Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Near-term forecast for Bakken production

Out of focus photo by James Ulvog.

Out of focus photo by James Ulvog.

Amy Dalrymple reports comments by Mr. Lynn Helms on what might happen in the Bakken oil patch over the next six months. Her article is at Dickinson Press on 12/9: Low oil prices for some drillers to sell; but new operators the opportunity.

First point in the article, which drives the headline, is a number of operators have sold 710 wells to operators moving into the state. Obviously the prices are based on what crude is going for now, which means these are long-term bets that prices will be substantially higher in a few years. If those bets are correct, the new players will score big. In the meantime cash-pressed operators are selling off peripheral assets so they can stay alive to focus on core assets.

General directions for 2016

General expectation is that oil prices will stay low for at least the first half of 2016.

Mr. Helms said there are 65 rigs drilling in the state on 12/9 and companies say they are expecting the count to drop another 10 in the first half of 2016. That would suggest a count of mid-50s by June or so.

With prices where they are now, Mr. Helms projects state-wide production will drop to something in the range of 1 million bopd. I’m not sure what timeframe that covers, because the comment refers to the two-year budgeting cycle the state uses which runs through June 2017.

Production in October averaged 1.17M bopd, so a drop to exactly 1.0M bopd would be a reduction of about 170,000 barrels a day.

Mr. Helms thinks a number of producers pushed as much production as they could into October and September on the thinking that prices now are higher than they will be over the next six months. Pulling some production into the previous two months instead of several months out will increase the cash flow slightly if that forecast is correct.

That also explains why production in October increased just a smidgen. Also explains one part of why he thinks production will be dropping in the next few months.

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