More good stuff on the Bakken – 5/27

Here’s a few quick notes on interesting news from the North Dakota oil fields:

Rig counts actually going up –

5/20 – Million Dollar Way – Another Post-Boom Low — 80 Active Rigs; Eleven (11) New Permits; Slawson Proposing A 11-Well Pad In Big Bend Oil Field  – 80 rigs

5/22 – Million Dollar Way – Eleven (11) New Permits – Count of rigs is up to 82.

5/26 – Million Dollar Way – Five (5) New Permits – Rig count up to 84.

I wonder if the drilling is now in a plateau. A few more articles on point:

5/20 – Bismarck Tribune – Declining rig count leveling off – Guesses are the rig count has bottomed out and will plateau around the current level. Mr. Lynn Helms is hearing from drillers that they will start catching up on the ‘fracklog’ when prices clear $65 and rigs would return at $70.

5/22 – Wall Street Journal – Oil-Rig Count Decline Continues Moderating – Count of rigs in the US dropped by only 1 last week. Article suggests the rate of decline is slowing.

5/22 – KFYR-TV – Williston Rent Prices Drop Along with Price of Oil – An unnamed and uncited person in city government says average rents for a one-bedroom apartment at 800 ft.² was $1,400 a year ago and has dropped to $1,100 today.

Article says what I observed in town two weeks ago: a huge amount of apartments will be available soon.

Why is that stat offered by the city showing only a 21% drop instead of a complete collapse?

Go back to supply and demand. The number of people in Williston who need housing has probably dropped dramatically. That reduces demand.

At the same time a number of man camps are being closed. That reduces supply.

Pull the demand curve dramatically to the left and prices will drop tremendously. Pull the supply curve dramatically to the left and there will be an upward pressure on prices.  At the moment the net effect is a significant, but not massive, drop in prices.

Into the future keep in mind a huge amount of man camp space will be removed and a lot of apartments will come online. While the net effect be? I don’t know, but will guess some additional drop in prices but not back to what it was before the boom. We will see.

5/22 – Shale Plays Media – Fighting low oil prices with innovation – Lots of new techniques and cost reductions to come into play. CEO of Total says most operators had a breakeven price of about $75 per barrel a year ago. He thinks most operators see breakeven now at $60, and could drop to around $50 soon.

Some operators are installing systems that allow pumps to turn off and on instead of running 24 hours a day. Statoil has reduced fuel consumption by 20%. That also slows down repair and maintenance costs.

Article also mentions walking rigs to drill multiple wells on a pad, experimentation in composition of the fracking fluid, and enhanced recovery with liquefied CO2.

Also mentioned is the “oil factory” from Liberty.

All of these innovations are things the OPEC oil ministers were not quite counting on when they decided to kick off the price war.

As Prof. Perry at Carpe Diem has often said, betting against American innovation is not a smart play.

5/24 – AP at Bakken.Com – Cleanup of oil spill at ND farm to take 2 more years – A huge leak north of Tioga is expected to take another two years to fully clean up, for total of about four years. Most comments I’ve seen indicate the leak was about 20,600 barrels.

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