FARGO – The North Dakota petroleum industry, meeting here this week, is girding for a challenging fall and winter as producers continue to weather a sharp reduction in oil prices.
Last week, at least one company filed a bankruptcy petition to reorganize its finances and a shakeout of unknown magnitude will ripple through the industry, likely striking smaller firms that had to borrow to expand, industry representatives told The Forum Editorial Board Monday.
"This is a tough time," said Ron Ness, president of the North Dakota Petroleum Council. "Companies here are struggling to survive. It's going to be a rough road ahead for awhile."
Oil prices have plunged 60 percent over the past four months, and the drilling rig count recently dropped from 76 to 69, reflecting the slowdown in North Dakota's Oil Patch.
"This is not a bust," Ness said, noting the state still has more than 12,000 wells producing oil, and production has been stable at around 1.2 million barrels per day.
Still, with lower oil prices likely to prevail, he predicted an "interesting six to eight months" ahead, possibly longer.
To adapt to the lower prices, oil producers and service companies have been striving to become more efficient. Also, state figures show companies have drilled about 900 wells that are not producing.
"I think this fall is going to get tough," Ness said, adding that communities in oil-producing areas - and the state budget in the next biennium - will feel the pinch.
Despite the lower prices, the petroleum industry still is working to reduce the flaring of natural gas.
"Industry is still committed to the 90 percent capture target by 2020," said Eric Dille, government relations director for EOG Resources and chairman of North Dakota's flaring reduction task force.
Oil and gas producers in North Dakota are now capturing 82 percent of natural gas, a rate that is ahead of the current target of 77 percent, he said.
Still, given the pressures facing the industry it will be difficult to reach the interim 85 percent capture target, a goal the industry could ask additional leeway to meet, Dille said. Reaching that target by January would be "problematic," he said.
The targets are set by the North Dakota Industrial Commission.
Rigs have moved to the core areas of the Bakken, richer areas that produce more oil and gas, a key factor in explaining why gas production is greater than anticipated, Dille said.
The North Dakota Petroleum Council's annual meeting, at the Ramada Plaza Fargo Hotel & Conference Center, concludes today.