North Dakota Breaks Records for Oil & Gas Activity - Sep. 2014

Bakken Oil Workers
Bakken Oil Workers

The State of North Dakota hit 1,184,635 b/d oil in September 2014, setting a new record, according to the Department of Mineral Resources’ (DMR) November Director's Cut. That's 50,000 more b/d than August. During the same month, North Dakota also had record monthly gas production (1,403,448 mcf/d), and reported the highest number of producing wells to date (11,741).

But this month, the state's record breaking oil and gas activity is overshadowed by falling crude oil prices. September was a relatively good month for oil at ~93.00 on average for a barrel of West Texas Intermediate (WTI), but prices have dropped nearly ~$20 in the last two months.

According to the DMR's report, released on November 14, 2014, the current rig count is down 15% in the states five most active counties:

  • Divide - down 54%
  • Dunn - down 29%
  • McKenzie - down 4%
  • Mountrail - down 24%
  • Williams- down 19%

DMR Director Lynn Helms blames the recent drop in the Bakken rig count directly on lower oil prices. The cost of drilling a Bakken well is high - anywhere between $8-million to $9-million. If the price of oil continues to fall, some producers, depending on their location in the play and a host of other factors, will scale back their Bakken drilling programs.

Read more: Bakken Study Analyzes Impact of Oil Prices on Development

Flaring Down in North Dakota Bakken

The natural gas flaring rate dropped from 27% in August to 24% in September. By comparison, the highest flared percent of natural gas was 36% in September of 2011.

New regulations have called for producers to reduce flaring to below 26%, starting with their October production figures. Helms recently pointed out that in addition to lower oil prices, flaring regulations could also impact Bakken development, because producers may face production restrictions if they fail to meet the new standards.

Beginning on June 1st, the North Dakota Industrial Commission (NDIC) began implementing its first in a series of policy changes aimed at reducing flaring in the Bakken.

Read more:NDIC Implements New Bakken Flaring Rule

Seismic Activity Up in North Dakota Bakken, But Leasing is Down

Seismic activity is up with seven surveys active or recording and five permitted. New leasing on the other hand has dropped off sharply. Most leases consist of renewals and top leases in the Bakken - Three Forks area.

North Dakota Hits Record Oil & Gas Production - June 2014

Bakken Oil Well
Bakken Oil Well

The State of North Dakota hit nearly 1.1-million b/d oil in June 2014, setting a new record, according to the Department of Mineral Resources' (DMR) August Director's Cut. During the same month, North Dakota also had record monthly gas production (1,253,154 mcf/d), and the highest recorded number of producing wells (11,079).

In April, North Dakota crossed the milestone 1-million b/d oil mark. The Bakken region, which includes portions of western Montana, exceeded the 1-million b/d mark at end of last year according to the Energy Information Administration (EIA). It is the fourth region, along with the Gulf of Mexico, Eagle Ford, and Permian basins, producing more than 1 million b/d in the nation.

Read moreNorth Dakota Hits the 1-Million b/d Mark

About 28% of gas produced in May and June was flared, despite the completion of Hess' Tioga Gas Plant expansion in May 2014. DMR officials noted the plant has been operating below full capacity due to the delayed expansion of gas gathering from South of Lake Sakakawea.

The expansion project, which is part of a $1.5 billion investment Hess has made in the area for infrastructure improvements, began processing about 120-million standard cubic feet of gas per day (mmscf/d) in May, according to Hess. The company expects the plant will process at least 250 mmscf/d with the potential to increase beyond 300 mmscf/d.

Read more: Hess Production to Soar in Bakken by the End of 2014

Highlights from August 2014 Director’s Cut

  • May Oil – 1,040,469 b/d
  • June Oil – 1,092,617 b/d
  • May Gas – 1,192,860 mcf/d
  • June Gas – 1,253,154 mcf/d
  • May Producing Wells – 10,902
  • June Producing Wells – 11,079
  • 28% of produced gas in May and June flared


Bakken Production Sets Another Record for Producing Wells - February 2014

Bakken Production Chart - Goldman Sachs
Bakken Production Chart - Goldman Sachs

In February 2014, the number of producing wells in North Dakota reached an all-time record high of 10,186. The information was released in the North Dakota Industrial Commission's (NDIC) Director's Cut for Aril 2014. The number of producing wells in North Dakota has risen month over month since the beginning of the year.

Approximately 94% of all oil production in February came from the Bakken and Three forks formation - 892,399 b/d. Another 6% came from legacy conventional pools.

Read more: Bakken Production Sets Another Record - More than 10,000 ND Wells Producing

Weather had the most significant impact on production in January and February. In the month of February alone, there were 18 days with temperatures five or more degrees below normal. Four days were recorded where wind gusts were too high for completion work. During this time frame, Hess's Tioga natural gas plant expansion plans were delayed; and company officials cited poor weather conditions as the cause. As a result, approximately 100 wells in North Dakota had to be shut-in to reduce flaring. In March, Hess began selling gas from its' Tioga plant.

Read more: Hess to Begin Selling Bakken Natural Gas from Tioga Plant

NDIC Director Lynn Helms commented, “the drilling rig count was pretty much unchanged from January to February, and the number of well completions was up slightly from 60 to 70. Days from spud to initial production decreased 8 days to 114. Investor confidence appears to be growing. There were still over 100 wells shut in for the Tioga gas plant conversion in an attempt to minimize flaring, but the biggest production impact was still the weather.

Highlights from the NDIC's Director's Cut

  • Jan Oil - 935,126 b/d
  • Feb Oil - 951,340 b/d
  • Feb Oil - 892,399 b/d from the Bakken and Three Forks (94%)
  • Jan Gas - 1,013,142 MCF/day
  • Feb Gas - 1,063,756 MCF/day
  • Jan Producing Wells - 10,114
  • Feb Producing Wells - 10,186 (preliminary)(Record)
  • 7,065 Wells or 69% are now unconventional Bakken – Three forks wells
  • 3,121 wells or 31% produce from legacy conventional pools
  • Jan Permitting - 253 drilling and 0 seismic
  • Feb Permitting - 180 drilling and 5 seismic
  • Mar Permitting - 250 drilling and 2 seismic


ND Defines Stricter Rules for Pipeline Construction & Stripper Well Exemptions

A number of changes to the North Dakota Administrative Code could impact pipeline development and stripper wells in 2014. Approved by the North Dakota Industrial Commission last month, forty-seven (47) new rules were proposed, bringing the number of rules for oil and gas operations to seventy (70). According to the Department of Mineral Resources, a division of the Industrial Commission, the changes could take place as early as April 1, 2014. One particular area of the code, 43-02-03-29, addresses pipeline development in the region:

All newly constructed underground gathering pipelines must be devoid of leaks and constructed of materials resistant to external corrosion and to the effects of transported fluids. All such pipelines installed in a trench must be installed in a manner that minimizes interference with agriculture, road and utility construction, the introduction of secondary stresses, the possibility of damage to the pipe, and tracer wire shall be buried with any nonconductive pipe installed. When a trench for an oil and gas underground gathering pipeline is backfilled, it must be backfilled in a manner that provides firm support under the pipe and prevents damage to the pipe and pipe coating from equipment or from the backfill material.

The new regulations come at a time when increased scrutiny on pipeline development in the region is piquing. A Tesoro pipeline released approximately 20,000 bbls of crude near Tioga, ND, in October. The cause is believed to be related to corrosion.

Read more: North Dakota Oil Spill Recover Efforts Underway

NDIC's Authority to Define Stripper Wells Expanded

Yet another area of production that could see an impact are in wells defined as stripper wells. The Director of the Department of Mineral Resources, Lynn Helms, already had the authority to determine stripper well property status. The change could impact the number of wells receiving tax exemptions through stripper well status. The new regulations extend Helms's ability to determine a stripper well. Furthermore, the revised regulations account for horizontal drilling, relative to stripper wells:

"If a well that has previously qualified as a stripper well property is reentered and recompleted as a horizontal well, the stripper well property status on that well will terminate. "

Other facets of production worth noting that will be affected are with the notification of fires, leaks, spills or blowouts and underground injection wells.


North Dakota Production Will Surpass 1 Million b/d Early in 2014

Bakken Production Chart - Goldman Sachs
Bakken Production Chart - Goldman Sachs

North Dakota oil production grew a little less than 10,000 b/d from September to October to set another record with 941,637 b/d.

With current weather conditions, it will take an exceptional November and December for the state to surpass 1 million b/d before year-end. The Bakken has surprised us before, but it looks like it will be some point in the first quarter before North Dakota joins the million barrel a day club.

The state also set a record in October for natural gas production with 1.07 bcf/d and for the number of producing wells with 9,900. With ~200 wells coming online per month, the state will easily surpass 10,000 wells before the end of 2013. Pretty amazing for a state that had just ~3,600 producing wells at the beginning of 2008.

Other highlights from the monthly director's cut include:

  • 5,939 wells producing from the Bakken and Three Forks
  • October sweet crude prices fell to $85.16/bbl and further to $71.42/bbl in November
  • 202 well completions in October
  • McKenzie County roads were close 3-4 days due to rain in October
  • Operators have indicated plans to add 10-15 rigs by mid-year 2014
  • Days from spud to initial production increased to 114 days from 100 days in October
  • More than 95% of drilling targets the Bakken and Three Forks
  • ~460 wells were awaiting completion at the end of October

Read the full director's cut at