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Why Niobrara November Crude Oil Production Fell 17% in a Year

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Niobrara crude oil production

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on December 12, 2016. The report estimates that the Niobrara Shale produced ~0.40 million barrels per day of crude oil in November 2016. That was 1.2% less than production in October 2016 and 17.0% less than production in November 2015.

Month-over-month, the Niobrara Shale’s November 2016 crude oil production represents the 11th fall in the past 12 months.

Oil production for the Niobrara Shale rose from 139,330 bpd (barrels per day) in November 2008 to ~404,410 bpd in November 2016. That’s a rise of 190.0% in eight years.

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Rigs and monthly additions from the average rig

The number of rigs working at the Niobrara Shale rose to 28 in November 2016 compared to 26 in the previous month. In November 2015, there were 35 rigs in the region.

The EIA calculates that the Niobrara Shale crude oil production per rig in November 2016 rose 46.0% to 1,106 bpd from November 2015. The production growth per rig has risen ~26.0x 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 fall in the past year.

What this means for oilfield services companies

Oilfield services companies continue to lose revenue and profits when drilling activity in the Niobrara Shale falls. Rig equipment makers and rig-related technology service providers include Schlumberger (SLB), Nabors Industries (NBR), National Oilwell Varco (NOV), and Baker Hughes (BHI). Schlumberger makes up 0.61% of the SPDR S&P 500 ETF (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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