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North-Dakota Production Creeps Up In Spite Of Lower U.S Oil Output

The Bakken Production Statistics and the ND Production Statistics with June production numbers has been published.

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Bakken production was up by 10,887 barrels per day to 1,152,455 BPD while all North Dakota production was up by 8,565 barrels per day to 1,211,180 BPD. Bakken production is still 11,068 bpd below their December high while all North Dakota production is still 17,240 bpd below their December high.

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Bakken barrels per day per well dropped by 2 to 116 and all North Dakota barrels per day per well dropped by 1 to 97.

From the Director’s Cut, bold mine.

May Producing Wells = 12,679
June Producing Wells = 12,864 (preliminary)(NEW all-time high)
May Permitting: 150 drilling and 0 seismic
June Permitting: 192 drilling and 0 seismic
July Permitting: 233 drilling and 1 seismic (all time high was 370 in 10/2012)
May Sweet Crude Price = $44.70/barrel
June Sweet Crude Price = $47.73/barrel
July Sweet Crude Price = $39.41/barrel
Today’s Sweet Crude Price1 = $28.50/barrel (lowest since December 2008)(all-time high was $136.29 7/3/2008)

May rig count 83
June rig count 78

The drilling rig count dropped 5 from May to June, 5 more from June to July, and remains unchanged this month. Operators are now committed to running fewer rigs than their planned 2015 minimum as drill times and efficiencies continue to improve and oil prices continue to fall. This has resulted in a current active drilling rig count that remains 5 to 10 rigs below what was operators indicated would be their 2015 average if oil price remained below $65/barrel.

Related: The “Thin Green Line” Holding Back U.S. Energy Exports

The number of well completions rose sharply from 116(final) in May to 149(preliminary) in June as a large number of NC status wells reached the 1 year deadline for completion, or TA approval. Renewed oil price weakness anticipated to last well into next year is by far the main reason for the continued slow-down. There was one significant precipitation event in the Williston area and a separate one in the Minot area, 5 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F.

At the end of June there were an estimated 848 wells waiting on completion services, 60 less than at the end of May. The current rig count plus NC well inventory is sufficient to maintain 1.2 million barrels of oil per day for 24 months.

This does not jive with the EIA’s latest predictions for US production through 2016, data below.

The EIA’s Short Term Energy Outlook came out a few days ago. There was one big surprise.

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The EIA has, quite dramatically, downgraded its future US production expectations. The average C+C production, for the of 2015, had been revised downward by only 120,000 bpd but the average production for 2016 has been revised down by 360,000 bpd. The largest change, in future expectations, was December 2016 which has been revised down by 430,000 barrels per day.

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The EIA predicts the decline continues through the third quarter of 2016 then production will start to surge upward again. I have no idea why they think this will happen as they are expecting no such increase in the price of oil.

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The EIA does not think 2015 will be the peak as far as non-OPEC total liquids are concerned. They have 2014 non-OPEC total liquids averaging 58.38 million barrels per day and have 2016 total liquids averaging 58.48 million barrels per day. Well that’s this month’s projection anyway.

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This chart is Total Liquids, not C+C like the two charts above it. While the EIA lowered its 2016 average US C+C expectations by 360,000 bpd they only lowered their Total Liquids averaged expected production by 330,000 bpd. But that does not mean they lowered World or Non-OPEC Total Liquids or by the same amount.

The above chart shows all changes in the EIA’s Total Liquids predictions from the July STEO to the August STEO. Only the nations in the chart above had any changes July to August. They increased their Total Liquids prediction for Mexico and Russia by 100,000 each and decreased their total Non-OPEC Total Liquids prediction by 70,000.

All this just shows that the EIA can, rather dramatically, change their outlook for oil production, for any nation, from month to month. Who knows what their outlook next month might look like?

My point is not to knock the EIA for their changing predictions but to point out that we should not put too much value in them because they are mostly just wild guesses, subject to change from month to month.

Related: PV Solar Could Have Some Serious Competition

All the following text and graphs were posted by Enno Peters:

I have updated several charts, and will mostly let them speak for themselves.

(Click to enlarge)

Lynn Helms mentioned during the last webinar that wells starting in May 2015 produced about 25% better than wells starting in May 2014. I can’t find support for this in the data:

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The most important improvement during the last years was a (slight) increase in initial production, while production after a year of operation is trending remarkably similar with earlier years.

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In the following graph we can see the average production for new wells, for the full calendar month (as no accurate information is available regarding the number of producing days). The blue line shows the average production during the 1st month of production, while the green line shows the average production during the first 3 months of production. This graph shows more clearly that 2014 wells produce initially a bit more than 2013 wells, but from 2014 onwards there has been no significant improvement any further. This is surprising, as some high grading effects since the price drop should be visible by now.


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The following chart shows the new number of well spuds (red), and wells starting production (green), per month. Also the average rig count per month is shown (purple), which tracks well with the number of wells spud. Only recently the number of new wells spud per rig is going up, probably because better rigs/crews are still working, and because of improved operations due to fewer rigs. The blue line tracks the wells that are spudded, but not yet producing (=uncompleted wells). Maybe not all of these spudded wells will be completed, but so far their status does not indicate otherwise. This uncompleted well inventory includes normally a working inventory of about 4-5 times the wells spudded in a month (the typical lead time from spud to production). Therefore, I estimate that about 450-550 wells from this inventory are in excess of a normal inventory, and may have to come on line in the coming year.

Related: August Is Unlikely To See A Recovery In Oil Prices

Note : the completion numbers from the Director’s cut are highly unreliable, as can be seen by comparing them from the Director’s cut with the numbers from the annual statistics report. A much more reliable way is to use the number of wells having first production, which historically (comparing them with the annual statistics reports) also tracks the actual completed wells very closely.

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The following graph shows the monthly contribution to the overall oil production in ND from new wells (growth during first 2 months of production), and the decline in older wells (> 2 months). The difference is the monthly growth/decline in total ND oil output. A small difference with the actual numbers is caused by service wells and wells not individually reported. What this chart shows is that after May (in which there was quite a large growth in production ), the growth in June has almost stopped, due to less growth from new wells, and more decline from old wells.

(Click to enlarge)

The following graph shows that oil production from the Middle Bakken formation peaked in December. I belief it is likely that this will proof to be the final peak, as the absolute number of new Middle Bakken wells already peaked in 2012, and recently the ratio of Three Forks wells vs Middle Bakken wells is going up. This is important as, historically, Three Forks wells produced on average about 15% less than Middle Bakken wells, and the Middle Bakken formation has been the major driver behind ND production so far.

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Finally, a projection of what kind of oil production can be expected from North Dakota, based on 4 different scenarios, shown by the number of new wells per month, from July onwards until end of next year. Currently about 100 wells are spudded per month, and in the current price environment I find it hard to belief that wells are drilled without plans to complete them. This number may drop, but there is still an inventory of not completed wells. Therefore, I think the most likely projection is between the green and blue line, at least for the coming 6 months, which means that by year end ND should produce between 1.1 and 1.2 million bpd.

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By Ron Patterson

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