WILLISTON -– North Dakota oil production increased slightly in November, but companies are “running on empty” as they start the new year with plunging oil prices, the state’s top oil regulator said Friday.
Daily oil production increased more than 5,000 barrels in November to nearly 1.18 million barrels per day, the Department of Mineral Resources said.
Natural gas production also increased slightly in November to a new all-time high of nearly 1.67 billion cubic feet per day.
“That is really quite a surprise,” Director Lynn Helms said.
But with the price for a barrel of North Dakota sweet crude at $20 on Friday, a $6.50 drop since Jan. 1 and the lowest rate since March 2002, Helms said he expects to see further cuts in oil activity.
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Operators already have reduced the number of drilling rigs in North Dakota lower than planned for 2016, Helms said. The state had 49 rigs on Friday, the lowest since August 2009. Helms predicts the rig count could go as low as 30 if oil stays at current prices.
Applications for drilling permits have fallen off in North Dakota, with the state issuing 95 permits in December, a figure not seen since 2010.
“That indicates that there is decreasing optimism about short-term oil prices. Companies are looking at 2016 and saying not until the very end of the year, if then,” Helms said.
Helms, who chooses a theme for his monthly updates with reporters, compared the current state of the Bakken to lyrics of the Jackson Browne song “Running on Empty.”
“Quite honestly, we’re down in the bottom of the bottom of the tank in terms of cash flow and capital to maintain activity in the state of North Dakota,” Helms said.
Helms said he learned this week that a third Bakken operator is likely going to file for bankruptcy next week. Samson Resources and American Eagle Energy already have filed for bankruptcy, and Helms said he thinks four or five more Bakken operators could “run to the end of their financial rope” by the end of the year if prices don’t improve.
But investors are showing long-term optimism about oil prices by acquiring oil wells that Bakken operators are putting up for sale.
“As soon as wells are going on the market, there are buyers lining up for them,” Helms said.
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While the rest of the state saw a drop in rig count, Fort Berthold saw an increase from nine rigs to 11. Helms said tribal and federal leases require a new well to be drilled every 90 days.
“There’s a commitment there that forces drilling activity regardless of price or regardless of economics,” Helms said.
The reservation had a slight increase in oil production in November to 199,962 barrels per day, or about 17 percent of the state’s overall production.
Natural gas flaring increased from 14 percent to 16 percent in November. The volume of gas flared was nearly 266 million cubic feet per day, an increase of 29 million cubic feet per day since October.
Helms said much of the increase was due to mechanical problems at the Hess Corp. natural gas processing plant in Tioga that caused additional flaring.
Hydraulic fracturing crews completed 26 wells in November, down from 43 well completions in October. At the end of November, the state had 969 wells that were drilled but waiting on fracking crews.
About 52 percent of Bakken crude was transported by pipeline in November, with 41 percent transported by rail, said the North Dakota Pipeline Authority.
