Bakken Players Need $55 for Viable Production

North Dakota needs an oil price of around $55 per barrel and a fleet of around 140 rigs to sustain production at the current level of 1.2 million barrels per day, the state's chief regulator told legislators yesterday.

Department of Mineral Resources Director Lynn Helms outlined breakeven rates for wells across the state and production projections for a range of prices in a presentation for the House Appropriations Committee of the State Legislature (https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf).

Breakeven rates for new wells, the level at which all drilling would cease, range from $29 in Dunn county and $30 in McKenzie to $36 in Williams and $41 in Mountrail. These four counties account for 90 percent of the drilling in the state.

Breakevens in counties on the periphery of the Bakken play, which have far fewer rigs, range up to $52 in Renville-Bottineau, $62 in Burke and $73 in Divide.

But Flint Hills Resources posted price for North Dakota crude was just $32, Helms said, compared with almost $49 per barrel for WTI. The average for the year so far has been $40, and is still falling.

Even before prices hit these minimum levels, drilling will slow sharply. The number of rigs operating in the state has already fallen to 165, down from 191 in October, according to the department.

If prices are around $35 per barrel, the number of rigs will fall to just 90, and production will decline to 1.03 million barrels per day (b/d) by the start of July 2015, and then dwindle to 875,000 b/d in July 2016 and 720,000 b/d in July 2017.

To keep output steady at 1.2 million b/d for the next three years, the state's producers need a price of $55 rising closer to $65 in the longer term to support a fleet of 140-155 rigs.

Helms' projections confirm North Dakota's oil output will start to fall by the end of the year unless prices rise from their current very depressed level.

Prices of $48 WTI and $32 Bakken are not sustainable in anything other than the very short term.

By John Kemp