North Dakota sees $45 per barrel as a threshold for production

By Daniel J. Graeber  |  June 14, 2017 at 6:24 AM
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June 14 (UPI) -- Though oil production in shale-rich North Dakota has improved, the sector could stall out if crude oil prices stay lower for longer, a state director said.

The North Dakota Industrial Commission reported the preliminary crude oil production rate in April, the last full month for which it published data, was 1.04 million barrels per day, an increase of nearly 3 percent from the previous month.

More than 95 of the state's total oil production came from the Bakken and Three Forks shale reservoir, which spills over state borders to surrounding areas.

Shale oil production has been more resilient to lower crude oil prices than previously estimated as operators improve efficiency. The state reported a break-even price during the first quarter at $24 per barrel on average, though an April review from pricing group S&P Global Platts found that average may be from wells already completed. Platts reported that break-even prices referenced by the state may reflect a level needed to maintain operations rather than a point at which operators are making money.

NDIC Director Lynn Helms said the rig count in the state was 55, up from the average of 50 reported in May. Rig counts serve as a loose indicator for the appetite for spending in the exploration and production side of the sector and Helms said operators in North Dakota have changed their mindset from one of conservation to one of potentially incremental increases.

The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was around $46 per barrel in early Wednesday trading, compared with an April average of around $50 per barrel. Helms said weakness in crude oil prices could stretch into the third quarter.

"If WTI drops below $45 per barrel for more than 30 days, the rig count is expected to drop," he said in a monthly report.

The all-time high North Dakota rig count was 218, reported in late May 2012. Efficiencies aside, WTI was near $88 per barrel at the time.

Helms added the number of wells actually completed in April declined from the previous month. The average rig count per month was unchanged at 50 from April to May.

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