The Bakken Shale| September 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 September)
Total Rigs in North Dakota- 9
Total Rigs in United States- 261
Total U.S. Rigs down 70% YTD
Financial & Economic Updates
Big Money
North Dakota’s oil and gas industry has already spent $16 billion to get to its current gas capture capacity, but it is still shy of meeting projected needs almost 2 decades down the road. It is estimated that it will need an additional $18 billion in order to further expand the gas capture capacity. The volume of the projected peak? 5.3 billion cubic feet per day of natural gas as compared to the current record of 2.8 billion cubic feet of natural gas in a single day. The state has reported a gas capture rate of 92% as of late, but this is largely a result of COVID and decreased demand. If demand were to increase, the state would struggle to keep up with the amount of gas produced. This is why new gas capture infrastructure is going to be vital, not to mention expensive, over the next 2 decades.
State Highlights
Breach of a Million
North Dakota reported 1.04 million barrels of crude oil per day for July and nearly 2.1 billion cubic feet per day of natural gas production. This is a 16.5% increase in production for oil and gas. Even though this breach of 1 million barrels per day is nice, it was predicted to just be temporary and influenced by temporary price increases. It takes roughly 70 new wells per month to sustain production in the range of 1.25 million barrels per day. Compare this to the 12, 37, and 59 drilled in May through July respectively, and it seems that it is possible to achieve this rate of production, world demand willing. In July it was reported that there were 3,700 inactive wells representing a little more than a quarter million barrels. Most organizations (besides RARE PETRO that is) predict that pre-COVID demand will not return until late 2022, so only time will tell if North Dakota can keep these production rates up.
Penalties? Never Head of ’em
Oil and gas companies in the state of North Dakota will now have until the end of April before penalties and steep interest rates will begin applying to overdue royalty bills. This is temporary good news for companies, but this 6 month extension could only further amplify the amount of debt one can pile up in that time. The North Dakota Board of University and School of Lands both voted unanimously for this extension. Even though this extension is nice, people are already complaining about not getting their cut. Land Commissioner Jodi Smith told Forum News Service in July that 34 firms owe tens of millions of dollars to the state for public school funding. 12 of those companies have told the state Department of Trust Lands they will try to pay by the end of the month. Let’s hope that interest rates don’t destroy these companies by the time bill collectors come knocking.
Refining
North Dakota Production
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PETRO Engineering, PLLC via the following sources unless otherwise
noted:
www.eia.gov
www.drillinginfo.com
www.bhge.com
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