All eyes are on North Dakota's production numbers...
The Wall Street Journal is reporting that U.S. oil prices have jumped to their highest point of the year ($56.36), citing an oil production decline for a second-straight month in North Dakota. This is said to signal that the "country's production may be peaking and global demand may be rising."
While world markets and politics are also clearly considered, North Dakota always enters the conversation. Even CNBC's discussion of world oil market considerations nodded toward North Dakota, noting that "North Dakota's February oil production fell 15,000 barrels per day versus January, although the number of producing wells hit a record high."
What is North Dakota's take on this? The Director of the Department of Mineral Resources in North Dakota provides a monthly update describing current activity in the North Dakota oil patch – referred to as the "Director's Cut."
Some say that statistics can be manipulated to reflect whatever trends you want them to say. However, some numbers just don't lie.
The February 2015 Director's Cut states that "[o]il price is by far the biggest driver behind the slow-down, with operators reporting postponed completion work to avoid high initial oil production at very low prices and to achieve NDIC gas capture goals." Further, "[r]ig count in the Williston Basin has fallen rapidly."
With regard to North Dakota:
- February 2015: https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-04-14.pdf
- Oil Production was 32,958,640 barrels (1,177,094 barrels/day)
- The price of sweet crude was $34.11
- The February rig count was 133
- Over 99% of drilling now targets the Bakken and Three Forks formation
- February 2014 (ONE YEAR AGO): https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2014-04-11.pdf
- Oil Production was 26,637,513 barrels (951,340 barrels/day)
- The price of sweet crude was $86.89/barrel
- The February rig count was 189
- Over 95% of drilling targets the Bakken and Three Forks formations
- February 2013 (TWO YEARS AGO): https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2013-04-16.pdf
- Oil Production was 22,871,411 barrels (737,787 barrels/day)
- The price of sweet crude was $86.88
- The February rig count was 183
- Over 95% of drilling targets the Bakken and Three Forks formation
- February 2012 (THREE YEARS AGO): https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2012-04-11.pdf
- Oil Production was 16,935,846 barrels (514,318 barrels/day)
- The price of sweet crude was $83.26
- The February rig count was 202
- Over 95% of drilling targets the Bakken and Three Forks formations
Moreover, Lynn Helms, the Director of the North Dakota Department of Minerals Resources, recently speculated that at least 125 wells that have been drilled but not completed would be completed in June of 2015, pushing North Dakota's oil production back up to 1.2 million barrels/day. By contrast, in February, only 42 wells were completed.
If prices won't truly recover until there is an adjustment to supply, North Dakota's belated completions, and the likely attendant rise in production, do not bode well for a significant recovery in 2015.
Some numbers just don't lie.
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