North Dakota Oil-Rig Count Drops Again, as Price for Crude Remains Weak

Amid persistently low oil prices, the number of rigs drilling new oil wells in North Dakota hit its lowest point in more than five years, North Dakota’s top oil-industry regulator said Friday.

The count of rigs, mostly targeting oil and gas in shale layers, stands at 79, a drop of 21 since March, and the lowest since December 2009, near the beginning of North Dakota’s oil boom, according to the monthly Director’s Cut report by Lynn Helms, head of the state Mineral Resources Department.

Oil drillers have been scaling back operations for months as low oil prices make it uneconomical to invest in new crude-oil supplies.

Domestic crude oil dropped below $60 per barrel on Friday, though it has rallied since January’s low point of under $44. A year ago, the month-ahead contract for West Texas Intermediate sold for $107 per barrel. North Dakota crude sells at a discount to WTI because of shipping constraints. Friday’s unofficial Bakken price was $48 per barrel.

In the Friday report, Helms said operators are running five to eight fewer drilling rigs than they had projected to run at current oil-price levels.

“Continued oil price weakness anticipated to last into next year is by far the primary reason for the slowdown,” Helms said.

The high point of drilling was in May 2012, with 281 rigs, Helms reported. Most of them bore into the Bakken shale formation or the less-famous Three Forks shale layer beneath.

Even when wells are drilled, they often aren’t completed to save money – a trend that seems to be accelerating. Hydraulic fracturing is the final step to inject water, chemicals and sand under high pressure to release shale oil and natural gas.

Helms said the tally of well completions fell from 244 in March to a preliminary estimate of 94 in April. Meanwhile, the number of wells awaiting completion rose by 45 in April, to an estimated 925 wells.

To maintain the state’s production near its high point of 1.2 million barrels per day, about 110 to 120 wells need to be completed each month, Helms said. That’s because new oil wells produce a lot of crude at the beginning, then settle into a lower production rate.

North Dakota’s oil production fell to 1.16 million barrels per day, down from March and from the all-time high in December of 1.22 million barrels. Most of the oil still is shipped on oil trains to refineries on the east and west coasts.