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Forum News Service, Published November 15 2013

Total Bakken output projected to top 1 million barrels in December

WILLISTON, N.D. – The entire U.S. Williston Basin produced more than 1 million barrels of oil per day in September, driven by another record month of North Dakota oil production.

North Dakota produced 931,940 barrels per day, a 2 percent increase over August, according to preliminary numbers released Friday by the Department of Mineral Resources.

The U.S. Williston Basin also includes portions of South Dakota, which produced 5,017 barrels per day in September, and Montana, which produced 75,460 barrels per day in August, according to figures provided by Justin Kringstad, director of the North Dakota Pipeline Authority.

“That’s what our rail and pipeline system is having to handle now,” Kringstad said of the record production.

Although a September production figure for Montana is not yet available, Kringstad said he anticipates it held steady at about 75,000 barrels.

Bakken oil production in North Dakota and Montana is projected to top 1 million barrels of oil per day in December, according to the U.S. Energy Information Administration. That estimate does not include production from other formations, said Kringstad, who talked to the EIA about the report.

North Dakota is on track to hit a total of 1 million barrels per day early next year as production is expected to keep climbing this year despite a recent drop in oil prices, said Department of Mineral Resources Director Lynn Helms.

Companies have told Helms they plan to add five to 10 more rigs to the current 185 drilling in the state, as well as bring in more hydraulic fracturing crews this year.

Although the industry often pulls back at the end of the year to avoid overspending annual budgets, this year operators gained efficiencies in drilling multiple wells on the same pad and saw a 20 percent decrease in well costs, Helms said.

“They actually have a little extra capital going into the last quarter of the year and they’re planning to ramp up activity,” he said.

North Dakota natural gas production also hit a record in September, with nearly 1.1 billion cubic feet per day, according to preliminary figures.

The percent of natural gas flared in September dropped slightly from 29.5 percent to 29.2 percent, Helms said. The volume of natural gas flared during the month increased from 9.541 billion cubic feet to 9.573 billion cubic feet, one of the smallest increases Helms said he’s seen in two years.

“That’s good news, but that’s still way too much flaring,” Helms said.

Helms listed the price of light, sweet crude at $71.25 per barrel, down from the $85-$90 range it had been in previous months.

Helms said the industry considers a price of $80-$85 to be a “sweet spot” for North Dakota crude and companies grow concerned when it falls below that. But for the four counties with the most drilling activity, the break-even price is $45 a barrel or less, he said.

“There’s a long ways to go before Williams, Mountrail, McKenzie and Dunn counties pull the reins in and really decrease activity,” Helms said.

Helms said he didn’t know what is causing the decline in price, other than possibly a constraint on the refining market for light, sweet crude in the Midwest.

“My take on it is that this is going to drive a lot more oil into railcars,” said Helms, adding that oil prices on the coasts haven’t seen the same fallout. Rail is the best way for North Dakota crude to reach those refineries.

For the first time, Helms included in his report how much of the state’s production came from Bakken and Three Forks wells compared to older, legacy oil wells.

Ninety-three percent of North Dakota’s oil came from Bakken and Three Forks wells in September, which Helms called a “stunning number.”

“Production would be less than 10 percent of what it is today if it wasn’t for the Bakken and Three Forks,” Helms said.

About 61 percent of North Dakota’s total 9,682 producing wells are Bakken and Three Forks wells, he said.

The Bakken now accounts for a little more than 10 percent of total U.S. oil production, according to the EIA.