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North Dakota oil production sees unusual August dip

WILLISTON, N.D. - North Dakota oil production dropped 1.7 percent in August, a time of year when production usually is on the rise.

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Rigging equipment is pictured in a field on June 4, 2015. REUTERS / Cooper Neill

WILLISTON, N.D. – North Dakota oil production dropped 1.7 percent in August, a time of year when production usually is on the rise.

The state produced nearly 1.19 million barrels per day in August, a drop of 20,552 barrels a day from July, according to preliminary numbers from the Department of Mineral Resources.

It was the first time in 12 years that North Dakota saw oil production drop in August.

"It is definitely not normal. August is almost always an up month," Director Lynn Helms said Tuesday. "This is a reflection of what's really happening in the industry in this prolonged low-price environment."

Low oil prices continue to prompt companies to leave oil in the ground until prices recover, Helms said.

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The state had a record 993 wells that were drilled but waiting on fracking crews at the end of August, an increase of 79 wells since July.

Companies also continue to cut back on drilling. The state had 67 drilling rigs operating Tuesday, the lowest since November 2009 and down from 191 a year ago.

At one time, North Dakota had five companies that operated 10 or more drilling rigs, Helms said. Today, no company has a rig count in the double-digits, with operators running eight or fewer rigs. Helms said the rig count could go as low as 60.

"They've retracted to a pretty low rig count and low completions numbers and they're trying to weather the storm," Helms said.

Companies also voluntarily reduced oil production in August by an estimated 10,000 barrels per day in order to comply with state flaring goals, Helms said.

North Dakota's state budget is based on a production rate of about 1.1 million barrels per day. Helms said he anticipates a continued decline in production, climbing down to 1.1 million barrels per day by the end of the 2015-17 biennium.

If prices drop more, production could get closer to 1 million barrels per day by the end of the biennium, Helms said.

The top 10 companies that operate in the Bakken have indicated they can maintain production with oil prices at $50 for a barrel of West Texas Intermediate crude, Helms said. The benchmark for growing production is when that price reaches $60, Helms said. On Tuesday, the WTI price was about $47.

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North Dakota natural gas production decreased by 1 percent in August to an average of 1.6 billion cubic feet per day.

The percent of natural gas flared in August was 20 percent, the same percentage as July. The daily volume of Bakken natural gas flared in August increased 9.5 million cubic feet per day.

Forty-seven percent of Bakken crude was transported by rail in August, compared with 45 percent transported by pipeline, said Justin Kringstad, director of the North Dakota Pipeline Authority.

A majority of the rail shipments continue to go to the East Coast (59 percent) and the West Coast (21 percent).

North Dakota had 13,016 producing oil and gas wells at the end of August, a new all-time high.

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