CHICAGO, April 3 (UPI) -- The rig count in North Dakota continues to decline and the economic health of cities depending on the oil industry may start to suffer, credit analysis finds.
State data show 94 rigs actively exploring for or producing oil and natural gas. That's down 2 percent since the start of the week and a reflection of spending cuts enacted by energy companies reacting to the low price of oil.
State-wide, analysis from Standards & Poor's finds the North Dakota economy will be able to cope with a depressed energy sector. For cities and counties in the oil-rich parts of the state, the slowdown could result in decreased revenues during the second half of 2015 and early 2016.
"Oil-industry activity in North Dakota fuels direct and indirect taxes, such as sales, income, and property taxes," credit analyst Carol Spain said in an emailed statement from Chicago. "A decline in industry activity could contribute to a decline in state taxes, but likely the impact would be greater for local governments whose economies are concentrated in the oil industry."
North Dakota's economy is growing at a faster rate than any other state in the nation, with real gross domestic product growth of 9.7 percent reported for 2013 by the U.S. Department of Commerce. Gov. Jack Dalrymple, in his State of the State Address early this year, recognized the potential impacts of the oil market downturn for his state, but held out expectations for a correction.
The state in its latest forecast expects to take $8.3 billion in tax revenue from oil and gas for 2015-17. That forecast assumed oil prices in the $74-82 per barrel range. West Texas Intermediate crude oil last traded at $49.55 per barrel.
S&P said there's been no evidence of a sub-state economic slowdown in North Dakota, but because the oil economy is relatively new, many cities will face challenges navigating through a weak commodities market.