Weather woes likely will slow the blistering pace of North Dakota oil production growth as unseasonably nasty October storms closed roads and held up road and pad construction in McKenzie County, Lynn Helms, North Dakota Department of Minerals director, said in an Oct. 15 press conference at which he released his monthly Director’s Cut column and August oil and gas production figures.
Oct. 15 was the second day of major road closures in McKenzie County, Helms said.
Later in the day county officials reopened most roads, but said oil companies would be responsible for repairs caused by their own heavy vehicle traffic.
In August North Dakota hit an all-time oil production high of 911,242 barrels of oil per day, up from 875,736 bpd in July, according to Department of Minerals’ Oil and Gas Division figures. August production incorporated 847,149 bpd from the Bakken petroleum system, which includes the Three Forks and other zones.
“We blew through 900,000 barrels per day,” Helms said.
Well completions down
Well completions fell sharply from 251 in July to 130 in August and the division was attempting to find out why, he said. Infrastructure issues throughout the Bakken — primarily road construction and resurfacing — likely were a cause of the fall. Despite lower completions there was a 4 percent increase in oil production because the number of completions was about 1.5 times the threshold needed to maintain production, Helms said.
The drilling rig count decreased only slightly from July to August, Helms said.
The July rig count of 186 was pared slightly to 183 rigs in August — a count which remained stable through September and up to Oct. 15, Helms said.
The utilization rate for rigs capable of drilling 20,000 feet or more was about 90 percent, and for shallow well rigs with a capability to drill to 7,000 feet or less the utilization rate was about 60 percent.
Completion crews kept pace with drilling rigs as the average number of days to drill a well from spud to total depth remaining steady at about 22, Helms said, but the average number of days from total depth to initial production rose from 79 to 105.
Helms estimated that at the end of August there were about 450 wells waiting on completion services, a decrease of 10 wells.
A record 9,452 producing wells were active in August, up from 9,334 producing wells in July.
Oil production in North Dakota has more than doubled since 2011, when the daily production average for August was about 446,000 barrels of oil.
Storms of October
Looking forward, there are challenges to production growth, Helms said, adding that there is a possibility the state might break the million barrel per day production level before the year is out, but it won’t be easy to do.
McKenzie County is just one-third of North Dakota’s oil production, Helms said, but it could have enough impact to postpone the 1 million barrel per day production mark to next year, he said.
The storms of October will continue to bog down the pace of drilling into winter because of rain delayed road and pad construction, said Helms, adding that typically October weather in North Dakota is warm and dry with cool nights.
The McKenzie County road shutdown had affected four zones for two days, Helms said.
“Rigs are stranded in their spot,” Helms said. “No oil, salt water, drilling rigs or workover rigs are moving in McKenzie County.”
Helms said the road closures had an outsized impact on well completions, but most operations now are on multi-well pads, so rig movement was not so much affected.
“To complete wells you need to deliver pipe,” Helms said, adding that October delays would have a lingering affect all winter. Contractors were unable to move equipment to build roads and pads for winter drilling, and mud in some areas was slowing construction.
The October weather is likely to have a production impact over the winter of at least 10 percent, Helms said.
He said the production rate of above 900,000 bpd exceeded anticipated production levels in the state’s revenue forecast. The average sale price also was well above those in state models, Helms said.
In August, the sweet crude price realized on average for North Dakota production was $93.97 per barrel, down from $95.78 in July. The price continued to fall in September, to $92.96 per barrel. The Oct. 15 price was $86.50 per barrel.
Gas also a record
Natural gas production in the state set a new record in August as well, more than 1 billion cubic feet per day, a new all-time high based on the division’s preliminary production figures — up from July production of 972 million cubic feet per day.
One billion cubic feet of gas per day is a major milestone, Helms said.
The state’s flaring reduction task force was instrumental in boosting gas production, he said.
With natural gas storage 1.6 percent above the five-year average, Helms expects continued low prices for the foreseeable future, he said.
North Dakota natural gas production increased 3 percent versus a 4 percent increase in oil production, Helms said, noting that the ratio appears inconsistent with a Bentek study that shows gas-oil ratios increasing over time. But the number of new wells with lower gas-oil ratios skews the data, he said.
North Dakota shallow gas exploration is not economic at near-term gas prices, Helms said. The price of natural gas delivered to the northern border at Watford City was up 25 cents to $3.34 per thousand cubic feet. The resultant oil-to-gas price ratio is 26:1, Helms said, but the high liquids content of Bakken gas makes gathering and processing economic.
Helms said there was no impact on exploration and production in the state yet due to the federal government shutdown, adding that for another two weeks or so the industry would run smoothly, but beyond that, permitting problems might arise if federal agencies remained closed.
Helms said that in North Dakota regulatory capability was expanding; currently 18 of 22 new regulatory positions the state had announced have been filled.
“It will allow us to maintain a really high profile inspection and enforcement profile in the field,” Helms said, adding that he expected to see faster processing times at state offices for permits and other regulatory actions.
Fracturing company responds
At the end of the conference, Helms took the floor and said he had received a phone call from someone at one of the hydraulic fracturing companies who had called to offer an explanation of why completions were down in August.
There was a day that had two inches of rain and resultant muddy conditions caused a postponement of a number of completions until September, Helms said.
“They had a large number of completions postponed into September from August, that was one factor,” he said.
“Several of the companies that had switched over to multi-pad drilling and these batch processes were a little bit behind on their drilling, so there were complete pads of wells — four to six wells — that were scheduled for a frack that were postponed for a month.” Helms said. “So these folks are anticipating a pretty good sized surge in September production.”
