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Bakken Crude Oil Production in October: Fourth Straight Decline

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Nov. 13 2015, Updated 2:07 p.m. ET

Bakken crude oil production

On November 9, 2015, the EIA (US Energy Information Administration) released its Drilling Productivity Report. The report estimates that in October 2015, the Bakken Shale produced 1.16 MMbpd (million barrels per day) of crude oil—1.8% less than the production levels in September 2015 and 4.6% lower than production was one year previously. In October, the Bakken Shale’s month-over-month crude oil production fell for the fourth time in a row.

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

Shale oil production at the Bakken rose from 145,070 bpd (barrels per day) in October 2007 to ~1.16 MMbpd in October 2015. This represents a 700% rise in eight years.

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What this means for energy companies

The recent fall in production will likely hurt Bakken Shale producers already behind this fall. Bakken-based producers include Continental Resources (CLR), SM Energy Company (SM), Marathon Oil Corporation (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 tend to lose when drilling activity falls.

Rigs and monthly additions on per-rig average

The number of rigs working at the Bakken Shale decreased to 63 in October, down from 68 in September. One year previously, there were 191 drilling rigs in the region. Most of these rigs are horizontal in trajectory or type.

The EIA calculates that the average Bakken rig added 694 bpd of production in October 2015, a 45% rise since September 2014. From October 2007, the additional production per rig rose by 4.9x.

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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