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Niobrara Crude Oil Production in October: More Declines since 2014

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Niobrara crude oil production

The EIA (US Energy Information Administration) released its Drilling Productivity Report on November 9, 2015. The report estimates that the Niobrara Shale produced 397,000 barrels of crude oil per day in October. This is ~4% less than production in September and 8% less than production in October 2014.

Month-over-month, Niobrara’s October crude oil production numbers represent its sixth consecutive decline. It was also the largest fall in monthly production in 2015.

The Niobrara Shale oil production rose from ~130,300 bpd (barrels per day) in October 2007 to ~397,000 bpd in October 2015. This represents a rise of 205% over eight years.

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Niobrara Shale’s natural gas production

In October, the Niobrara Shale’s natural gas production fell 49.5 MMcf (million cubic feet) per day compared to production in the previous month. This follows a 49.6 MMcf per day fall in September compared to August. Natural gas production at the Niobrara Shale rose from an average of ~3.67 Bcf (billion cubic feet) per day in 2007 to ~4.29 bcf per day in October. That’s a ~17% growth.

What it means for Niobrara producers

The recent production fall will likely hurt Niobrara Shale producers already behind this fall. Niobrara producers include Noble Energy (NBL), Bonanza Creek Energy (BCEI), and Whiting Petroleum Corporation (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 Company (HAL).

Schlumberger accounts for 0.5% of the SPDR S&P 500 ETF (SPY). Whiting Petroleum accounts for 0.3% of the iShares US Energy ETF (IYE).

Rigs and monthly additions on per-rig average

The number of rigs working at Niobrara fell by four to 38 in October compared to the previous month. One year previously, there were 109 drilling rigs in the region.

The EIA calculates that the average Niobrara Shale rig added production of 616 bpd in October 2015, a 48% rise since October 2014. The additional production per rig rose by ~18x over 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 fall 2015.

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

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