North Dakota's oil production fell about 20,400 b/d month on month in June to 1.026 million b/d, and output is expected to fall below 1 million b/d "pretty soon," likely before year-end, the state's top oil and gas regulator said on Friday.
And once that happens, production could linger at a level around 900,000 b/d for more than a year, Lynn Helms, the director of oil and gas for North Dakota's Department of Mineral Resources, said during the state's monthly production webinar.
Helms said oil companies have been restricting or shutting in production, especially recently due to the most recent drop in WTI oil prices to the low $40/b. Oil had been in the high $40s/b from mid-May to early July and even briefly climbed higher than $50/b in June.
"Operators are frustrated, not wanting to liquidate their [best] assets," Helms said. "In the month of August, I'm hearing there's some pretty significant shut-in or restricted production."
June crude production represents a drop of 2% from May's 1.047 million b/d and the lowest volume seen since April 2014.
The current industry downturn that has seen 20 months of low oil prices has caused many oil companies that produce from shale and unconventional plays around the US to high-grade their portfolios and focus on producing their best acreage and wells.
But according to Helms, some operators in North Dakota's Bakken Shale -- a giant oil field which accounts for about 95% of the state's oil output -- appear reluctant to do that.
North Dakota's all-time production peak was in December 2014 at 1.227 million b/d.
Helms noted that the number of drilling rigs in the state has come off a low on May of 27 and averaged 28 in June and 31 for July. On Friday, the North Dakota rig count was 34, versus an all-time high of 218 in late May 2012, figures released on Friday by the DMR showed.
But while the rig count is increasing, part of the expected continuing decrease in North Dakota production stems from operators drilling but not completing wells, Helms said.
North Dakota is "30-40 completions shy" of the number needed to maintain production, he said, adding that 70-80 completions a month are required to maintain production and 80-plus/month to grow production.
The estimated number of state wells awaiting completion at the end of June was 887, down 44 from the end of May, state figures showed.
"We're not completing enough wells to maintain production," he said, adding operators are "close to drilling enough."
Drilled but uncompleted wells -- popularly known as DUCs -- are wells that many operators have purposely left unfinished during the downturn, unwilling to produce their best wells into a low-priced oil market.
Meanwhile, new second-quarter breakeven prices released by North Dakota show at least one of the state's most productive counties, Dunn, now able to produce a barrel of oil for $16/b WTI, lower than the $22/b required in Q1.
Elsewhere in prolific Bakken Shale areas, breakeven prices were $23/b for Williams County and $24/b for McKenzie County, both were previously $30/b, and $29/b for Stark County, which was previously $33/b.
Well depths vary "quite a bit" across the Bakken, with Dunn and McKenzie wells deep and "much more" expensive, Helms said.
"It's a bit of a surprise that they have the lowest ... breakeven costs," he said. "But they also have the highest productivity."
As the state's oil production dropped in June, North Dakota gas output rose by about 18,500 Mcf/d to 1.662 Bcf/d, or 1.1% according to the latest state figures.
"The core part of the Bakken, where economics are still robust, is very gassy, and a lot of gas is produced with the oil," Helms said.
