Bakken oil and gas production numbers remain strong in February
Eric Gill
The N.D. Industrial Commission's Oil and Gas Division released its February 2023 production data during the monthly Director's Cut media conference Tuesday.
"Great news in terms of oil production," said Lynn Helms, director of the N.D. Dept. of Mineral Resources. "We jumped back well-above 1.1 million barrels a day — an increase of 9% over January, and then 16% above our revenue forecast."
Unfortunately, the global price of oil fell to $72.47/barrel in February — 3.4% below revenue forecasts.
Combined with the production increase, however, Helms said it was good news for the state.
The big news announced during Tuesday's Director's Cut presentation encompasses a judicial ruling favoring N.D. oil producers.
Helms said the state emerged victorious after the first round of legal proceedings to enforce the sales of federally owned lands believed to hold valuable deposits for potential oil drilling.
The leasing of federal lands to N.D.-based oil exploration was placed on hold by the Biden Administration.
"On the federal agency side of things, we were extremely happy that [federal] Judge [Daniel] Traynor [U.S. District Court N.D.] ... ordered the BLM [Bureau of Land Management] to hold quarterly lease sales and to find parcels available to lease, and to consistently hold those quarterly lease sales in compliance with the Mineral Leasing Act," Helms said.
"That was great to get that preliminary injunction," he said.
In response to Judge Traynor's ruling, N.D. Gov. Doug Burgum stated: "From the beginning, North Dakota has opposed President Biden’s illegal ban on federal oil and gas leasing, and we will continue to fight their misguided attacks on U.S. energy that hurt the global environment by pushing energy supply to countries that don’t produce energy as cleanly as the United States and put our nation’s economy and energy security at risk. For global stability, we should be selling U.S. energy to our friends and allies, not forcing them to buy it from our adversaries."
Returning to February's positive oil and gas production numbers, Helms cited the stability of the state's oil-rig counts as a sign the industry is moving in the right direction. He said there currently are 47 rigs in N.D., but noted there is "some volatility" in the number of rig counts.
"We did add one brand-new rig to the state" count, Helms said. "So we are seeing that gradual, slow increase, and we hope to be adding additional new rigs as workforce becomes available and iron becomes available.
"And," Helms continued, "you probably saw in the headlines ... that there's an effort to bring out-of-state workers in — actually, international workers in — to grow our workforce in the oil and gas sector in the state of North Dakota."
Although natural gas prices are down globally, Helms and Justin Kringstad, director of the N.D. Pipeline Authority, said natural gas production increased in the state during February.
"Natural gas production was up 7% at a little over 3 billion cubic feet a day," Helms said, noting the figure was not quite on par with record-setting production numbers reported in September 2022.
Kringstad concurred with Helms about the positive results.
"Continued strong news on the gas-capture side," Kringstad said, noting a 95% gas-capture statistic compared to 5% of flaring wells.
Kringstad called flaring from wells a "consistent challenge."
"Some other positive news on the gas-capture front," he continued. "We had more wells selling gas than new wells producing gas in the month of February. So, again, even [with] that [severe weather in December], real strong connection numbers by the midstream companies is always encouraging."
While gas-to-oil ratios dropped in February, Helms said it appears to be a "temporary" decline.
"Very good news," he said. "Good, solid numbers coming on gas capture, even though we're seeing extremely low natural gas prices. We're estimating $1.75 [mcf] for natural gas going into [the] northern border system at Watford City.
"That's a new record oil-to-gas price ratio of $46," he continued, noting there is a lot of pressure on companies to maintain natural gas capture efforts in the state. "Nationwide, U.S. natural gas storage is 19% above the five-year average."
The director briefly discussed OPEC's decision to cut production of crude oil. Helms attributed the OPEC (Organization of the Petroleum Exporting Countries) decision to several factors including attempts by the United States to pressure the consortium to lower oil prices, Wall Street short-sellers trying to drive down prices, the recent banking crises and worldwide "financial problems."
Each of these factors contributed to volatility in crude-oil markets, according to Helms, resulting in OPEC's decision, which ultimately backfired on attempts to manipulate prices.
"Crude oil inventories are slightly above average in the U.S. and worldwide," Helms said. "But the big news there is the announced surprise [production] cuts by OPEC."
Kringstad, who also spoke during the Director's Cut streaming-audio conference, addressed month-over-month decreases in gas-to-oil ratios in N.D. He said state officials are exploring why the decline has been an ongoing trend for the past several months.
"We are planning and expecting that trend to continue upward," Kringstad said.
As director of the N.D. Pipeline Authority, Kringstad is responsible for monitoring data on the transport of oil and gas across the state.
"When we look at crude oil movements for the month of February, we saw a general slight shift in barrels being moved by pipeline as opposed to by rail car," he said, indicating companies base their decisions about the mode of transport partly on regional pricing.
"When we look at what the refiners are paying around the U.S.," Kringstad said, the N.D. Pipeline Authority has noticed higher demand on the West Coast compared to the East Coast. Consequently, prices are higher, prompting companies to target the West Coast.
"When we look at where those barrels are going, it's no surprise that we're seeing more ... heading toward the Pacific Northwest than over to the East Coast," Kringstad said.
"By and large, if someone were looking for just a general estimate of how much crude was moving out of the region by rail car in February, it was rated at 90,000 to 100,000 barrels per day ... with roughly three-quarters of it heading to the Pacific Northwest and the remaining volume heading to PADD (Petroleum Administration for Defense District) 1 in the Atlantic Coast line."
Conversely, Kringstad noted less pressure on N.D.-based companies coming from Canadian imports of natural gas in the early months of 2023.
"Still sitting in a very good spot for gas-processing locally," he said. "At the moment, still looking at that 2026 to 2027 timeframe before we're going to need additional gas capacity in the Basin."
Kringstad shared Helms' enthusiasm for the long-term outlook of global crude oil prices.
"Generally, we saw a $10/barrel increase" from 2022 to 2024, Kringstad said of predictions for oil futures, citing U.S. Energy Information Administration (EIA) calculations. "So they [EIA] have a real strong outlook for pricing that's going to bode well for a place like North Dakota over the long term.
"Again, prices well north of $60, $70, $80 in those outward [2024] years," Kringstad continued. "We've got significant inventory and opportunities here, so the long-term outlook continues to look very strong."