Bakken Crude Oil Production Fell in August: Who’s Losing?



Bakken crude oil production

On September 14, 2015, the EIA (U.S. Energy Information Administration) released its Drilling Productivity Report. It estimates that in August 2015, the Bakken Shale produced 1.22 MMbpd (million barrels per day) of crude oil. That’s 1.40% less than the production levels in July 2015. However, it’s 5.10% more than the production a year ago. In August, the Bakken Shale’s month-over-month crude oil production fell for the second time in a row.

Rising US production led to a fall in crude oil prices. As oil prices remain suppressed, oil producers will have less incentive to increase production. Crude oil production may even fall. We’re seeing this with the Bakken production.

Shale oil production at the Bakken rose from ~140,000 bpd (barrels per day) in August 2007 to ~1.22 MMbpd in August 2015. This represents a 776% rise in eight years.

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What this means for energy companies

The recent fall in production will hurt the Bakken Shale producers that may be behind this fall. Some Bakken-based producers include Denbury Resources (DNR), Continental Resources (CLR), SM Energy (SM), Marathon Oil (MRO), and EOG Resources (EOG). Together, SM Energy and Marathon Oil account for 2.50% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Lower Bakken production is also negative for OFS (oilfield service) companies like Schlumberger (SLB), Baker Hughes (BHI), and Nabors Industries (NBR). OFS companies that manufacture rigs and equipment and provide drilling services could also lose if the drilling activity falls.

Rigs and monthly additions from one average rig

The number of rigs working at the Bakken Shale rose to 70 in August—up from 69 in July. A year ago, there were 189 drilling rigs in the region. Most of these rigs are horizontal in trajectory or type.

The EIA calculates that the average Bakken rig added the production of 683 bpd (barrels per day) in August 2015—a 41% rise since August 2014. From August 2007, the additional production per rig rose 4.8x.

Williston Basin has highest tight oil reserves

The most productive formations for horizontal drilling and hydraulic fracturing are in the Williston Basin’s Bakken and Three Forks formations. According to the EIA, the Bakken and Three Forks play that covers portions of North Dakota, Montana, and South Dakota has the largest tight oil proved reserves in the US.

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


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