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Why February Bakken Crude Oil Production Fell 6.8% Year-over-Year

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Mar. 10 2016, Updated 1:54 p.m. ET

Bakken crude oil production

On March 7, 2016, the EIA (U.S. Energy Information Administration) released its Drilling Productivity Report. It estimated that the Bakken Shale produced 1.1 MMbpd (million barrels per day) of crude oil in February 2016. That’s 1.6% less than the production level in January 2016 and 6.8% less than the production level in February 2015.

In the past eight months, the Bakken Shale’s month-over-month crude oil production fell on seven occasions.

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Shale oil production at the Bakken rose from 147,000 bpd (barrels per day) in February 2008 to ~1.1 MMbpd in February 2016. This represents a 668% rise in eight years. However, as crude oil prices remain suppressed, oil producers will have less incentive to increase production. Crude oil production may even fall. We’re seeing this with Bakken production.

Rigs and monthly additions from the average rig

The number of rigs working at the Bakken Shale fell from 45 in January 2016 to 38 in February 2016. A year ago, there were 123 drilling rigs in the region. Most of these rigs are horizontal in trajectory or type.

The EIA calculates that the average Bakken rig added production of 740 bpd in February 2016, a 40% rise over February 2015. Since January 2008, additional production per rig has risen 4.3x.

What does this mean for oilfield services companies?

Oilfield service and equipment companies lose revenue if drilling activity falls. The lower Bakken rig count and production are negative for companies such as RPC (RES), Baker Hughes (BHI), Weatherford International (WFT), and Halliburton (HAL). BHI accounts for 1.4% of the ProShares Ultra Oil & Gas ETF (DIG).

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