The 2015 Williston Basin Petroleum Conference kicked off with oil development outlooks from state and province leaders who regulate development in the Bakken resource. North Dakota Department of Mineral Resources Public Information Officer Alison Ritter said her department expects companies to complete their wells, particularly if the large tax exemption trigger takes effect on June 1 reducing taxes by 130 percent. She said there is a small percentage of the 900 wells waiting on completion that are up against that deadline.
“A company can ask to put that well on temporarily abandoned status but that does require additional monitoring and testing on the well,” she said.
She added that it is up to a company whether it wants to make that investment on top of the typical $4 million it already has spent to drill the well. North Dakota Petroleum Council President Ron Ness also addressed the issue following Ritter’s presentation and said a lot will depend on whether the large tax exemption trigger kicks in. If it does not, he said the industry won’t rush to completions.
“You will see industry continue to TA (temporarily abandon) status the well beyond the one-year standpoint and only complete them as individual company decisions are needed, or as we see the ability for the price to continue to increase,” Ness said.
Ritter said DMR thought only the Bakken was experiencing the mounting list of wells waiting on completion, but inquiries into other oil-producing states led to similar stories.
“We thought it was just the Bakken scenario, but the more we learned about this price decline and rigs laying down and frack crews being put on hold we learned that the Eagle Ford in Texas has something like 1,400 wells on hold waiting for completion and the Permian Basin ― they have hundreds of wells waiting on completion,” she said. “It really does show how those wells are waiting to be fracked and that has really, really been driven by price.”
‘Dramatic’ rig drop
Ritter also discussed how the deep dip in oil prices has negatively affected rig counts.
“It’s really dramatic,” she said as she provided graphs that showed 165 out of 183 rigs had moved to the four core counties of the Bakken in November 2014 and in April that had dropped to 80 of 86 rigs. She said DMR expects rig counts to take nearly a year to return to higher levels once oil prices rebound.
In January, DMR Director Lynn Helms released his projections of rig counts based on prices and showed that a $40 oil price at the wellhead equates to 90 rigs which means he anticipates another 2,400 wells to be drilled in order to avoid heavy production decline. But the department does not foresee a significant drop in production and Ritter said “we think we can hover around 1.1 million per day.”
Saskatchewan moving beyond Bakken
In Saskatchewan, the Bakken is beginning to be overshadowed by a new player. While the Bakken produced 24.6 million barrels of oil in 2013, by the end of 2014 that was reduced to just over 23 million barrels, according to Saskatchewan Ministry of the Economy’s Melinda Yurkowski. She said about 200 of the 575 wells drilled so far in 2015 were in the Bakken, down from 368 wells during the same period a year prior. Some activity has shifted to the Viking play on the western border of the province where wells produced 19.4 million barrels in 2014 accounting for one-third of the drilling in the province. Operators in Saskatchewan drilled 3,665 wells in 2014 and set a record for the highest number of horizontally drilled wells in history at 2,840. About 900 wells were drilled in the southeast corner of the province where the Bakken is prevalent and the rest were on the western border. Yurkowski said the Petroleum Services Association of Canada forecasted in October 2014 that the province would drill 3,300 to 3,400 wells in 2015 but it has since downgraded that to 2,700 wells. A new release of numbers is expected in May.
To the east in Manitoba
Keith Lowdon of Manitoba Mineral Resources said oil development there has caused him to “run the gamut of being very optimistic and then curtailing that optimism to slight glee.”
Though it doesn’t have the high Bakken production of its neighbors, it does have other producing formations and ones with potential. In 2014, 464 wells were drilled in Manitoba with 21 rigs. Oil production hit 16.7 million barrels for the year and he said vertical wells actually doubled in 2014. Primary producers in the province include Tundra Oil and Gas with 166 wells; Corex Resources, which purchased some former Chevron assets, drilled 64 wells; and EOG Resources drilled 51 wells but sold its acreage to Tundra Oil and Gas. Manitoba has 5,077 total producing wells including the Bakken and its Spearfish-equivalent called Amaranth.
Lowdon said the province estimates drilling 280 wells in 2015 producing 47,000 barrels of oil per day. Drilling is currently down 25 percent over last year. He said Manitoba has issues similar to North Dakota’s abandoned wells and pipelines that require reclamation. The province has an abandonment fund but it only contains $1.6 million which suffices for now, but if a spill were to occur in a water body, the fund would be depleted quickly, he said. He has hired staff to research what other provinces and states are doing to determine what type of system may work more effectively.
