BISMARCK – North Dakota oil production dropped 3 percent in January to just shy of 1.2 million barrels per day, the Department of Mineral Resources said Thursday.
Low oil prices are prompting more operators to delay bringing new oil wells online, Director Lynn Helms said, causing monthly oil production to drop from last month’s record high.
The low prices also have led to a rapid decline in the number of drilling rigs operating in North Dakota, which was 111 on Thursday, the lowest since April 2010.
The rig count is expected to bottom out around 100, Helms said, about 20 lower than he predicted a month ago. The state’s record was 218 rigs operating in May 2012.
Drilling contractors have cut at least 800 full-time jobs in North Dakota, Helms said, and will cut more as additional rigs become idle. Helms estimated the total jobs lost at 3,000 to 4,000.
“It’s becoming painful for them out there in the Oil Patch,” Helms said.
Crews completed 47 wells in January, according to the preliminary numbers, compared with 183 wells that were completed in December.
Helms estimates the state needs to have 115 wells drilled and completed each month to maintain production of 1.2 million barrels per day.
While additional months of declining production are expected, Helms said he anticipates a surge in production in June.
The state now has an estimated 825 wells that are drilled but waiting for hydraulic fracturing crews. Those wells need to be completed within a year, and the deadline for 125 of those wells is at the end of June.
“We anticipate June to be a really big month in terms of completions and production increases,” Helms said.
A tax incentive referred to as the “large trigger” could take effect in June, also contributing to an increase in production that month.
If the West Texas Intermediate oil price is less than $55.09 for five consecutive months, the large trigger kicks in and provides an exemption from the oil extraction tax for the first 24 months of production.
Tax Commissioner Ryan Rauschenberger said Thursday that about 70 percent of the state’s oil production is from wells less than 24 months old.
“It has quite a large fiscal impact,” Rauschenberger said.
A new state revenue forecast that is expected next week assumes the large trigger will kick in this June and stay in effect at least part of next biennium, Rauschenberger said. The revised forecast also will take into consideration lower sales tax, income tax and corporate income tax revenue associated with fewer wells being drilled.
While a month earlier Helms said he didn’t think the state would hit the large trigger, he said Thursday he has since changed his attitude based on crude oil inventories nationwide that will have an impact on WTI prices.
The percent of natural gas flared in North Dakota decreased to 22 percent in January. Companies beat the January target set by the North Dakota Industrial Commission by 1 percent.
Flaring on the Fort Berthold Indian Reservation was lower than the rest of the state for the first time ever, Helms said. Flaring on trust lands within the reservation, which historically had been greater than the state’s average, was 20 percent.
The improvement largely resulted from companies adding more natural gas compressor stations last year, Helms said.
Some companies had to voluntarily curtail oil production in order to meet gas capture targets, an amount Helms estimated to be 12,000 to 15,000 barrels per day.
Also Thursday, the Dakota Resource Council and the Dacotah Chapter of the Sierra Club called on state legislators to do more to reduce natural gas flaring.
The organizations cited a recent poll conducted by the Social Science Research Institute at the University of North Dakota that found that 65 percent of respondents said mineral owners should be paid royalties for natural gas that is flared.