Bakken News Pulse May 2020

Posted: June 19, 2020

The Bakken Shale| May 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 May)

Total Rigs in North Dakota- 12
Total Rigs in United States- 301
Total U.S. Rigs down 69% YTD

Financial & Economic Updates

Producers Pursue Cheaper Options

The average break even price for producers in the Bakken is $46.54 a barrel as compared to the $40.00 required in the Permian. This is why the Bakken shale has been taking some of the hardest hits from recessed prices. Colorado based Bakken operator, Resource Energy, realized they would need to consider shutting in more of its output. It is simply uneconomic to produce, much less transport this oil, and many operators are coming to that conclusion as well.

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State Highlights

North Dakota Government Urged to Act

Continental resources is the largest producer in North Dakota and was clearly displeased at a hearing for operators held at the end of May. Continental’s Vice President, Blu Hulsey, said, “North Dakota can be a leader as far as action is concerned.” This comes hot off the heels of two other hearings. The first hearing in Texas focused on a motion to implement production limits, but this was eventually shutdown. The second hearing in Oklahoma recognized some production as waste, allowing some producers to shut in wells without losing leases. This is a move that was widely adopted by many of the top oil and gas producers. Oklahoma has not fully declined the idea of limiting production. North Dakota has been struggling for a bit but has not taken much action in response to COVID and the price war since April when it considered paying operators to restart wells. Fortunately that was not an avenue that was pursued as the following months would have been extraordinarily costly for the state.

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Struggles to Restart Nearly Half of Shut in Wells

Staggering numbers of shut ins occurring in North Dakota have caused worries for the state government. Last month, 6,800 wells were shut in, or 42.5% of the 16,000 active wells. Plenty of tax revenue is generated from these wells, and this is why North Dakota’s director of the Department of Mineral Resources has created the “Bakken Restart Task Force” in hopes to “secure, strengthen, and stimulate North Dakota’s energy future.” The oil and gas industry supports 72,000 jobs in the state directly, and indirectly and was estimated to generate $5 B in state revenue in June and July alone.

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North Dakota Production

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