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Why Niobrara February Crude Oil Production Fell 8% in a Year

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Mar. 11 2016, Updated 9:07 a.m. ET

Niobrara crude oil production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on March 7, 2016. The report estimates that the Niobrara Shale produced 438,000 bpd (barrels per day) of crude oil in February 2016. This was 3% less than production in January 2016 and 8% less than production in February 2015.

Month-over-month, the Niobrara Shale’s February 2016 crude oil production number represents six consecutive falls.

The Niobrara Shale oil production rose from 128,000 bpd in January 2008 to ~438,000 bpd in February 2016. This is a rise of 241% in eight years.

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Rigs and monthly additions from the average rig

The number of rigs working at the Niobrara Shale fell by three to 23 in February 2016 compared to the previous month. In February 2015, there were 75 rigs in the region.

The EIA calculates that the Niobrara Shale crude oil production per rig in February 2016 rose 53% over February 2015. The production growth per rig has risen by 21x 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 the recent fall.

What this means for oilfield services companies

Lower rig counts and energy production in the past year have reduced oilfield services companies’ revenues and profits. Rig equipment makers and rig-related technology service providers include Schlumberger (SLB), C&J Energy Services (CJES), Superior Energy Services (SPN), and Core Laboratories (CLB).

Oilfield services companies may continue to lose revenues and profits if drilling activity in the Niobrara Shale falls. Schlumberger makes up 0.53% of the SPDR S&P 500 ETF (SPY). For investors who would like exposure to the energy sector, energy makes up 6.9% of SPY.

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