Houston — North Dakota oil production dropped nearly 2% in June to 1,225,510 b/d from its all-time high set just the month before, the head of the state's oil and gas division said Thursday.
The fall was caused by scaled-back well production to comply with stringent state gas flaring measures, and also by strong rain during the month.
Rainy weather, especially on three consecutive days, resulted in the four largest producing counties - Dunn, Mountrail, Williams and McKenzie - shutting down traffic on some roads, director Lynn Helms said during the state's monthly press conference on state production.
"Industry in June was tapping the brakes" because of flaring, Helms said. "One significant operator in McKenzie County ... had 20,000 b/d [of oil] shut in for two or three days as a result of the load restrictions on the wet roads."
July was also moderately rainy, so "we might see some of these hiccups" in next month's production statistics, said Helms. Each month's statistics are released two months later.
Restrictions associated with gas flaring accounted for 11,500 b/d of the nearly 21,000 b/d of total oil production decrease, Helms said. The rest was weather-related.
The flaring issue also accounts for a lower current rig count than in June, when it averaged 63, he said. The rig count rose in July to 66 but on Thursday was 58. The all-time high was 218 in May 2012.
RECORD NUMBER OF WELLS PRODUCING IN JUNE
North Dakota's gas flaring rules call for reducing the percentage of flaring from 15% currently to 12% by November 1, which has caused some operators to begin preparing by restricting individual well production even though a record number of wells were producing in June -14,778 compared with 14,763 in May.
Wells drilled in the play were trending up earlier this year. In the first half of 2018, 597 Bakken wells were drilled, compared with 1,035 in all of 2017, according to S&P Global Platts Analytics.
However, those figures are nowhere near the 2,359 wells drilled in 2013, and 2802 wells in 2014 when the play was growing at over 20% per year. In 2014, output growth was 29% even as oil prices plummeted nearly 50% from mid-2014 to year-end.
Total production from the Williston Basin, of which Bakken Shale accounts for a percentage approaching 100%, is currently 1.319 million b/d of oil, including around 40,000 b/d from Montana, according to Platts projections.
While Montana production should be about flat for the next five years, the Williston's North Dakota oil production should rise to 1.681 million b/d by the end of 2023, Platts figures show.
Reasons are not difficult to find. US oil prices near $70/b that this year have increased far past the roughly $50/b "stuck point" in 2015-2017 and supported well economics and increased activity in the play, coupled with increasing and more intense well completions, have pushed up crude yields, oil executives said in second-quarter earnings calls in August.
For example, Marathon Oil grew its Bakken crude production 14% sequentially to 69,000 b/d, boosted in part by two new wells in its West Myrmidon field -- Mamie and Winona -- that set new basin oil records for the Three Forks formation, CEO Lee Tillman said. The wells' average initial production over 30 days averaged over 3,000 b/d of oil each.
'HALO OF OPPORTUNITY' IN RIGHT OIL WELL COMPLETIONS: WHITING
Whiting Petroleum has found its path to unlocking Bakken value in applying superior well completions to untapped areas. In July, the company closed a 55,000 net acre acquisition in North Dakota's McKenzie County that has not had modern well completions of a type Whiting is applying to its own fields.
"There is a halo of opportunity ... around the core where significant value can be unlocked through application of proprietary completion methods," Whiting CEO Brad Holly said.
A Q2 presentation slide shows Whiting boosted the volume of cumulative production over 90 days by about 20,000 barrels over offset wells through proprietary sophisticated well completion methods that are less costly.
Based on Whiting's detailed geologic mapping, "we see substantial oil in place across a large area of the Bakken," Holly said. "It's incumbent upon us to apply the right completion technique to ... get it out."
Operators are also stepping up Bakken activity. Hess Corporation added a fifth rig to what had been a four-rig program in the play earlier in the year, where its Q2 production was 114,000 boe/d. A sixth rig will be added around October.
Continental Resources' Bakken Shale wells earn return rates of more than 150%, company CEO Harold Hamm said, adding that the play "will contribute to a wave of new [company] oil production beginning in the third quarter and growing second-half 2018 and full-year 2019 production numbers for both production and oil."
In Q2 the company drilled its most successful Bakken well yet, Mountain Gap 7-10H, which came online with 3,104 boe/d of output. The company produced 158,119 boe/d from the play in that period.
In addition, "[Continental has] additional opportunities for our high-grade and quality crude oil to access the waterborne export market as additional large capacity pipelines are available to deliver oil to the Gulf for export," Hamm said.
