Director's Cut Is Out -- January 14, 2015 -- A New Production Record; Slump In Fracking; Flaring Rose

How good is the Bakken? It was interesting that no one has commented on this little bit of trivia. Monthly production hit a new daily production record in November (the data for this month's Director's Cut). That occurred despite a very challenging October when for the first time in a long time, production did not hit a new record due to heavy wind precluding fracking/completion of many wells. So, in November, not only did operators make up for the "loss" in October due to weather but hit another production record in November. 

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The Dickinson Press provides more background to the Director's Cut that was released today. The article discusses the extraction tax incentive: the first trigger and the second trigger.

Helms also noted that because flaring increased in November, "the Department of Mineral Resources will send letters to two operators this week, telling them to curtail production because they're not up to speed on gas capture." It seems the obvious question is who are the two operators.

With regard to rig count:

Rigs are down approximately 25 over the past month to 158, with all but about 10 in the core counties, Helms said. Oil prices have dropped by more than 50 percent since the summer.

He estimated the state needs 130 rigs operating to maintain production, but that the rig count may hit as low as 120 by the third quarter of 2015.

"If we see these kind of prices stick around through the first quarter, then we're gonna drop below that production maintenance rig count for a brief period of time," he said, adding that he expects oil prices to recover by the year's end.

These articles are frequently archived only for subscribers after a short period of time.

There has to be a bit of irony somewhere here when the state will be ordering operators -- two operators in this case -- to curtail production because of flaring issues. Long-time readers know how I feel about the flaring issue. I always said that if they wanted to stop flaring immediately, just stop drilling. I guess that's the route that's being taken. 

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This month's Director's Cut is incredibly interesting:

• wells waiting to be completed surged (huge story): up to 750 (historically around 400)
• production hits new record despite 750 wells waiting to be completed
• percent of flared gas rises despite 750 wells waiting to be completed
• except for wind on 11 days, weather a minor issue for the Bakken in November
• takeaway still relies on rail (probably more so)
• number of wells hits new record

Note: I believe the 750 wells waiting to be fracked are "today" -- in real time, whereas the production in today's Director's Cut was November production -- a look back. The bullets above may not be entirely accurate; I may be comparing apples to oranges in terms of timing (wells waiting to be fracked -- current, real time; production numbers -- a look back to November, before the price slump had really set in. We should start seeing a significant decline in production in the January production numbers, which we won't see until March, 2015. I wouldn't bet the farm on it, but it's even possible another production record will be hit in December, but after that production should start declining. In my humble opinion, as they say. 

In an earlier post, I suggested three metrics to follow during the slump in oil prices:

• IPs
• active rigs
• wells waiting to be completed

Add a fourth metric: percent natural gas flare.

Link here.

Disclaimer: this update is always done in haste; typographical errors are likely. This is for my use only. If this is important to you, you should go to the source. 

Oil:

• November, 2014: 1,188,258 (revised) 1,187,206 bopd (preliminary, new all-time high)
• October, 2014: 1,182,174 bopd (preliminary); 1,183,515 bopd (revised)
• September, 2014: 1,186,228 (revised); 1,184,635 (new all-time high)
• delta: 3,691(daily bopd)
• 4,743 / 1,186,228 =  0.4% (updated after revised data came in)

Producing wells: 

• November, 2014: 11,942 (preliminary, new all-time high)
• October, 2014: 11,892; revised 11,942 (preliminary, new all-time high)
• September, 2014: 11,758 (revised); 11,741 (preliminary; new all-time high)
• August, 2014: 11,565
• July, 2014: 11,293
• June, 2014: 11,079  

Permitting:

• December, 2014: 251
• November, 2014: 235
• October, 2014: 328
• September, 2014: 261
• August, 2014: 273
• July, 2014: 265
• June, 2014: 247
• All-time high was 370 in 10/2012
  

Pricing:

• Today, 2015: $29.25 (lowest since December 2008) (all-time high was $136.29 7/3/2008)
• December: $40.74
• November: $60.61
• October, 2014: $68.94
• Sept, 2014: $74.85
• August, 2014: $78.46
• July, 2014: $86.20

Rig count:

• Today: 156 (lowest since Oct 2010) (all time high was 218 on 5/29/2012) 
• December, 2014: 181
• November, 2014: 188
• October, 2014: 191
• Sept, 2014: 193
• August, 2014: 193
• July, 2014:  192
• June, 2014: 190

Director's comments:

• the number of well completions decreased from 145 (final) in October to 39 (preliminary) in November 
• operators report postponing completion work to avoid high initial oil production at very low prices and achieve NDIC gas capture goals
• no major precipitation events; 11 days with winds in excess of 35 mph (too high for completion work)
• 7 days with temperatures below -10F

Back on December 13, 2014, I suggested exactly that: the operators would stop fracking. Look at this: generally there were about 400 wells waiting for completion, then it jumped to 450, then 650, and now 775, an increase of 125 in the past month. That is quite astounding. (Also, December 18, 2014; and, December 16, 2014.)

I opined somewhere that the best way to cut flaring was to stop drilling. So where are we on flaring? From the Director's Cut:

The price of natural gas delivered to Northern Border at Watford City is down $0.28 to $2.70/MCF. This results in a current oil to gas price ratio of 11 to 1.

The percentage of gas flared rose to 25%.

The Tioga gas plant remained below 70% of full capacity due to delayed expansion of gas gathering from south of Lake Sakakawea. The October capture percentage was 75% with the daily volume of gas flared from October to November increasing 36.5 MMCFD.

The historical high flared percent was 36% in 09/2011.

Gas capture statistics are as follows:

• Statewide 75%
• Statewide Bakken 75%
• Non-FBIR Bakken 75%
• FBIR Bakken 74%
• October 2014 capture target =74%
• January 2015 capture target =77%

The percentage of natural gas flared in October was 22%; in November, the percentage of gas flared rose to 25%. And that's with 750 wells waiting to be completed.

It would be interesting to know more about the "delay" in expanding the gas gathering "from south of Lake Sakakawea." Is this federal bureaucratic red tape on Fort Berthold?

Takeaway still relies on rail.

Rigs are coming down quickly: utilization rates for deep drilling rigs (generally 90% or better) are now at 80%; shallow well rigs, about 50%.

Permitting peaked in October, as is the general rule, but it is noteworthy the increase in permitting in December, 2014, over November, 2014.

Can you imagine the daily production coming out of the Bakken if those 750 wells were completed, or if "we" just got back to "normal," of having about 400 wells waiting to be completed. In addition, the wells keep getting better and better.

The Tyler, from NDIC production numbers released along with the Director's Cut:

MARATHON OIL COMPANY WILDCAT - TYLER

                                                                           oil produced       barrels of water    days   Runs  gas Prod.   gas sold

POWELL 31-27TH NWNE 27 135 99 SLP 26335                     57            1330             26        0             160              0

RUNDLE TRUST 21-29TH NWNW 29 136 99 SLP 26794        0               10                 1         0                9               0

TOTAL : 2 wells 57 1340 27 0 169 0