Niobrara September Crude Oil Production Fell: Fifth Straight Fall



Niobrara crude oil production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on October 13, 2015. The report estimates that the Niobrara Shale produced 409 thousand barrels of crude oil per day in September. This is ~4% less than production in August but 1% more than production a year ago.

Month-over-month, Niobrara’s September crude oil production number represents the fifth consecutive fall. It was also the largest fall in monthly production in 2015.

The Niobrara Shale oil production rose from ~126,000 bpd (barrels per day) in September 2007 to ~409,000 bpd in September 2015. This is a rise of 225% in eight years.

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Niobrara Shale’s natural gas production

In September, the Niobrara Shale’s natural gas production fell 49.6 MMcf (million cubic feet) per day compared to production in the previous month. This follows a 50.3 MMcf per day fall in August compared to July. Natural gas production at the Niobrara Shale rose from an average of ~3.67 Bcf (billion cubic feet) per day in 2007 to ~4.37 bcf per day in September. That’s ~19% 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 such as 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 drilling activity falls. Rig equipment makers and rig-related technology service providers include Schlumberger (SLB) and Halliburton (HAL).

Noble Energy accounts for 1.5% of the Energy Select Sector SPDR ETF (XLE). Whiting Petroleum accounts for 0.3% of the iShares US Energy ETF (IYE).

Rigs and monthly additions from one average rig

The number of rigs working at Niobrara fell by three to 42 in September compared to the previous month. A year ago, there were 105 drilling rigs in the region.

The EIA calculates that the average Niobrara Shale rig added production of 589 bpd in September 2015, a 45% rise since September 2014. The additional production per rig rose by ~17x in the past eight years. The Niobrara Shale in Colorado and Wyoming was one of the fastest-growing oil-producing regions in the United States before the recent fall.

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


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