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Niobrara Crude Oil Production in August: Deepest Fall in 2015

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Niobrara crude oil production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on September 14, 2015. The report estimates that the Niobrara Shale produced 417.2 thousand barrels of crude oil per day in August. This is 4% less than production in July, but 3% more than production a year ago.

Month-over-month, the August crude oil production number represents the fourth consecutive fall in the Niobrara Shale. It was also its largest fall in production, so far, in 2015.

The Niobrara Shale oil production rose from ~128,000 bpd (barrels per day) in August 2007 to ~417,000 bpd in August 2015. This is a rise of 227% in eight years.

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Niobrara Shale’s natural gas production

In August, the Niobrara Shale’s natural gas production fell 50.4 MMcf (million cubic feet) per day compared to production in the previous month. This follows a 45.6 MMcf per day fall in July compared to June. The natural gas production at the Niobrara Shale rose from an average of ~3.67 Bcf (billion cubic feet) per day in 2007 to ~4.42 bcf per day currently. That’s ~20% growth.

What it means for Niobrara producers

The recent production fall will hurt Niobrara Shale producers that may be behind this fall. This includes energy producers like Noble Energy (NBL), Bonanza Creek Energy (BCEI), and Whiting Petroleum (WLL). OFS (oilfield service) companies that manufacture rigs and equipment and provide drilling services could also lose if the drilling activity falls. Rig equipment makers and rig-related technology service providers include Schlumberger (SLB) and Halliburton (HAL).

Noble Energy accounts for 1.40% of the Energy Select Sector SPDR ETF (XLE). Whiting Petroleum accounts for 0.24% of the iShares U.S. Energy ETF (IYE).

Rigs and monthly additions from one average rig

The number of rigs working at the Niobrara fell by one to 45 in August compared to the previous month. A year ago, there were 101 drilling rigs in the region.

The EIA calculates that the average Niobrara Shale rig added production of 547 bpd in August 2015—a 40% rise since August 2014. The additional production per rig rose by ~15x in the past eight years.

The Niobrara Shale in Colorado and Wyoming was one of the fastest-growing oil-producing regions in the US before the recent fall.

In the next part, we’ll take a look at the natural gas production at the Marcellus Shale.

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