Bismarck Tribune - Bismarck News - Bakken still rockin, but oil drop will affect some areas

Bakken still rockin, but oil drop will affect some areas

Oct 19, 2008 - 04:05:15 CDT

By BRIAN DUGGAN and LAUREN DONOVAN
Bismarck Tribune

A dramatic decline in the price of oil is good news for consumers, but it will likely chill the hot action across some areas in North Dakota's Bakken oil formation.

With an estimated recoverable reserve of 4.3 billion barrels, the Bakken and associated oil layers have attracted dozens of drillers and 85 rigs into the state, the most since the last oil boom in the early '80s.

Strong prices for oil, including this summer's all-time high of more than $160 a barrel, helped lubricate a play in which one well alone costs as much as $5 million.

With oil now touching in at $70 a barrel, it's likely some producers will pull away from areas where they had been looking to expand.

Lynn Helms, director of the state's Department of Natural Resources, said he doesn't expect changes in the main core of the Bakken - Dunn, McKenzie and Mountrail counties - but acknowledges the perimeter of the Bakken play could be affected.

"This oil price is going to dampen expansion of the play but it's not going to lead to collapse of the Bakken play or the play going away," Helms said. "The main areas are very solid."

Helms said the expansion areas are in trouble. However, he said there is no single oil price floor that applies statewide.

The old rule of thumb of $65 to $75 a barrel to support the Bakken is less true with drilling technology that increases well output from an average of 250 barrels two years ago to 650 barrels a day today in some places.

"Mountrail is performing so well with the new technology that break-even prices for those kinds of wells is down around $20 a barrel," Helms said. Those wells used to break even around $60.

"Mountrail is the exception to the rule," Helms said.

For Dunn and East McKenzie counties, where 32 rigs are in operation, the break-even price is about $40 a barrel.

Trouble spots are in Burke County at an $80 break-even range and Divide at $55, along with Ward and McLean counties, he said.

"The core areas where we've got 60 rigs running are very solid even at these oil prices. But for the outlaying areas - Divide, Burke and Williams - it's a very different picture," Helms said.

Oil companies are reticent to talk about their positions, especially publicly traded companies that are vulnerable to rapid dynamics in the stock market.

Two of those - Marathon Oil and Continental Resources, both actively drilling the Bakken in Dunn and McKenzie counties - are scheduled for quarterly conference calls with stockholders and market analysts and may comment on market conditions and drilling plans then.

Continental's spokesman said the company will talk after its Nov. 6 conference call, and Marathon's spokeswoman said her company hasn't announced any change in its Bakken plans, and projections will be included in its January budget.

Rick Ross, vice president of operations for Whiting Oil, which is drilling in the Mountrail County portion of the Bakken, said his company has drilled "very prolific" wells there "and we can stand a lower price than in other places."

Ross said each company has its own tolerance in the market.

"It's not that we all fall off the table at once," he said. "There's a huge range."

He said his company has not made a decision to slow down. "I don't see it changing for us," Ross said.

Whiting has 22 completed wells and eight in various stages of drilling and completion. Half of its 190,000 leased acres are in the Sanish and Parshall fields on the Bakken.

Ron Ness, head of the North Dakota Petroleum Council, said that while price tolerance varies from one oil company to the next, he is hearing concern, not only from drillers, but secondary businesses that support the industry.

"I have heard a lot of nervousness," Ness said. "The threshold for each company will be different."

The canary in the oil "coal mine," is generally leasing activity, he said. When mineral acreage leasing falls quiet, it's a sign something's amiss.

McLean County recorder Dewey Oster said he has seen less foot traffic from landmen researching minerals acres, but he doesn't know whether it's due to available land all leased up, or less interest in that far range of the Bakken play.

Brenda Cook, the recorder for Mercer County - an expansion zone where leasing had been fairly hot and one rig moved in last month - said she's seeing half the number of landmen in the past few weeks.

She said she thinks oil prices are one aspect, but says, "They may have leased up the land they're looking for."

Landmen tend to be tightlipped, she said.

In Dunn County, recorder Chris Larsen said she's recording 20 leases day, down from a peak of 50.

She thinks it's less a price issue than one of opportunity.

"I think it's because everybody is pretty much leased up," she said.

(Reach reporter Lauren Donovan at 888-303-5511 or lauren@westriv.com.)

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Comments

lisa giff wrote on Nov 14, 2008 12:29 AM:

" It is all good. We have to know that he is going to change things and has the pressure of doing that. Hopefully he will. No matter what he does, some will be good, and some will be bad, I pray, as we all could, that Im going to be rich. Or at least maybe able to change jobs and take some of the edge off. I have inherited some acreage in Stanly and my Great Grand DAD, who's name is HERO, did alright by me. YEEEEHHHAA!!!!!!! DRILL, BABY, DRILL. "

Seppy wrote on Oct 20, 2008 12:04 AM:

" Well, well, well, You know so "much" about politics... I just love the market crashing, the economy in the ditch, deficit spending to the tune of a half a trillion dollars a year, spending 12 billion dollars a month in a war that cannot be won, violating the constitution, no habeaus corpus, and a multitude of other illegal activities. John Hoven would have been a much more qualified pick for VP instead of the bimbo. But, you are worried about oil production... get a life...
it won't change that much no matter who gets in office. The oil business goes up and down and has for fifty years... It is good now but will go down eventually and it won't be because Obama is President. It is better than G. Bush III alias McCain "

J miller wrote on Oct 19, 2008 8:48 PM:

" Gee people! Can't you see if Obama group gets into office you'll all be looking for work elsewhere. We have to get McCain/Palin into Washington tosave everyone's livelihood. For pete's sake!! He'll hit the oil business right where it hurts. But then, you won't have any hunters either; cause there will go any hunting guns . Everyone will be affected; in a bad way. "

Topher wrote on Oct 19, 2008 8:18 PM:

" To gg,

Come on. A statement like that just shows how educated you are in the oil industry. Do your research, theres hundreds of by-products of crude, your keyboard for example. Wake up smell the roses people, All these politicians get perks from the oil industry whether you like it or not. Get over self-righteous know it all coffee shop type talk. Maybe you will learn something. Obama please, this whole spreading the wealth makes me laugh. The sad part of it is we the people get the gov't we deserve because of peoples ridiculous ideas "

gg wrote on Oct 19, 2008 4:11 PM:

" Vote for obama if you want to keep the price of oil lower? Do you know what you are talking about kg? Obama wants to tax oil companies and the gas we use to fill our cars. he hates the oil industry believe me if he gets in $160 barrel will seem like the good old days. "

steve C. wrote on Oct 19, 2008 3:39 PM:

" to tahnee; I too have friends in the oil field business. Without a doubt, an oil company will not continue if it is even a dollar or two above "break even". They are constantly looking for the gusher, (both green and black) as my friend has told me that their bonuses depend on the price of oil per barrel. I am however, sorry to hear that you are republican. "

Tahnee wrote on Oct 19, 2008 1:45 PM:

" Didn't you read the article? ND had about 30-40 rigs in the state before this boom and when oil prices were a lot lower. I helped audit oil companies a couple years ago so I looked at the active rigs in the state almost daily - besides the fact that my fiance is a directional driller so I know what I'm talking about in regards to this. IF you read the article, there is a certain point where it isn't worth drilling in certain areas - as in they would be LOSING money. There isn't a business out there that would take on a project if it would lose them money. Before the technology was too expensive to drill in certain areas. Now that the oil prices are higher and the technology keeps improving, they can afford to drill. If the prices drop too much, they can't afford the current technology anymore - that is part of the reason UND is looking into improving ways to get more oil out of the Bakken. And I'm proud to say I am a Republican and I do want them to drill baby drill. My fiance's career (and my soon to be father-in-law's career) depends on it. "

steve C. wrote on Oct 19, 2008 11:49 AM:

" Kind of waiting to see some republican responses to this. Whatever happened to "drill baby drill". Wouldn't this be another example of not using the land already leased by the oil companies? Oh. that's right, they need to drill offshore and all the other places where they do not have leases or are not sure if oil is even in these places. Well, I can only say that "X" marks the spot where the oil is and they do not want to take advantage of it simply because the price is to low. No wonder why the prices have always been to high. Don't the republicans want energy independence? Sorry, my mistake, there has to be record profits for big oil before we drill. "

Tahnee wrote on Oct 19, 2008 11:19 AM:

" Some people, my family included, make a living and depend on the oil field. But don't think we don't feel the burden of high gas prices - especially when you drive 150+ miles to the job location (and that is a very close location). Even so I want the oil prices to remain at a level that will keep the oil jobs here in ND but not so high that it makes it a burden for people to drive to and from work. My fiance and soon to be father-in-law have worked all over the US and even over seas and it is much easier on our families to have them working in the state where we can see them more than once a month. My family is very nervous right now about what would happen if Obama is elected. If we lose the oil field jobs, we would probably have to declare bankruptcy. The oil boom has provided good paying jobs to many people - remember that. "

kg wrote on Oct 19, 2008 10:11 AM:

" hy wait until after Nov. 6th for a conference call? Does it have to do with WHO is voted for president where gas prices will go? Message here if you don't want gas prices to go way back up again, vote for OBAMA!!!!! Coincidence they came down just prior to the election............ They don't actually think we are too stupid to think they will stay there if the republicans are voted in again!!!!! "

la wrote on Oct 19, 2008 9:37 AM:

" Well since the price of oil reached a high of $147.00 per barrel in July, 2008 instead of $160 as this article suggest does that mean their are more glaring mistakes. Interesting again! "

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