In February 2020, crude oil production in North Dakota averaged 1,451,029 bopd (preliminary), up 20,518 bopd from 1,430,511 bopd (revised) in January. This is the 4th highest level of output, behind the high water mark of 1,519,032 bopd in November.
Production is going to drop rapidly. Drop will be at least 20% of current production. I’ll make a not-so-wild guess decline will be a quarter or more (>25%).
Prices have collapsed due to a double black swan. The COVID-19 pandemic has caused a demand side shock.
Latest guess, from someone who has a clue about such issues, on where production is going in North Dakota is somewhere around 1.5M or 1.6M barrels a day late this year or early next year.
Huge finds off coast of Guyana and in New Mexico/Texas.
Question needs to be asked again: What Peak Oil?
The Million Dollar Way – 7/7/19 – ND Oil Production to Surge – Lynn Helms. Citing another source, the article says Lynn Helms, director of DMR, thinks production in North Dakota will surge later this year after gas infrastructure construction is done.
In December 2015, crude oil production in North Dakota dropped from a slightly revised 1,181,786 bopd in November to 1,152,280 bopd in December, for a 2.50% decline.
Completed well count was 76, which is a substantial drop from the 119 to 123 range in July through September. From August 2011 through December 2014 there were anywhere from 180 up to 213 rigs running. During that time, the average rig count was 192, by my calculations.
Fracklog is 945 at the end of December, which is a drop from the count during August through November but is higher than any month before that. This is the estimated tally of wells that have been drilled to total depth but have not yet been fracked & completed. As a result these are wells essentially held in inventory pending a price increase of oil.
The February Director’s Cut report indicated oil prices continue to drop, hitting $16.50 a barrel, yes under 17 bucks in February. The director’s expectation is for low oil prices to continue through the third quarter of 2016 with further drop in number of rigs in operation.
As you would expect with the dramatic drop in prices, exploration & production companies are cutting back operations. Today’s news making that point:
Here are three very different articles on the future of crude oil prices.
One of the memorable things I learned in grad school was the idea that you can’t project the current trend of something into the future forever.
Keep in mind that West Texas Intermediate price was somewhere in the region of $100 a barrel in mid ’14. WTI is now about $26. Let me round off some calculations for simplicity. Let’s call that a current price of $30. Let’s call that a year and a half.
So we see a drop of about $70 in 1.5 years. A straight line projection would calculate out as another $45/bbl in another year. Thus, by 12/31/16 WTI price will be $30 minus $45, or a negative $15. Yes, you read that right. A straight line projection means that oil producers will be paying refineries $15 for every barrel the refiners agree to take off the producer’s hands. Gas prices will consist only of the refining costs, a humongous list of taxes, with an offset for the negative cost of raw material.
You can’t do straight line projections forever.
Here are three superb articles that help me understand what is going on in the world of crude oil…
After the Carnage, Shale Will Rise Again
Helms predicts oil prices to rise again in foreseeable future
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.
Currently a well must be completed, or start producing oil, within a year of the drilling being finished or else. The ‘or else’ is the state gives six months notice to complete and if not done in that cumulative 18-month timeframe, the well must be filled in.
The NDIC just gave drillers permission a total of two years to go from finishing the drilling to starting production.
Production of crude in the state increased to 1,211,180 bopd (prelim) in June from 1,202,615 bopd (final) in May. That is up 8,565 bopd. Only month with higher average production was December 2014 at 1,227,529 bopd.
Keep in mind the goal of the Saudis when they kicked off the price war was to take Bakken production off the table. I don’t think the results above are quite what they had in mind.
The post quotes a correspondent who works for a drilling company and has deep knowledge. This correspondent says the expectation at the beginning of the boom was 3.5% of the original oil in place would be recovered. Industry estimates today suggest the recovery rate is 15-18%. With additional technological developments, the correspondent’s guess is there could be another 5% of the oil recovered.
Get a fresh cup of coffee and journey with me as my little brain processes through what this means.