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After Continental Resources suspended drilling in North Dakota and started shutting in operating wells, now another company has followed: Oasis Petroleum.
Reuters quotes unnamed sources that said the company has started to halt drilling operations in the Bakken shale, which spans North Dakota, Montana, and two Canadian provinces. Within several weeks, the sources told Reuters, all drilling will cease.
The news was only to be expected after Continental—the largest oil producer in North Dakota—started shrinking production. With prices close to historic lows, it was only a matter of time before well shut-ins and frac holidays began.
North Dakota’s oil production has fallen by about 300,000 bpd so far, and counting. Earlier in April, official data from the state’s administration showed a quarter of all oil wells had been shut in, cutting production by some 260,000 bpd. That was before the Continental news came out.
Oasis is a much smaller producer. At the end of 2019, its daily average stood at 87,400 bpd of oil equivalent. In its latest financial report, the company calculated its operating costs at $6.95 per barrel, which was substantially below its earlier guidance. In the current situation, however, it was not low enough.
Oasis also has a substantial debt burden, at over $2.7 billion and Moody’s has already warned that the company might run into debt refinancing problems because of the oil price context.
“While Oasis’ cash flow deteriorates due to low commodity prices, the company will also face increasing debt refinancing risk,” a Moody’s analyst said in a note earlier in April. The agency’s outlook on Oasis is negative, revised from stable.
More production cuts may be on the way in the North Dakota portion of the Bakken: energy regulators from the state have scheduled a meeting for May 20 to discuss whether continuing to produce oil at current prices does not constitute a waste of resources.
WTI traded at $14.34 a barrel at the time of writing.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.