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

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Oct. 15 2015, Published 7:12 p.m. ET

Bakken crude oil production

On October 13, 2015, the EIA (U.S. Energy Information Administration) released its Drilling Productivity Report. It estimates that in September 2015, the Bakken Shale produced 1.2 MMbpd (million barrels per day) of crude oil. That’s 1.7% less than the production levels in August 2015. It’s also 1.1% lower than production a year ago. In September, the Bakken Shale’s month-over-month crude oil production fell for the third 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 ~140,500 bpd (barrels per day) in September 2007 to ~1.20 MMbpd in September 2015. This represents a 757% rise in eight years.

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What this means for energy companies

The recent fall in production will hurt Bakken Shale producers that may be behind this fall. Bakken-based producers include Continental Resources (CLR), SM Energy (SM), Marathon Oil (MRO), and EOG Resources (EOG). Marathon Oil accounts for 1.1% of the Energy Select Sector SPDR ETF (XLE).

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

Rigs and monthly additions from one average rig

The number of rigs working at the Bakken Shale decreased to 68 in September, down from 70 in August. A year ago, there were 194 drilling rigs in the region. Most of these rigs are horizontal in trajectory or type.

The EIA calculates that the average Bakken rig added production of 692 bpd in September 2015, a 47% rise since September 2014. From September 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 United States.

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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