GRAND FORKS, N.D., July 30, 2015 — Falling oil prices may have caused a slowdown of activity in and around North Dakota’s resource-rich Bakken shale play – but there are surprising benefits from the downturn, according to Dan Eberhart, CEO of Canary, LLC, one of the largest privately held wellhead companies in the US.
As the global economy weakened in 2014 and the oil market swung to the supply side, particularly after OPEC refused to cut production amid an American energy glut, oil prices began a precipitous drop. Today, a barrel of West Texas Intermediate (WTI) oil – the US benchmark – has lost more than half its value compared to a year ago.
As a result of the price slide, the US oil rig count declined for 29 consecutive weeks, bottoming out in late June at 628, the lowest it had been since August 2010. Recently released data from the North Dakota Department of Mineral Resources reported 75 drilling rigs in the Bakken, or 112 fewer than a year ago.
Although the national count has rebounded slightly since, for Bakken producers who were pumping out more than 1 million barrels a day a year ago, recovery is uncertain as oil prices remain soft.
That would seem to make positive news hard to come by. But Eberhart, who spoke at the July 27-29 Bakken Conference & Expo inGrand Forks, said that during a recent visit to North Dakota he saw how energy companies and state leaders are shaking off the “bust mentality” and putting the lull to good use.
For one thing, he said, even before prices started to decline, established producers were optimizing their wells to increase productivity.
“By innovating, producers lowered their break-even points, which allowed many wells to remain viable in a low-price environment,” Eberhart said. “This is one reason we’re seeing crude inventories continuing to build despite the rig count falling.”
In addition, North Dakota is taking advantage of the breather to catch up on infrastructure upgrades – including improvements that will help energy companies lower their operating costs, particularly those related to transportation.
Since the Bakken shale boom began in 2007, the state has struggled to keep up with infrastructure demands. Workers streaming into the western part of the state overtaxed housing, schools and other resources. Trucks hauling heavy equipment clogged rural two-lane roads never engineered to carry the kind of traffic associated with oil operations.
In February, Gov. Jack Dalrymple signed a $1.1 billion budget to improve those roads, along with sewers, schools, water treatment and other facilities. Much of the money to fund the upgrades has come from oil extraction taxes paid by energy companies.
According to Eberhart, these infrastructure improvements will help oil companies lower well development and operating costs even further.
“One of the issues energy companies have faced in the Bakken is how high the cost of operating has been compared to the rest of US oilfields,” Eberhart explained. “If the downturn enables the state to make improvements that will push the Bakken closer to other operating basin cost structures, the benefits will be enormous and more meaningful than they would be in other basins.”
About Canary, LLC
After ten acquisitions and seven decades, Canary, LLC, is now the largest private wellhead service company in North America and one of Inc. Magazine’s 5000 fastest growing U.S. companies. Canary serves its clients and the public through quality drilling and production services, local charitable endeavors, and educational campaigns concerning our nation’s energy policies. Check out Canary at canaryUSA.com, fb.com/canaryconnects, or @CanaryConnects