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March Oil Production Increases at Bakken Shale

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Bakken crude oil production and rigs

In the Drilling Productivity Report (or DPR) released on April 13, 2015, the U.S. Energy Information Administration (or EIA) estimates that in March 2015, the Bakken shale produced 1.33 million barrels of crude oil per day. This is 1% more than February’s production and 32% higher than production a year ago.

The number of rigs in the Bakken decreased to 101 in March, from 123 in February. A year ago, there were 181 drilling rigs in the region. Most of these rigs are directional in trajectory, or type.

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Oil production per rig

As you can see in the above graph, drilling efficiency in the Bakken has started to accelerate in the past year. By March, Bakken produced 576 barrels per day (or bbl/d) per rig, a 26% gain in production per rig since March 2014.

Meanwhile, the high rate of production has led to a decline in oil prices. As oil prices remain suppressed, oil producers will have less incentive to increase production, and production may even fall.

Falling oil prices will hurt Bakken shale producers such as Continental Resources, Inc. (CLR), Whiting Petroleum Corporation (WLL), EOG Resources, Inc. (EOG), and Hess Corporation (HES). WLL and CLR together account for 2.7% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Many midstream natural gas companies and MLPs operate in Bakken, North Dakota. These companies generate revenues from natural gas volume that is transported, stored, treated, and delivered. An increase in Bakken shale oil production should benefit MLPs such as Enbridge Energy Partners (EEP) and Targa Resources Partners (NGLS).

Williston Basin has highest tight oil reserves

The Williston Basin’s large size and number of wells have unlocked huge oil reserves in the region. The most productive formations for the horizontal drilling and hydraulic fracturing process are in Williston Basin’s Bakken and Three Forks.

According to the EIA’s latest available data, the Williston Basin across eastern Montana, western North Dakota, South Dakota, and southern Saskatchewan has the largest tight oil proved reserves in the United States.

In the next part of this series, we’ll look at the Niobrara shale crude oil and gas production.

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