March 9, 2016 – Railway Age
RBN Energy: Putting the brakes on Bakken crude
By: William C. Vantuono
Increased pressure on North Dakota crude oil producers is “finally” putting the brakes on Bakken crude production, writes RBN Energy LLC analyst Sandy Fielden in Is It All Over Now? Producers Lose Their Appetite For Bakken Crude Output.
“For the past, year many shale oil producers have defied the expectations of many and kept output at or near to record levels in the face of falling oil prices and much tougher economics,” writes Fielden. “Improvements in productivity, cost cutting and a concentration on ‘sweet spot’ wells that generate high initial production (IP) rates have all helped cash strapped producers survive. But with oil prices so far in 2016 stuck in the $35/Bbl and lower range and with the worldwide crude storage glut still weighing on the market, producers are finally pulling back.”
A few highlights:
• A number of signs point to the decline in production continuing during the rest of 2016 unless there is an extended oil price recovery. For a start, the number of new permits to drill wells in North Dakota is at a seven-year low, indicating a low appetite for drilling. Second, there were 1,183 inactive wells in the state in December, about 30% above normal for this time of year. The operators have essentially abandoned these inactive wells, usually because they are losing money. Many of these inactive wells are older and had very low production rates, less than 35 b/d. Such older wells are known as “stripper” wells and their costs are long ago written off, so operators usually keep them running unless transport and maintenance costs exceed the value of the crude (i.e. prices get too low). A third indicator of declining producer interest in the Bakken is the large number of producing wells in North Dakota currently being transferred (sold) by one operator to another—697 wells as of Feb. 17, 2016.
Read the full article here: http://www.railwayage.com/index.php/management/rbn-energy-putting-the-brakes-on-bakken-crude.html
