Sunday, March 18, 2018

Bakken Reality Check -- 2015 -- March 18, 2018

Note: I'm not sure if this is ready for prime time. I will post it anyway. Don't quote me on any of this. I'm still working through it. The reason for doing this was the developing meme that North Dakota has to add 157 net new wells month-over-month to maintain production at 1.2 million bopd.  It was my impression that North Dakota has not come close to 157 wells/month (1,884 per year) and yet the state has increased production year-over-year in the past eight months.

Note: the spreadsheet below was created very, very quickly. There are likely to be typographical errors. The data was taken from the NDIC statistics site. I do not know why daily production data and number of producing wells at the NDIC statistics site varies slightly from the daily activity reports.

I was curious about comparing the change in the number of producing wells (third column), the annual change in the overall number of producing wells, and the change in production.

I was curious to see if comments/projections at "Bakken Reality Check" produced back in 2015 held true. Compare this table with the screenshot of Figure 5 from that linked "Bakken Reality Check" below the spreadsheet.

Month
# # of producing wells
Producing wells
Crude oil production (bopd)
Crude oil production (bopd)
Producing wells
Crude oil production (bopd)


Change From Previous Month
BOPD
Change From Previous Month
Change from one year ago
Change from one year earlier
Jan 18
14,002
-7
1,175,638
-5,681
1,014
141,470
Dec 17
14,009
-14
1,181,319
-15,657
990
238,997
Nov 17
14,023
52
1,196,976
13,166
815
162,492
Oct 17
13,971
78
1,183,810
76,465
817
140,117
Sept 17
13,893
130
1,107,345
18,027
834
135,600
Aug 17
13,763
102
1,089,318
41,219
783
106,873
Jul 17
13,661
53
1,048,099
15,226
702
18,255
Jun 17
13,608
47
1,032,873
-8,122
678
5,507
May 17
13,561
118
1,040,995
-9,481
705
-6,153
Apr 17
13,443
129
1,050,476
-154
703
8,438
Mar 17
13,314
115
1,050,630
16,382
566
-61,157
Feb 17
13,199
211
1,034,248
80
484
-85,389
Jan 17
12,988
-31
1,034,168
91,846
162
-87,460
Dec 16
13,019
-189
942,322
-92,162
269
-209,598
Nov 16
13,208
54
1,034,484
-9,209
436
-147,540
Oct 16
13,154
95
1,043,693
71,948
330
-129,327
Sep 16
13,059
79
971,745
-10,700
459
-189,998
Aug 16
12,980
21
982,445
-47,399
324
-205,437
Jul 16
12,959
29
1,029,844
2,478
371
-178,085
Jun 16
12,930
74
1,027,366
-19,782
454
-184,628
May 16
12,856
116
1,047,148
5,110
588
-157,166
Apr 16
12,740
-8
1,042,038
-69,749


Mar 16
12,748
33
1,111,787
-7,850


Feb 16
12,715
-111
1,119,637
-1,991


Jan 16
12,826
76
1,121,628
-30,292


Dec 15
12,750
-22
1,151,920
-30,104


Nov 15
12,772
-52
1,182,024
9,004


Oct 15
12,824
224
1,173,020
11,277


Sept 15
12,600
-56
1,161,743
-26,139


Aug 15
12,656
68
1,187,882
-20,047


Jul 15
12,588
112
1,207,929
-4,065


Jun 15
12,476
208
1,211,994
7,680


May 15
12,268
143
1,204,314
32,498


Apr 15
12,125

1,171,816




The screenshot from the "Bakken Reality Check" linked above:


"Bakken Reality Check" suggests that operators need to add 157 wells each month (1,884 per year) to maintain peak production at 1.2 million.

Between the autumn of 2015, when the Bakken Reality Check was published, and January, 2018, the most recent month for which data has been released:
  • due to the Saudi Surge (January 2015 - January 2017) and the severe decline in the price of WTI, North Dakota crude oil production dropped from 1,151,920 bopd (December, 2015) to a low of 942,322 bopd one year later (December, 2016)
  • however, after things "started to return to normal," North Dakota crude oil production actually rose to 1,196,976 bopd by November, 2017
  • from November, 2015, to November, 2016, there was an increase of 436 producing wells -- well below the 1,884 new wells / year that "Bakken Reality Check" suggested would be needed to "maintain" -- and one could argue, ND came close to "maintaining" production
  • from November, 2016, to November, 2017, there were only 815 additional producing wells, again, well below the 1,884 threshhold suggested by "Bakken Reality Check"
  • November, 2016 to November, 2017: production increased by 16% with number of additional producing wells well below the 1,884 threshhold
Again, I did this very quickly, and there are likely to be errors in my numbers, and my methodology, but I wanted to take a quick look at the "Bakken Reality Check" projections back in 2015 to what has happened since.

This is very much in line with an increasing number of analysts noting that there seems to be a "negative decline rate" developing in shale plays.

See the article by oilprice.com editor Nick Cunningham: "Can the oil industry continue to lower decline rates at mature fields?"

And this post from earlier this month:
I cannot remember ever in my career having seen a negative decline rate,” the British oil-giant’s chief executive officer said in an interview on the sidelines of the CERAWeek by IHS Markit energy conference in Houston. 

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