N.D. hits near-record oil production as prices plummet
If the price stays low, it could crimp the state’s tax revenue, state Mineral Resources Department Director Lynn Helms said on a conference call with reporters.
“We think we’re in a period of sustained low prices for at least two years,” Helms said. “It’s going to be a long, difficult period.”
Most observers predicted U.S. oil production would drop when the price began falling in November.
Instead, North Dakota produced 1.21 million barrels a day in June, according to figures released Friday. That’s the second-highest monthly average on record. There are signs that production could stay high — the number of wells waiting for hydraulic fracturing has fallen, and the rig count has stabilized at 73 in July and 74 in August. The state issued 233 drilling permits in July, up from 192 in June.
Oil prices have fallen to $28.50 a barrel in North Dakota, below the projections used for the state budget. That’s the lowest since December 2008, in the middle of the Great Recession.
About 95 percent of North Dakota’s oil comes from the Bakken formation, which has been developed in the last 10 years using hydraulic fracturing and other improved technologies. The field still doesn’t have enough pipelines to carry its oil to refining centers on the coasts, so producers get a lower price than in other parts of the country.
The Department of Mineral Resources estimated producers could break even in three of the Bakken’s core counties, even if oil prices fell to $24 to $26 a barrel. Companies are squeezing more oil out of each well by drilling longer horizontal legs and using extensive “frac jobs,” said Helms.
“Even as the price has dropped, they’ve found ways to cut costs,” he said.