North Dakota Oil and Gas Division Director Lynn Helms has been saying for months that he expected oil production in the state to increase significantly once summer arrived and load restrictions were lifted on state roads. In July that prediction turned out to be spot on as the state saw its largest monthly production increase on record.
Preliminary production numbers released by the Oil and Gas Division on Sept. 13 indicate the state’s average daily oil production in July was 874,460 barrels per day, itself a record high but also a record increase of 52,862 bpd or 6.4 percent over June’s official production of 821,598 bpd, an increase which Helms calls “almost startling.”
“I just want to remind you that we have been talking about summer surging and it is here, and we expect next month to be a big month as well,” Helms said in a monthly press conference on Sept. 13.
North Dakota experienced what Helms has referred to as a “sawtooth” effect in the average production numbers beginning in November 2012 when the average daily production declined for the first time since April 2011 (see chart). That sawtooth effect continued with December’s production going up sharply, January’s output going down sharply, and then another sharp increase in production in February, which was a record high monthly increase at the time. From March through June production steadily increased, but at a moderate pace due to adverse weather and road limitations. Now with hard roadbeds and summer weather, the state has seen its largest monthly production jump to date.
Surpassing budget target
The state’s output at the end of June fell 1 percent short of the July 1 target of 830,000 bpd used in legislative budget projections for the 2013-15 biennium. That was mainly attributable to load restrictions that remained in place on many state roads well into June. However, July’s output is 5.4 percent above that 830,000 bpd target putting the state back on track to meet budget projections.
The legislature’s budget for the biennium projected North Dakota production would remain at an average of 830,000 bpd through 2013, but would then increase to 850,000 bpd and remain at that level until the end of the biennium in June 2015.
Completions up, rigs down
Underlying the July jump in output was a significant increase in well completions, which jumped by 102 from June to 251 completions for July. “We had quite a few frack crews that sat idle in May and June because of the wet weather and the road restrictions,” Helms said. “It just wasn’t possible to move frack sand and frack water.”
With the warm, dry weather that came at the end of June, he said the frack crews “got mobilized” and began working on the inventory of uncompleted wells. “Industry did react to the nice summer weather that came … at the end of June and throughout the month of July and got busy completing wells”
Even with the sharp increase in completions in July, however, Helms said there is still a backlog of some 460 wells waiting completion, and that total is only 30 less than at the end of June. For the first time this year, completions outpaced drilling rigs, and Helms expects that pace to continue in August and well into the fall.
However, as production and completions rose in July, the state’s rig count actually declined slightly in July, down one rig from June to 186 rigs. The rig count further declined in August to 183 rigs, and as of Sept. 13, the count was down another three to 180 rigs.
“I think that the big news is the rig count actually declined just slightly in June and July, but well completions really jumped,” Helms said in response to the two metrics.
But concurrent with the downtick in rig count was a downtick in the average number of days between rigs reaching total well depth and initial well production, which fell from 94 days in June to 79 days in July. The number of days between spud and total depth remained steady at 22 in July.
Permitting
Permitting is another metric that is seeing an uptick. The Oil and Gas Division issued 165 drilling permits in June, and in July that number went up to 179. In August the division issued 276 drilling permits. The increase in permitting activity, Helms said, is in anticipation of the onset of winter in months ahead, and will probably continue to increase in the months ahead.
Helms said the Oil and Gas Division anticipates that industry will not be able to build roads or locations in the winter, so around the first of August the division steps up the permitting process in order to have enough drilling inventory to get through winter as well as through load restrictions that come in the spring. “We start the first of August anticipating winter, and I know that’s completely out of sync, but we have to, in some cases, be out of sync with the cycles of nature here.”
The July numbers
Preliminary production numbers indicate 27,108,258 barrels of oil were produced in North Dakota in July — that worked out to the new record of 874,460 bpd. The July total production was a net increase of 2,450,311 barrels over June production.
Natural gas production in the month totaled just short of 31 billion cubic feet, bcf, up 9.7 percent from June’s natural gas production of approximately 28 bcf. Natural gas production averaged 970 million cubic feet, mmcf, per day in July, up from June’s average of 933 mmcf per day.
North Dakota had 9,322 producing wells at the end of July, up 226 wells from June. Over half of those wells are in McKenzie (1,945), Mountrail (1,687), Williams (1,399) and Dunn (1,142) counties, with Bottineau County having the next highest number of producing wells at 533. Over 95 percent of the state’s drilling is targeting the Bakken and Three Forks formations.
