Another gas production record
North Dakota’s State Industrial Commission has released new production stats for the month of March 2018.
Oil production reached 36,024,209 barrels in March, or 1,162,071 BPD (preliminary). The report said that 95% (1,106,836 BPD) of production came from the Bakken/Three Forks, with the remaining 5% (55,235 BPD) from legacy conventional pools.
Gas production reached an all-time high once again with 65,605,128 Mcf, or 2,116,294 Mcf/d, produced in the third month of 2018. Producing wells also broke last month’s record, with 14,457 wells online (preliminary). Most of these wells, 87% or 12,627, are unconventional Bakken/Three Forks wells. Legacy conventional pools make up for the remaining 13%, or 1,830 wells.
About 108 drilling permits were issued in March, with a rig count of 59. April had 104 drilling and three seismic permits, with 60 rigs. North Dakota’s sweet crude price has been on a steady uptick, with March at $50.90/barrel, April at $55.02/barrel and at the time of this article, $59.25/barrel.
Commentary
- Over 99% of drilling now targets the Bakken and Three Forks formations
- Estimated wells waiting on completion is 916, up 15 from the end of February to the end of March
- Estimated inactive well count is 1,653, down 1 from the end of February to the end of March
- Crude oil take-away capacity including rail deliveries to coastal refineries is more than adequate
The drilling rig count was up two from February to March then increased one from March to April, and is currently unchanged from April to today. Operators have shifted from running the minimum number of rigs to incremental increases and decreases as WTI oil price moves between $45 and $60/barrel.
WTI would have to drop below $45/barrel for more than 30 days for rig count to drop, the NDIC said.
WTI has remained above $55/barrel for more than 90 days so rig count is expected to continue increasing. Current operator plans are to add 5-10 rigs in the second and third quarters of 2018 depending on workforce and infrastructure constraints.
The number of well completions has stabilized primarily due to weather at 65 (final) in January, 67 (final) in February and 65 (preliminary) in March.
Price downside risk diminished by Venezuela production collapse and return of Iran sanctions
Oil price downside risk has diminished. OPEC is discussing how to manage production cuts through late 2018 as Venezuela’s exports collapse and the U.S. imposes sanctions on Iran. Crude oil futures markets appear to anticipate supply and demand remaining in balance through OPEC production cuts and US shale production growth. US crude oil inventories are now approximately equal to the long-term average.
In March there were two significant precipitation events, nine days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F.
Oil price associated with competition with the Permian and Anadarko shale oil plays continue to limit drilling rig count. Utilization rate for rigs capable of 20,000+ feet is 40-50% and for shallow well rigs (7,000 feet or less) 25-30%.
Drilling permit activity increased from February to March then decreased slightly from March to April, which is normal for this time of year. Operators continue to maintain a permit inventory that will accommodate variable price points for the next 12 months.
