North Dakota Wells Must Be Drilled/Completed Within A Year -- RBN Energy -- April 10, 2015; Also, Reason For Backlog Of Wells Waiting To Be Fracked

Updates

November 24, 2015: a reminder -- the NDIC relaxed the one-year rule on well completions. Back on October 22, 2015, it was announced that the NDIC had given operators an extra year to complete wells. 
 

Original Post

 

From RBN Energy:

The prospect of the large trigger tax incentive kicking in on June 1, 2015 is one factor that might explain a recent increase in the number of wells that have been drilled and are awaiting completion in North Dakota (the State defines completion to mean when the first oil is produced through wellhead equipment into tanks).

[At the linked article] the chart in Figure #2 shows well completion data from the NDIC. The red line shows that the number of wells waiting on completion increased from just over 400 in January 2013 to more than 800 in January 2015.  

No doubt that some of these wells have been held up because producers are waiting to complete their wells when the large trigger tax incentive kicks in during June.  

But there is more to it than that. 

Wells can be waiting on completion for a number of other reasons.  These include the absence of infrastructure – as could be the case for North Dakota producers trying to comply with regulations to reduce flaring or needing to set up equipment to condition their crude for rail loading. In a low price environment, producers can also delay well completions as a form of storage – waiting for crude prices to recover. In North Dakota winter weather can also be reason enough to delay completions. The blue line in Figure #2 is the number of completions each month since January 2013 and although there were just 47 completions in January 2015 compared to 183 in December 2014, the numbers do not appear to be outside the normal range so some portion of the lower number of completions in January is likely just usual impact of the North Dakota winter.  

Generally speaking, smaller producers are incented to complete wells sooner rather than later in order to generate cash to repay finance costs so that lengthy completion delays are not common.

In any case, North Dakota drilling permits only last for a year – by which time producers have to drill and complete their wells - meaning that any backlog will only last for a limited time.