The Bakken Shale| April 2020
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 breakeven point at US$62/bbl. The top formations within the region are the Three Forks and the Spanish formations.
State Drilling Statistics
Active Drilling Rigs in Basin- (-)
Total Rigs in North Dakota- 27
Total Rigs in United States- 465
Total U.S. Rigs down 53% YTD
Financial & Economic Updates
North Dakota Production Plummeting
As corona virus continues to impact producers across the nation, North Dakota has revealed some numbers that reflect just how poorly the largest shale plays in the United States are doing. Within the Bakken, and specifically North Dakota, oil producers have already closed at least 6,000 wells. This removes an equivalent of 405,000 barrels of oil per day, or 30% of the state’s total production. It goes without saying that North Dakota and shale operators find themselves in a tough spot, but more are choosing to abandon ship rather than weathering the storm.
Desperate Times call for Old Measures
North Dakota is considering production caps, a strategy it has not implemented since the 1950s when oil was first discovered in the state. Although it is something the state would prefer to not see, it could be a valid solution if all else fails. So far, the North Dakota Oil and Gas Division revived a waiver policy allowing wells to be idled for longer than a year before they either start producing or are permanently abandoned. In addition, it is now acceptable to shut in wells without breaking a state lease. This increased flexibility has proved useful for many operators as more pursue the strategy of slowing or halting production altogether to get through this glut.
The Downside to Shutting In
Although North Dakota is doing its best to work with operators to develop solutions that will allow them to survive through the COVID-19 epidemic, shutting in wells could prove dangerous in the future. Although it will prevent operators from selling oil at price points that are uneconomic, bringing a well back online in order to produce once again runs the risk of costing the operator around $50,000 or more. In case prices do not rebound in the way that everyone desires, the state held an emergency meeting that discussed all possible options to support the industry, even using the federal stimulus money or tax breaks for operators.
North Dakota Production
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