OIL DRILLING EFFICIENCY
Amid the abandoned worker camps, idled drilling rigs and empty field-office parking lots of western North Dakota, a shale industry reshaped by the oil-price collapse is beginning to emerge.
As the number of failed operators mounts, the surviving companies are laying the groundwork for what they forecast will be an era of slower but steadier growth in the state at the epicenter of the U.S.'s energy boom.
Cash-strapped operators are dialing back or abandoning North Dakota. But the survivors—many of which are bigger and more diversified players—are finding ways to make the Bakken Shale formation pay even at low oil prices by trimming budgets, improving field logistics and focusing on their best assets.
This downturn marks the first bust since the rise of so-called unconventional shale-oil plays nearly a decade ago, fueled by new technologies, ready access to capital and a surge in crude prices to record highs. One of the world's highest-cost oil fields, the Bakken is key test ground for the U.S. energy industry's wherewithal.
"You can't shut down the Bakken. The American oil industry is getting smarter and more efficient" in how and where it drills, said Kathy Neset, a veteran geologist who owns a consultancy in Tioga, N.D. "We've still got pins on the wall," she said, pointing to a map with the location of active rigs.
Active drillers include a number of diversified companies with deep pockets, such as Hess Corp., Statoil ASA of Norway and Exxon Mobil Corp. unit XTO Energy. They are targeting their richest reservoirs, getting better at pinpointing where to place drill bits and improving rig logistics so they can drill more wells faster than ever.
Those highly productive new wells are partially offsetting the decline in output from older wells, including some that are being shut because their operating costs surpass the market value of their oil. While North Dakota's production is expected to fall below the million-barrel-a-day mark by early 2017 unless prices recover to above $50, it has held up better than many analysts expected.
Crude prices have been rallying since hitting a 13-year low in February, and advanced to new six-month highs in recent weeks. Oil was trading above $48 a barrel on Tuesday.
Just 27 drilling rigs are active in North Dakota, matching a low last seen in July 2005 and down from an all-time high of 218 in 2012, according to the state's Department of Mineral Resources. But data from the Energy Information Administration show output per rig has increased by more than one-third over the past year in the Bakken.
Exxon Mobil increased net production in the Bakken and another shale play in Texas called the Permian by nearly 25% last year. "With cash operating cost at less than $10 per barrel, our Bakken and Permian developments remain attractive and competitive even in the current environment," CEO Rex Tillerson told investors on a conference call in March.
Still, North Dakota doesn't foresee a broad-based increase in drilling until prices stabilize above $60 a barrel, and few expect the heady days of 200-plus rigs to return. The spare capacity being eliminated won't come back even if crude prices rise, officials say, as operators have learned to do more with less equipment and fewer workers.
At Statoil, the rig count in North Dakota is down to just one from a high of 16 in 2013. The company, which says the wells being drilled now are profitable at current prices, is benchmarking its North Dakota and Texas operations to optimize drilling times and shrink costs in what it calls a "perfect well" program.
"If we make the right calls in 2016, it's going to define the next decade," Torgrim Reitan, Statoil's Houston-based executive vice president for U.S. operations, said in an interview. Mr. Reitan said that even with higher prices, growth will remain subdued as the industry has learned to do more with fewer rigs and workers. "We will not go back to the activity levels we used to have," he said.
The Bakken region in Western North Dakota and Eastern Montana has lost at least 20,000 jobs since employment peaked at more than 110,000 workers across all sectors in late 2014, according to a Federal Reserve Bank of Minneapolis analysis of U.S. Bureau of Labor Statistics data.
Average well drilling and completion costs have come down by nearly a third across all major U.S. shale plays from peak levels in 2012, but the EIA says Bakken Shale wells remain the most costly due mostly to their depth.
Hess, which exported the first cargo of Bakken crude from the U.S. Gulf Coast last month, says it is implementing lean manufacturing techniques borrowed from Toyota Motor Corp. such as just-in-time supply chain logistics and greater use of standardized parts. It is operating three rigs, down from a high of 17 in 2014, but it has increased the number of wells drilled per rig to 22 a year, up from 16 wells a year 18 months ago.
Standing near a quartet of pump jacks surrounded by farm land, David McKay, the vice president of what Hess calls its Bakken "Well Factory," credits the downturn for forcing producers to rethink their operations. "There was a time when we were all cheeks and heels" in the rush to boost output, he said in an interview. "The slowdown actually has helped convince people of the need to do everything more efficiently," he said.
Mr. McKay says those efforts have reduced completion costs by one-third over the past 12 months to around $2 million per well, cut the time it takes to frack a well to one day from up to three days two years ago, and boosted average initial well production by up to 20%.
Lynn Helms, North Dakota's top energy regulator, expects the slump will thin the herd of operators. "That's what's coming," he said earlier this year. "We'll see companies in financial distress be aggregated by some of the larger companies."
|July, 16, 11:05:00|
|July, 16, 11:00:00|
|July, 16, 10:55:00|
|July, 16, 10:50:00|
|July, 16, 10:45:00|
|July, 16, 10:40:00|
AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.