In downturn, N.Dakota's Oilfield Firms Jostle for Tiniest of Jobs

Oilfield service companies eager for work amid plunging crude oil prices have until the end of Wednesday to bid for a guaranteed job: plugging a North Dakota well abandoned by a producer closing up shop in the No. 2 U.S. oil patch.

 

Whichever oilfield service company does the plugging, be it Halliburton Co, Schlumberger NV or another firm, the job could bring in more than $20,000.

 

While that's far less than the millions they have received to drill and fracture wells in years past, the more-than 70 percent drop in oil prices since last summer means no job is too small.

 

Oil producers are delaying fracking jobs at roughly 850 wells throughout the state, according to data from regulators, harming profitability throughout the oilfield service industry and fueling layoffs.

 

Amid that slump, North Dakota officials last year confiscated Rio Petro Ltd's Sundhagen #1 well in Williams County, near the state oil capital of Williston.

 

The reason: Rio Petro did not notify regulators about work done on the well, a violation of state law. Nor did it increase the required bonding on the well, aimed at covering the cost of its reclamation, to $50,000 from the previously required $20,000. The privately held company also did not respond to the state's inquiries.

 

"Since they did not respond, we are basically confiscating the well," said Alison Ritter, spokeswoman for the state's Department of Mineral Resources.

 

The well has never been prolific, producing only 55,569 barrels since it first came online in 1980, according to state data.

 

That may explain why Rio Petro gave the well - its only one in the state - sparse attention. A secretary who answered the phone at the Airdrie, Alberta-based company declined to be identified said Rio Petro was preparing to shutter.

 

The state runs an Abandoned Well Site and Restoration Fund for older wells that is partially replenished by oil taxes. The fund has roughly $11 million. Up to $7.5 million may be spent each year on reclamation, the DMR's Ritter said.

 

From the state's perspective, plugging the Rio Petro well - rather than keeping it online - makes logical sense.

 

"We're not in the production business," said Ritter. "If another producer wants to come in and acquire this asset, that's up to them."