North Dakota rig count drops to 2010 low

  • Market: Crude oil, Oil products, Petroleum transportation
  • 14/01/15

North Dakota's drilling rig count has dropped to 158, the lowest level since October 2010 as operators react to plummeting crude prices.

The state rig count down 28pc from the high, with rig counts down 28-62pc in the five most active counties.

"Oil price is by far the biggest driver behind the slowdown," the Department of Mineral Resources (DMR) said. "Operators report postponing completion work to avoid high initial oil production at very low prices."

The agency estimates today's sweet crude price at $29.25/bl, the lowest since December 2008.

North Dakota is the biggest US crude producing state behind Texas.

It will take 130 rigs to maintain production, said DMR director Lynn Helms. The agency sees the rig count at 150 in the middle of the year. But if low pricing continues, the rig count could drop to around 120 by the third quarter.

Well completions sank from 145 in October to 39 in November, but 775 wells are waiting on completion. The large amount of wells waiting on completion is likely because operators will wait for a low oil price tax trigger to kick in, Helms said. North Dakota has triggers that lower taxes on oil if West Texas Intermediate (WTI) prices are below certain marks. One trigger requires that WTI average $57.50/bl for a single month and cuts a tax from 6.5pc to 2pc for some production on wells completed after the tax incentive is triggered. A larger trigger requires that WTI average $55.09/bl for five consecutive months and can cut taxes to 0-4pc. Leasing activity is also very low, the DMR said.

North Dakota oil production was higher by just 3,691 b/d in November to nearly 1.2mn b/d.

An estimated 59pc of the state's production moved by rail in November, while 35pc moved by pipeline.

ik/dcb



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