Director's Cut Is Out: Production Surges By 6.4% Over Previous Month; Completions More Than Double Month-Over-Month; Frack Crews Outpacing Drilling For First Time In Bakken History

A huge round of applause to the roughnecks and the frack teams. 

Production:

• June: 821,598 bopd
• July: 874,460 bopd (new all-time record)

A 6.43% increase.  This is the biggest percentage increase in almost two years (maybe longer; that's only as far back as I've tracked) and we're in the maintenance phase of drilling; the boom is over. Or so they say.

This is where I track future production, just for the fun of it. 

Producing wells:

• June producing wells: 9,096
• July producing wells: 9,322 (new all-time record)

Wow, look at the permitting:

• June permitting: 165
• July permitting: 179
• August permitting: 276 (all time high was 370 in October, 2012)

Pricing

• June: $86
• July: $96
• August: $94

From the narrative:

"The drilling rig count decreased slightly from June to July, but the number of well completions jumped 102 to 251, resulting in a 6.4% increase in oil production. That number of completions is almost three (3) times the threshold needed to maintain production."

"Completion crews outpaced drilling rigs for the first time this year."

"The average number of days to drill a well from spud to total depth remained steady at about 22, but the average number of days from total depth to initial production fell from 94 to 79."

Now you know why raw number of rigs is not all that significant. The rig count actually fell, but completions jumped from 102 in June to 251 in July. 

My vote: pay roughnecks for a full year of work, but drill and frack in North Dakota for only the best eight (8) months of the year.

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Flaring

Naysayers will argue; they will disagree. I would prefer that naysayers not read this part of the post.

From the narrative:

"The percentage of gas flared is back up 2% to 30% almost all of which can be attributed to processing plant outages for mechanical repairs and electrical failures."

How many story lines can one find in that one sentence?

• well completions more than double, and there's hardly an increase in flaring
• crude oil production surges by 6.43% month-over-mont, and there's hardly an increase in flaring
• flaring is still incredibly low compared to the high in 2011, when oil production was much lower
• pundits will continue to say one-third of natural gas is flared in North Dakota, which is untrue
• the slight rise in flared natural gas was not due to pace of drilling or completion activity
• almost the entire increase, though minimal, was due to processing plant issues
• infrastructure is improving
• operators are drilling/completing wells where natural gas lines exist
• operators have defined the limits and sweet spots of the Bakken
• operators are defining the limits and sweet spots of the Three Forks
• almost all acreage is now held by production; there is no urgency to place wells where it does not make sense
• almost all acreage is now held by production; there is no urgency to place wells where there are no natural gas gathering systems
• folks over at the TR&E board will now see that operators are less likely to drill on their acreage if natural gas processing systems are not in place
• electrical failures? this to me suggests issues with the grid; and that brings me back to the additional transmission lines that need to be put in place, including the one going through the Killdeer Mountains

With regard to natural gas production:

• June: 28 million cubic feet
• July: 30 million cubic feet
• Increase in natural gas production, month-over-month: 7.41%
• 21 million cubic feet sold (assuming 70% of production was sold; 30% was flared)

According to The Director's Cut: $3.09/MCF = $3,090/million cubic feet x 21 million thousand = $65,000,000 of natural gas sold. Folks can check the math; I generally make a lot of simple math errors.

On the other hand, 27 million bbls of crude oil was sold for almost $100/bbl = $2.7 billion.

If 9 million MCF was flared, that means about $30 million flared.

As I've said before, I can't get my arms around these numbers. So, let's drop some of the zeroes. $2.7 million in crude oil; $30,000 in natural gas. $30,000 in crude oil; $30 in natural gas. I'm sure the math is off but that's good enough for me. It helps put things into perspective.