North Dakota oil production fell to just over 1.15 million b/d in December, down 75,203 b/d from a year earlier when state production hit an all-time high, state Department of Mineral Resources data showed Wednesday.
December production fell by 29,507 b/d from November, as prices for North Dakota sweet crude and the number of drilling permits continued to freefall.
Lynn Helms, the state's top oil and gas regulator, called the December data "the first real production decline" the state has seen as producers curtail drilling efforts amid the ongoing price collapse.
While production did decline late last year, those dips were often blamed on flaring restrictions, gas capture goals and new oil conditioning rules. December's drop, it appears, was strictly a function of price, Helms said.
"This looks like it's a real number, based on real activity," he said.
Based on the breakeven prices released by the state Wednesday, only two North Dakota counties, Dunn and McLean, remain economic to drill amid current prices. Dunn, where the state estimates breakeven prices average $22/b, had seven active rigs Wednesday, while McLean, where breakevens average $25/b, had just one.
McKenzie County, which leads the state with 20 active rigs, has an average breakeven of $31/b. The statewide breakeven average is $40/b.
Platts on Tuesday assessed Bakken ex-Clearbook at $30.70/b, down from $49.34/b at the same time a year earlier.
The state uses a combination of WTI spot prices, calculating Bakken at roughly 85% of the WTI price, and pricing from Flint Hills Resources. On Tuesday, Flint Hills estimated North Dakota's sweet crude price at $16.50/b, its lowest price since February 2002.
The statewide rig count held steady at 64 from November to December, but has since dropped significantly to an average of 52 in January, then slid further to land at 40 on Wednesday. The all-time high was 218 in May 2012.
"Operators are now even more committed to running fewer rigs as oil prices remain at very low levels," Helms said. "Oil price weakness is now anticipated to last into at least the third quarter of this year and is the main reason for the continued slowdown."
Helms said with breakeven prices exceeding current crude prices in all but two counties, he expects the rig count to fall by another 10 to 11 rigs in the near term.
Helms said he expects statewide production to remain above 1 million b/d into early 2017, but added that without an increase in prices, it would then fall to about 900,000 b/d by late next year.
He estimated that WTI spot prices need to average roughly $45/b in order for statewide production to stay above 1 million beyond early next year.
"That stimulates enough drilling and enough completions that we don't see the [supply] decline," he said.
There were 95 drilling permits in December, down from 125 in November and the all-time high of 370 in October 2012. Permitting fell to 78 in January, according to the state agency.
"Drilling permit activity declined November to December, then fell further in January as operators continue to position themselves for low 2016 price scenarios," Helms said. "Operators have a significant permit inventory, should a return to the drilling price point occur in the next 12 months."
North Dakota natural gas production fell slightly from November, when production hit a record high of nearly 1.68 Bcf/d, to 1.67 Bcf/d in December.
In addition, the number of producing wells actually climbed from 13,100 in November to 13,119 in December. The high of 13,190 was set in October.
