The Red Queen Is Still On The Treadmill; She Has Not Fallen Off; 1,582 Wells In North Dakota Off-Line -- June 13, 2015

Note: facts and opinions are interspersed in the note below. Do not make any investment or financial decisions based on what is posted below; there will be factual and typographical errors. If this information is important to you, go to the source. 

The April data is posted at this link: https://www.dmr.nd.gov/oilgas/mpr/2015_04.pdf. 

I will be watching for the Director's Cut on Monday, but the important production and flaring information has been released.

The Bismarck Tribune is reporting data from April, 2015, for the Bakken:

• March, 2015, crude oil production: 1,190,502 bopd
• April, 2015, crude oil produciton: 1,168,636 bopd

The April production will be revised up (slightly) in the final data which will be released a month from now. The "preliminary" data and the "final" data are generally quite close.

Delta:

• 1,190-502 - 1,168,636 = 21,866 bopd
• 21,866 / 1,168,636 = 1.87% decrease month-over-month

Let the comments begin. Yours, not mine. Some more data first.

What the article failed to mention was the number of active rigs:

• April 30, 2014: 187
• March 31, 2015: 99
• April 30, 2015: 86

Let the comments begin. Yours, not mine. Some more data first.

Natural gas flaring

• as a percentage, declined statewide in April, to 18%
• previous two months (February, March): 19%
• as a percentage, 18% is the lowest since the summer of 2010
• July, 2010: 321,042 bopd (all-time record at that time)
• July, 2010, rig count: 135
• Unless I missed it, the percent of flaring was not even mentioned in the Director's Cut regarding the July, 2010, data.  
• Comment: look at that -- flaring today, in 2015, as a percentage, is less than that in 2010; in 2010, crude oil production was barely 300,000 bopd; today, with choking back, crude oil production in North Dakota is well over 1 million bopd

The Director also noted that as of yesterday, the active drilling rig count was 76, the lowest count since 2009.  

Producing wells:

• March, 2015: 12,443
• April, 2015: 12,537

Wells capable of producing in April, 2015: 14,119

• 1,582 wells capable of producing were off-line 
• this number is probably immaterial; a look at three other months suggests this is a typical percentage 

Comments:

• in 2012, Saudi Arabia announced a $35-billion 5-year plan to increase number of active rigs to sustain production; most recent data available shows the Saudis have minimally increased crude oil production since 2012
• in 2010, the active rig count in North Dakota was 135, and daily production was 300,000 bopd in North Dakota
• in 2015, the active rig count in North Dakota was 76 (almost half that of 2010), and daily production was significantly above 1 million bopd
• the 1.87% decrease month-over-month is trivial; this is within the normal variation once one gets to "manufacturing phase" (of course, with maximum production, the Bakken could easily be in the 2 million bopd); we have seen significantly greater decreases in month-over-month production (as much as 5%) during the winter
• while Saudi Arabia was maximizing production from each new and each older well, the Bakken operators were cutting back on production from new wells and old wells due to the slump in oil prices
• production in the Bakken is being cut back by several methods: a) fewer days on-line; b) choking back when wells are on-line; c) delaying fracking (SI/NC)
• while Saudi Arabia was maximizing production from each new and each older well, the Bakken operators were cutting back on production from new wells and old wells to meet new flaring rules
• while Saudi Arabia was maximizing production from each new and each older well, the Bakken operators were impacted by constrained takeaway capacity, crude oil storage issues, "wrong" type of refineries along the Gulf Coast, new conditioning rules, weather, roads, an anti-oil atmosphere at the Federal level, significant delays in new pipelines (Keystone XL, Sandpiper)

The Saudi story is even more interesting: most recent data available shows the Saudis have minimally increased crude oil production since 2012; during this same period, Saudi Arabia announced new refineries in their own country to refine their own oil to sell refined products to Europe (this is a new venture for Saudi Arabia and necessitates increased production for their own refineries. In addition, the amount of domestic requirements for Saudi Arabia have increased.

From Seeking Alpha:

• North Dakota oil production fell 1.8%, or nearly 22K bbl/day, in April to ~1.17M bbl/day after recording a surprising jump in March, as weak crude prices led producers to ease production.
• The number of drilling rigs operating in North Dakota stands at 76, the lowest since December 2009, according to the latest monthly report from the state's Department of Mineral Resources.
• The agency director has said he expects the state’s oil production to remain at 1.1M-1.2M bbl/day until oil prices recover.
• April natural gas production was up slightly at 1.54B cf/day from 1.51B cf/day in March.
• Unimpressed commentator Gregor McDonald tweets: "Sorry America, but 9,525 wells in the North Dakota Bakken producing on average 116 bbl/day is more cartoon than triumph."

I don't know if this is the same Gregor McDonald, but if it is, it sounds like he, too, missed the Bakken, has his own spin, and has a very different world view than I do. I find it somewhat incredible that of "all the stuff out there," Seeking Alpha chose to post that meaningless tweet. But it is what it is. The wells pay for themselves in 6 months in the best Bakken; two years in the worst Bakken when prices are optimal; and the Bakken will produce at a minimum 35 billion bbls of oil through 2100; compared with 7 billion bbls from the North Slope.

So, what is the most interesting data point that was not in The Bismarck Tribune article? Answer: I will let you think about it. There is a hint above. I will post the answer later. Maybe Sunday.

Update: Sunday, June 14, 2015 -- well, this is pretty cool. I posted the answer to the question back on June 8, 2015.