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December Bakken Crude Oil Production Fell 9.6% in a Year

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Jan. 15 2016, Updated 2:26 p.m. ET

Bakken crude oil production

On January 11, 2016, the EIA (U.S. Energy Information Administration) released its Drilling Productivity Report. It estimates that in December 2015, the Bakken Shale produced 1.1 MMbpd (million barrels per day) of crude oil. That’s 1.6% less than the production levels in November 2015. It’s also 9.6% lower than production in December 2014. In December 2015, the Bakken Shale’s month-over-month crude oil production fell for the sixth time in a row.

If 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 in the Bakken rose from 147,290 bpd (barrels per day) in December 2007 to ~1.1 MMbpd in December 2015. This represents a 674% rise in eight years.

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Active rigs

The number of rigs working at the Bakken Shale decreased to 56 in December 2015, down from 62 in November 2015. A year ago, there were 182 drilling rigs in the region. Most of the rigs in this region are horizontal in trajectory.

The EIA calculates that the average Bakken rig added production of 712 bpd in December 2015, a 46% rise since December 2014. From December 2007, the additional production per rig rose 4.9x.

What this means for OFS companies

The lower Bakken rig count and production levels are negative for OFS (oilfield service) companies such as Schlumberger (SLB), Baker Hughes (BHI), National Oilwell Varco (NOV), and Nabors Industries (NBR). OFS companies manufacture rigs and equipment and provide drilling services. They lose revenues if drilling activity falls. BHI accounts for 2.2% of the Energy Select Sector SPDR ETF (XLE). Read Market Realist’s Impending Merger with HAL Keeps Baker Hughes in the Spotlight to learn more.

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, these formations, which cover portions of North Dakota, Montana, and South Dakota, have 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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