While harsh winter weather smacked North Dakota in January, causing a 4.2 percent drop in its daily oil production, the state’s drilling rig count has been inching upwards. As of March 15, 188 rigs were operating in the state. North Dakota’s top oil official, Lynn Helms, says if the rig count stays around that level, production should exceed the 850,000 barrels of oil per day projected by the state for the biennium.
North Dakota’s rig count in February was 183, down two from the 185 rigs that were operating in January and down one from the 184 operating in December. However, the rig count has been increasing in March.
The record high rig count is 218 which was the number of rigs operating in North Dakota on May 29, 2012.
In February, the North Dakota Oil and Gas Division issued 185 drilling permits, down from the 218 that were issued in January but up from the 154 that were issued in December.
The record high number of drilling permits issued by the division was the 370 issued in October 2012.
Winter weather smacks January crude productionTwo winter weather events hit North Dakota in January which dropped the state’s average daily oil production for the month. Winter storm Gandolf in early January, followed by a sub-zero cold snap at the end of the month, resulted in a 4.2 percent drop in average daily oil production from the state’s December 2012 record high production.
The January decline that followed December’s record high came on the heels of the exact same situation that occurred when November’s production fell following record high production in October. The November drop in production was the first decline in North Dakota production in 19 months.
That pattern may not be over.
In a March 15 Director’s Cut press conference Lynn Helms, director of the North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division, said alternating good and bad weather conditions, coupled with upcoming road restrictions as spring breakup approaches, will result in a “sawtooth” patter of monthly oil production, up one month and down the next throughout the spring.
However, once into summer Helms believes production will get back on a trend of month-over-month increases, and believes average daily production is still on track to eventually reach the 850,000 bopd level that the state is using for its 2013-15 revenue projections.
January production numbersPreliminary data released the week of March 11 by the Oil and Gas Division indicate that by the end of January, North Dakota’s oil production was 738,022 barrels of oil per day, a decline of 32,089 bopd day from the record high of 770,111 bopd day in December.
Natural gas production fell in January to 793 million cubic feet per day, a 3.0 percent decrease from December’s production of 818 million cfpd.
All totaled, North Dakota produced 22.9 million barrels of oil in January compared to the 23.9 million barrels produced in December. Likewise, the state produced a total of 24.6 billion cubic feet of natural gas, down from the 25.4 billion cubic feet produced in December.
New producing wellsThe number of producing wells in the state increased to a record high of 8,322, up 85 from the 8,237 that were producing at the end of December.
The number of wells that went online in December was an increase of 123 over November.
In the previous Director’s Cut press conference in February, Helms said the division estimates that 90 new wells per month are necessary to maintain production in the 770,000 bopd range and that more than 100 new wells per month would be necessary to increase the production level to 850,000 bopd.
He says January was only the second month in the last year to year-and-a-half where the number of new producing wells was fewer than 90, and in both cases, Helms says, there was a corresponding decline in production.
Although 90 new wells per month is not a “magic number,” he says the number of new wells needs to be close to 90 in order for steadily increasing production to continue.
Fracking setbackThe number of wells waiting on hydraulic fracturing remained above 400 in January at 410, essentially unchanged from December. Helms says the sub-zero weather, like the cold snap that hit the state in late January, “really hampers the hydraulic fracturing business.” He says operators are much less likely to spend an estimated $200,000 to $300,000 to keep frack water warm when wind chills are in the minus 10 to 20 range. In those situations, he says, operators simply put things on hold.
The “sawtooth” patternHelms says the state experienced some cold weather in early February, but through the remainder of the month the weather was generally moderate, and he believes February should be a good month in terms of production.
March has seen a couple of storms already, and more winter weather is in the forecast, which he says could slow production.
April can be unpredictable, and then comes the spring breakup and road restrictions, which he says could extend into May.
As a result, Helms sees the “bad month/good month/bad month” or “sawtooth” pattern as he calls it, possibly extending all the way through May. But then come the summer months, which “are always very good to us.”
Road restrictionsThis spring, road restrictions could be very stringent, according to Helms.
He has heard that Williams County could temporarily drop the weight limit as low as 10 tons, “which basically means we won’t even move oil for a short period of time.”
He says Divide County is also considering some very restrictive weight limits through spring breakup.
Counties, he says, would rather deal with a week or two of very severe road restrictions rather than weeks or months of road reconstruction.