BISMARCK – Oil companies have drilled one-sixth of the potential Bakken and Three Forks wells in North Dakota, exceeding 10,000 wells in the shale formations for the first time in June.
The state’s oil production rose slightly in June to more than 1.2 million barrels per day, the second-highest production month behind only last December, the Department of Mineral Resources said Friday.
The nearly 1 percent increase in oil production was driven by companies that were aggressive in fracking and completing oil wells in June, Director Lynn Helms said.
Crews completed 149 wells in June, up from 116 in May, according to preliminary figures. An estimated 848 wells were drilled but waiting on fracking crews at the end of June.
North Dakota had 12,864 producing oil wells at the end of June, with 10,113 of those wells in the Bakken and Three Forks formations, preliminary figures show.
That amounts to about one-sixth of the drilling potential in the Bakken based on what we know today, Helms said.
Since drilling activity began to drop in December due to lower oil prices, North Dakota has maintained oil production, in part because operators have found ways to cut costs.
Helms said the current number of active drilling rigs – 74 on Friday – and the inventory of wells that needs to be completed is sufficient to maintain production of 1.2 million barrels per day for 24 months.
“We think that we’re in a period of sustained low prices. It could last two years,” Helms said. “The capacity is there to maintain North Dakota production for a full two years even at these sustained low prices. It’s going to be a long, difficult period.”
In June and July, the department saw a surge in drilling permit applications with operators optimistic about oil prices, Helms said.
But that optimism has faded so far this month, and the price for North Dakota sweet crude, which Helms quoted at $28.50 on Friday, is “real cause for concern,” he said.
If prices stay this low, Helms said he anticipates activity to slow even more.
“Those kinds of numbers can’t last,” he said.
North Dakota’s oil revenue exceeded the budget forecast for June and likely will for July, Helms said. But the state’s oil revenue will likely fall below what was forecasted for August, with prices for Bakken crude about 12 percent below what the state projected in its budget, he said.
“We’re going to end the biennium on a real positive, but that’s fading,” Helms said.
Natural gas production increased 1.2 percent to 1.65 billion cubic feet per day, a new all-time high, preliminary figures show. The percentage of gas flared decreased from 18 percent to 17 percent.
The state saw a shift in the percentage of crude oil hauled by rail in June, falling from 52 percent in May to 47 percent in June, said Justin Kringstad, director of the North Dakota Pipeline Authority.
Between 600,000 and 630,000 barrels per day were transported by rail in May and June, the lowest since mid-2013, according to Kringstad’s figures. The state saw a peak in crude-by-rail volumes last December, with an estimated 817,000 to 847,000 that traveled by rail that month.
Kringstad attributes the drop in rail transportation to a shift in market prices plus the addition of the Double H Pipeline and the Dakota Prairie Refinery that together take up about 100,000 barrels per day.
Most oil trains that left North Dakota in May went to either the East Coast, which received about 59 percent of the oil shipments, or the West Coast, which received 21 percent, Kringstad said, using information from the Energy Information Administration.
North Dakota oil production
1st barrel of oil produced in April 1951
1 billionth barrel of oil produced in October 1989
2 billionth barrel of oil produced in November 2011
3 billionth barrel of oil produced in January 2015
4 billionth barrel of oil projected in 2018
Source: Department of Mineral Resources