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.

Bakken entering ‘manufacturing’ stage? Also, count of oil rigs in field.

Out of focus photo by James Ulvog (yeah, yeah, don't give up my day job)

Out of focus photo of drilling rig and four not-yet-in-production wells by James Ulvog (yeah, yeah, I know – don’t give up my day job.)

Bruce Oksol wonders whether Bakken  oil production is entering the manufacturing phase after a frantic construction phase.

2/3 – The Million Dollar Way – Idle Chatter on DUCs and Related Data Points – Before a big factory or electrical plant or other major project begins production there is a massive construction effort. The number of jobs to run the facility is a fraction of the number of workers needed to construct the thing. When completed, the number of jobs at the facility drops off.

Mr. Oksol uses the illustration of a natural gas plant being built. During construction there will be around 2,000 temporary jobs. When that gas is turned into electricity, the plant will employ 45. That’s 2,000 temporary and 45 permanent jobs.

He wonders if Bakken is like that, having finished the ‘construction’ and now moving into manufacturing.

At the start of the Bakken oil rush, there the rig count grew to 200 more or less with a huge number of crews and a huge amount of construction getting the infrastructure in place to handle all the oil flow. Picture building out gathering pipelines, storage facilities, transloading to rail, improving the rails, housing construction, new sewage treatment plant in Williston, new gas processing in Tioga, etc. etc. All the land is now held by production so there isn’t the urgency to get every section drilled right now.

Now the underlying infrastructure is in place. Sky-high oil prices don’t support 200 rigs. So perhaps Bakken is now in manufacturing.

Perhaps 35 or 45 rigs will maintain a plateau of production. Probably lower than the output today, but perhaps 35 or 45 rigs could maintain a new plateau of production that can be sustained for 30 years.

Maybe. Just maybe, we see the Bakken shifting into the manufacturing stage.

If so, here is what the downshift from construction phase to manufacturing phase looks like in terms of rig count:

Rig count

Here is a recap of the North Dakota rig count, all from Million Dollar Way unless otherwise noted. Some older data repeated for context:

  • 184 – 2/4/13
  • 190 – 2/4/14
  • 140 – 2/4/15
  • 93 – 4/17/15
  • 82 – 6/5
  • 73 – 7/9
  • 74 – 8/20
  • 71 – 9/15
  • 69 – 10/22
  • 65 – 11/23

Public comment back in early December:  Lynn Helms thinks the count will drop another 10 in first half of 2016.

  • 64 – 12/18
  • 65 – 12/23
  • 61 – 12/30/15
  • 58 – 1/5/16 – rig count breaches into the 50s
  • 54 – 1/7 – Mr. Helms estimate of mid-50s proved true in first week of January.
  • 51 – 1/13
  • 49 – 1/14 – Wow, that was a fast trip through the 50s
  • 49 – 1/20, per speech given by Mr. Helms

1/20 – Mr. Helms thinks that if prices stay at the $25 range, rig count will drop to 30.

  • 47 – 1/21
  • 47 – 1/27
  • 45 – 1/29
  • 44 – 2/4/16

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