: 22.2 Bcf of gas (718.7 MMcf/d) in July, compared to 20.9 Bcf (699.9 MMcf/d) in June. Crude oil production reached 20.8 million bbl (674,000 b/d) in July, versus 19.9 million bbl (664,618 b/d) in June. Sweet crude prices were down slightly in July month-to-month ($71.13/bbl versus $72.58/bbl in June), but have ramped back up to $85.75/bbl, Helms said.
Gas delivered to Northern Border Pipeline at Watford City rose in July to $2.50/Mcf, Helms said. “This indicates the gas-oil ratios may be increasing and more gathering and processing capacity will be needed. Processing plant and pipeline gathering system construction is “in full swing. U.S. natural gas storage has dropped to 9% above the five-year average, but this still indicates low prices for the foreseeable future.”
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