Following two months of lackluster and even negative production growth, North Dakota’s oil production finished 2014 on a high note posting a nearly 40,000 barrel per day increase in December according to preliminary data released by the Department of Mineral Resources on Feb. 13.
The December production is a sharp rise over November which had a tepid production increase and October when production actually decreased, and is a stark contrast to December 2013 when the state’s oil production fell by nearly 50,000 bpd from the previous November, which still stands as the largest production decline in the state’s history (see chart).
At first glance, the large production increase was not intuitively obvious because it occurred during a period when oil prices were steadily falling and rigs were being laid down across the Bakken. However, what did increase in December was the number of well completions in the state, rising to 173, an increase of 125 over the 48 wells that were completed in November. But the question is why did the number of completions rise over three-fold between November and December?
DMR Director Lynn Helms believes much of the increase in completions in December was attributable to operators trying to reach year-end production targets while utilizing money remaining in their 2014 capital expenditure budgets. “So there was a surge in terms of completing wells and bringing wells on at year-end to spend up that 2014 capital budget and hit those production targets that they had promised for their stockholders and their venture capital folks,” Helms said in a monthly press conference on Feb. 13.
Coupled with budgets and production targets was the tumbling price of oil in December (the WTI price fell 23 percent in December following a 16 percent drop in November), which Helms believes contributed to the production increase because of the uncertainty in the market and the prospect that crude prices could fall more - which they did with WTI falling another 8 percent in January. “And so I think oil companies were looking at the oil price with no idea where the bottom was going to be and thinking they should capitalize on the price that they have now with that high initial production,” Helms said.
The December numbers
Preliminary production data indicate North Dakota’s average daily oil production reached a new record high of 1,227,344 barrels per day in December, up 39,086 bpd or 3.29 percent over November output.
For full-year 2014, North Dakota produced a total of 396,684,494 million barrels of oil for an average of 1,086,807 bpd. That 2014 production is an increase of 26.6 percent over 2013 when the state produced a total of 313,275,384 barrels for an average 858,289 bpd.
Ninety-five percent of the December production came from 73 percent of the state's wells targeting the Bakken petroleum system, with the remaining 5 percent of production coming from the other 27 percent of the state’s wells that target conventional “legacy” petroleum pools.
Natural gas production averaged 1.509 billion cubic feet per day in December, also a record high and an increase of 5.4 percent over November.
The 173 well completions in December pushed the number of producing wells to 12,124, breaking the 12,000-mark for the first time.
And despite the volatility in the global crude oil market and the laying down of rigs as contracts expire, the number of drilling permits increased to 251 in December, an increase of 16 over November. However, that number has since decreased with 246 permits issued in January, five fewer than December.
And finally there is the rig count. At the end of November there were 188 rigs operating in the state. That count fell by seven in December ending the month at 181. At the end of January the rig count had further declined to 160, and as of Feb. 13, the state’s rig count stood at 137, marking a 27 percent decline in the number of rigs operating in the state over two and a half months.
