BISMARCK – North Dakota oil production saw its first significant decline from the slowdown in December, dropping about 2.5 percent to 1.15 million barrels per day.
Department of Mineral Resources Director Lynn Helms said although there have been slight drops in oil production recently due to factors such as meeting gas capture goals, December marked the first month that the state has seen the effects of lower rig counts and fewer well completions.
“We’re seeing actual production declines begin to kick in,” Helms said Wednesday.
North Dakota’s oil industry is preparing for lower prices to last longer, Helms said, based on recent conversations he had with major Bakken operators.
“The attitude in the industry is that prices are significantly lower than anybody expected a year or even six months ago,” Helms said. “They anticipate them staying lower much longer than was expected a year or six months ago.”
The price for a barrel of North Dakota sweet crude was $16.50, according to Flint Hills Resources, the lowest price since February 2002, Helms said.
The number of drilling rigs operating in North Dakota fell to 39 on Wednesday, and Helms said he expects that to drop to 29 or 30 rigs.
Drilling permit activity has declined to the lowest rate since 2009, Helms said, as operators expect low prices to last until at least the third quarter of this year.
Helms said he expects operators to lay off more personnel this year.
“They’re all saying the first six months of this year, there’s going to be quite a few pink slips,” Helms said.
Ron Ness, president of the North Dakota Petroleum Council, made similar comments about layoffs to the Northwest Landowners Association earlier this month in Stanley.
“Companies really don’t have any place to cut back anymore,” Ness said. “It is absolutely killing companies to lay off the highly skilled people that we’ve attracted here right now.”
The state has 1,183 inactive wells, about 370 higher than normal, and Helms said he expects that number to climb.
The number of wells that were drilled but waiting on hydraulic fracturing crews was estimated to be 945 at the end of December, a decrease of 24 since November.
Natural gas production held steady in December at an average of 1.67 billion cubic feet per day, the preliminary figures show.
Helms said that’s a reflection of the activity concentrating on the core of the Bakken, where wells produce more natural gas.
The percentage of natural gas flared in December was 15 percent, down 1 percentage point from November.
The volume of oil transported by rail fell again in December to between 500,000 and 535,000 barrels per day in December, down from more than 730,000 barrels per day at the beginning of 2015, according to the North Dakota Pipeline Authority.
Director Justin Kringstad attributed the drop to economic factors that drive more oil to pipelines in addition to the drop in overall production.
An estimated 52 percent of oil was transported by pipeline in December, compared with 41 percent transported by rail, Kringstad said.