Why Niobrara Crude Oil Production Fell in March



Niobrara crude oil production

The EIA (US Energy Information Administration) released its Drilling Productivity Report on April 11, 2016. The report estimates that the Niobrara Shale produced ~434,000 bpd (barrels per day) of crude oil in March 2016. This was 3% less than production in February 2016, and 15% less than production in March 2015. Month-over-month, the Niobrara Shale’s March 2016 crude oil production number represents its fifth straight fall.

Why Niobrara Crude Oil Production Fell YoY in March

The Niobrara Shale oil production rose from 132,060 bpd in March 2008 to ~434,000 bpd in March 2016. This is a rise of 229% in eight years.

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Rigs and monthly additions

The number of rigs working at the Niobrara Shale fell by five to 18 in March 2016 compared to the previous month. In March 2015, there were 56 rigs in the region.

The EIA calculates that the Niobrara Shale crude oil production per rig in March 2016 increased by 58% from March 2015. The production growth per rig has risen by 23x 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

The lower rig count and energy production in the past year has 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).

Notably, oilfield services companies may continue to lose revenues and profits if drilling activity in the Niobrara Shale falls. Schlumberger makes up 0.58% of the SPDR S&P 500 ETF (SPY). For investors who would like exposure to the energy sector, energy makes up 6.8% of SPY.

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


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