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N.D. oil output up slightly even as fewer rigs are active in the Bakken

Fewer rigs are drilling for oil, but they are more efficient, helping to keep up production amid low crude prices.

July 11, 2015 at 11:36AM
A derrick hand works on a drilling rig structure near Watford CIty, N.D. in December 2013. North Dakota officials said Friday that oil production was up in May despite a drop in active rigs.
A derrick hand works on a drilling rig structure near Watford CIty, N.D. in December 2013. North Dakota officials said Friday that oil production was up in May despite a drop in active rigs. (Star Tribune/The Minnesota Star Tribune)

North Dakota's oil output recovered slightly in May, rising again to 1.2 million barrels per day, a level that the state's top oil regulator believes is sustainable even as oil prices have dipped again.

"The industry is going to find it pretty easy to stick at the 1.2 million barrels per day mark," Lynn Helms, North Dakota's top oil regulator said Friday as he released May production figures. " … People are hoping that prices increase and we go can go back into a growth mode, but we are capable of sustaining production for a couple of years."

The number of rigs drilling for North Dakota oil fell to 73 this month, the lowest number since November 2006, and down 67 percent from the peak in 2012. More than 14,000 drilling jobs have been lost, he added.

Even so, oil production in May climbed nearly 3 percent over April, though it was still 26,000 barrels per day short of the record set in December. Natural gas output set a record in May as more wells connected to pipelines.

On a conference call with reporters, Helms said several factors are sustaining production even as oil companies slashed drilling budgets. Some drillers, including Slawson Cos. of Wichita, and Houston-based Occidental Petroleum, have at times idled all their rigs, he added.

Those drillers still operating are highly efficient, often able to drill two wells per month, up from two wells every three months in the past, Helms said. Oil companies also have a backlog of 925 drilled wells that operators will need to complete over the next year to meet regulatory deadlines, he said.

When completing wells using hydraulic fracturing, operators are injecting substantially more sand and routinely getting 25 percent greater initial oil output, said Helms, director of the state Department of Mineral Resources.

"It is pretty astounding just how good they have gotten," Helms said of the drillers' pace of boring wells.

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Helms said the oil industry seeing a "double dip" in oil prices. The first dip bottomed out in January with the benchmark West Texas Intermediate crude oil down to $46 per barrel, less than half the price of June 2014. Drillers slashed budgets, and rig counts dropped.

After rising to $60 per barrel in late May, crude has been on the decline again, dropping to $53 this week.

Yet the number of permits for future North Dakota drilling rose 28 percent to 192 in June. Helms said companies appear to be positioning themselves to ramp up drilling when the WTI price reaches $70.

"Companies are still really optimistic about Bakken drilling, it's just a matter of when, not if," he added.

David Shaffer • 612-673-7090 • @ShafferStrib

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