North Dakota Posts Surprising Jump in Oil Output in March

May 13 (Reuters) - North Dakota posted a surprising jump in oil and natural gas output in March, as producers leaned on newer technologies and processes to offset a slump in commodity prices.

Many industry observers had expected output to fall for the third consecutive month in the wake of a more than 50 percent drop in oil prices since last summer.

"We scratched our heads in the month of March" as to why production increased, Lynn Helms, director of the state's Department of Mineral Resources, said during a conference call with reporters.

Yet the increase shows producers' willingness to wring efficiencies out of existing operations, as well as their attempt to maintain production, even at depressed prices, to safeguard relationships with service providers ahead of any future spike in crude oil prices.

About 189 North Dakota wells were completed in March at locations owned by Exxon Mobil Corp, Hess Corp, Continental Resources Inc and ConocoPhillips, reversing a trend in which most producers delayed completions.

"These four appear to be more in tune with having normal cash flow, and continue to complete their wells in a more aggressive manner," Helms said.

But in a sign of divergent strategies in the No. 2 U.S. oil producing state, EOG Resources Inc and Marathon Oil Corp continue to delay fracking.

"These two are going to hold onto completions as long as they legally can," Helms said. North Dakota imposes tax penalties for wells not fracked within one year.

The state's oil producers pumped nearly 1.2 million barrels per day (bpd) in March, up about 1 percent, or some 15,000 bpd, from February, according to the Department of Mineral Resources.

Natural gas production rose 14 percent to 47.2 million cubic feet. The state's natural gascapture rate fell by 1 percentage point to 80 percent, but still exceeds the state minimum of 77 percent.

The number of wells that had been drilled but not fracked, a metric commonly known as "ducks," fell by 20 during March to 880, reversing a months-long trend that had concerned some in the industry.

Helms said he only expects the state's drilling rig count to fall by one from 83 on Wednesday, though he added he does not expect the count to rise above 100 in the near future.

"We may be flat for a significant period of time here," he said. (Reporting by Ernest Scheyder; Editing by Paul Simao)