Break-even oil prices in the prime acreage of the Bakken now rival oil producing areas of the Middle East, according to Lynn Helms, director of the North Dakota Department of Mineral Resources. In giving his monthly Director’s Cut report on oil and gas activity in North Dakota for the month of September, Helms said that with ONEOK’s Bear Creek gas processing plant going into service north of Killdeer, activity in northwestern Dunn County has increased. The results from new high-volume, slick water fracturing with 40 to 50 stages have been “fantastic,” he said. Citing break-even prices for the third quarter of this year, Helms said Dunn County was at $15 a barrel, McLean County at $16 and McKenzie County at $17. “With the exception of Williams County—which went up a dollar—the rest of the counties all dropped between $5 and $13 dollars a barrel,” Helms explained. “What we’re seeing are the industry efforts to increase efficiency and move to lower and lower break-even prices.” A lack of gas processing infrastructure in Dunn County has held back producers such as ConocoPhillips from testing new well designs, but that changed when Bear Creek went into service. “The wells are coming in 200 to 300 barrels per day better than McKenzie County wells, and they have a lower gas-oil ratio,” Helms noted. At a break-even price of $15, he said Dunn County is competitive with new oil reserves being brought online in the Middle East where the break-even price is typically in the mid-teens. “When looking at break-even values below $20 a barrel, it’s as good a place to drill as any place in the world,” Helms explained. Overall, North Dakota’s oil production continued to fall during September to just under 972,000 barrels per day, a decrease of 10,000 barrels or 1 percent from August. Helms said the 71 wells completed during September was not enough to maintain production. Gas production also fell slightly from 1.64 million cubic feet per day in August to 1.61 million cubic feet per day in September. According to Helms, this was caused by a shift in activity from McKenzie Country to Dunn and Williams counties where the gas-to-oil ratios are lower. In discussing what the Organization of Petroleum Exporting Countries (OPEC) might do later this month to decrease production and increase oil prices, Helms was not optimistic. He noted that OPEC has ramped up its production to record levels and that there are 5,000 uncompleted wells in the U.S.—about 900 of them in the Bakken. “OPEC came out last week and said they have tempered or reduced their expectations for oil prices for the next few years,” he said. “We’re going to be at $50 per barrel by the end of this year, but they really only expect it to go up $5 a barrel for the next three years after that. We don’t really see oil price levels that would justify much drilling until the end of 2018 and certainly not into 2019. That slows all of the expectations about increased activity.” In addition, even if OPEC significantly reduces its production, the uncompleted U.S. wells represent the potential to quickly make up the difference. “With 5,000 wells drilled and waiting to be completed, it’s possible for the U.S. industry to fill any void rather quickly,” Helms said. “One would not expect rapid increases in oil prices.” He also believes that delays in completing the Dakota Access Pipeline have created uncertainty and hindered producers’ plans to increase activity in North Dakota. “If they can lock in a known transportation cost at $6 to $10 a barrel, that really helps them in terms of raising venture capital or borrowing money,” Helms explained. “If it has to go by rail at $15 to $25 a barrel, it puts North Dakota at a big disadvantage.” For more on the Bakken, follow us on Twitter @TheBakkenMag
Break-even oil prices in Bakken are now reaching equivalency with oil production areas in the Middle East, with new well designs to thank for the achievement, according to the North Dakota Department of Mineral Resources. Activity in the region has increased as the new Bear Creek gas processing plant has gone into production, which has galvanised the testing of new well designs by providing much-needed gas processing infrastructure. The local industry is trying to increase efficiency and lower the break-even price. The Bakken area’s break-even price is currently $15, competitive with the price per barrel for the low-cost producers of the Middle East.