The Bakken Shale| July 2020
Field Overview
Named after Henry Bakken, the farmer who owned the land where oil was originally discovered, the Bakken Shale is located in North Dakota, Montana, Manitoba, and Saskatchewan. The USGS estimated in 2013 that this basin has an expected ultimate recovery of 7.4 billion barrels. North Dakota Department of Natural Resources put the break even point at US$46/bbl (2020). The top formations within the region are the Three Forks and the Spanish formations.
State Drilling Statistics (End of July)
Total Rigs in North Dakota- 11
Total Rigs in United States- 251
Total U.S. Rigs down 73% YTD
Financial & Economic Updates
North Dakota’s Native Americans to sue for Millions in Royalties
The Mandan, Hidatsa and Arikara Nation is suing the United States federal government in an attempt to secure land and collect mineral royalties in a dispute over ownership of the bed of the Missouri River flowing through the Fort Berthold Indian Reservation. The MHA Nation claims that there is at least $200 million in oil and gas royalties that the Department of the Interior failed to collect in the name of their people. In 2017, a court reversal stripped the MHA nation of mineral rights in the land beneath the bed of the Missouri River. After decades of court reversals, the MHA Nation is putting its foot down and demanding that the DOI is held responsible for the theft of mineral and property rights and compensates financially.
State Highlights
North Dakota Crude Production Nearing Nonexistence
Recent reports show crude production in North Dakota fell 30% on the month to 850,000 b/d in May. Given current events, it is easy to extrapolate that it has gotten worse since then. North Dakota crude production has not fallen below an average of 1 million barrels per day since early 2017. It topped out just over 1.5 million barrels per day in November of 2019 and has since plummeted. Rig counts at the end of July did not fare well either as they dwindled around 10 total rigs in the state. This means that in seven months time, 82% of the drilling rigs in North Dakota have gone idle. At the very least, gas capture compliance was at 90% for the entire state, which is a small win that pales in comparison to the struggles that the Bakken play is facing.
Can it Get Worse?
As if North Dakota wasn’t struggling enough, pipelines and differentials would only add to the vast buffet of problems. Although production is depressed to low levels, those still left producing are scrambling to find transportation solutions for the oil that is brought to the surface now that the Dakota Access Pipeline (DAPL) has been shut down. There is a temporary stay on the court order, but the future is grim. About 300,000 barrels per day of North Dakota oil would need to move out of the state by rail if the DAPL is forced to remain closed and the capacity of other pipelines becomes maxed. This will lead to a massive increase in costs. The DAPL costs between $7-$9 per barrel where rails to the West cost $10 and the East and Gulf cost $11-$12. These small differences per barrel add up, and only serve as an additional barrier to many producers in the region. If the pipeline fiasco wasn’t enough already, differentials pose a massive threat to the companies operating in the Bakken. When WTI was at $28 per barrel, North Dakota light sweet crude was barely at $14/b.
Refining
North Dakota Production
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