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Niobrara’s November Crude Oil Production Fall Is 2015’s Highest

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Niobrara crude oil production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on December 7, 2015. The report estimates that the Niobrara Shale produced 390,000 barrels of crude oil per day in November. This is 4.6% less than production in October and 9% less than production a year ago.

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

Niobrara Shale oil production rose from 130,000 bpd (barrels per day) in November 2007 to ~390,000 bpd in November 2015. This is a rise of 199% in eight years.

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Niobrara Shale’s natural gas production

In November, the Niobrara Shale’s natural gas production fell 54.8 MMcf (million cubic feet) per day compared to production in the previous month. This follows a 49.1 MMcf per day fall in October compared to September. Natural gas production at the Niobrara Shale rose from ~3.9 Bcf (billion cubic feet) per day in November 2007 to ~4.2 bcf per day in November 2015. That’s ~8% growth.

Rigs and monthly additions from one average rig

The number of rigs working at Niobrara fell by three to 35 in November compared to the previous month. A year ago, there were 107 drilling rigs in the region.

The EIA calculates that the additional Niobrara Shale crude oil production per rig in November 2015 rose 51% since November 2014. The additional production per rig rose by 186% 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 its recent fall.

What this means for OFS companies

Lower rig count and energy production in the Niobrara Shale in the past year affected OFS (oilfield service) companies’ revenues and profits negatively. Rig equipment makers and rig-related technology service providers include Schlumberger (SLB), Halliburton (HAL), Superior Energy Services (SPN), and Core Laboratories (CLB).

OFS companies may continue to lose revenues and profits if drilling activities fall. HAL makes up 0.2% of the SPDR S&P 500 ETF (SPY), but for investors who would like energy exposure, the energy industry makes up 6.9% of SPY.

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

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