The number of drilling rigs, wells and jobs are declining along with oil prices, according to a report by KX News.
Although North Dakota witnessed record production levels and number of active oil wells in November, the continued drop in oil prices is having a visible impact on the region as oil rigs pack up and head out of town. The decline in prices has led to a dramatic decrease in rig counts, but more surprisingly, the number of wells left uncompleted.
During the monthly update from the Department of Mineral Resources, Lynn Helms said that despite the decrease in price and rig count, this isn’t foreign territory. In 2008 oil prices dropped $120 per barrel in roughly six weeks. Helms noted that the recent decline is nearly identical and the stacking of drilling rigs is an expected result. He said, “We’re in the upper 150’s. That’s down significantly over the last month. Down about 25. So you already begin to see the impacts of the low oil prices.”
Despite North Dakota’s rig count being the lowest it’s been in five years, what Helms found most surprising about the current state of the industry was the number of wells awaiting completion. There are currently 775 wells waiting to begin production. “That blows any previous number completely out of the water. That is almost 800 wells that have been drilled but because of low oil prices folks are just sitting and letting those wells wait for completion through these cold winter months,” Helms said.
As prices are predicted to remain low until the third quarter of this year, Helms predicts that the majority of these wells will continue to be idle in the near future. Despite the current climate of the industry though, Helms said there is a bright side.
In November there were only 39 new wells that reached the completion stage, but production levels were sustained. Helms noted that although the state is producing 30 percent more oil than it was 18 months ago, less than half the amount of drilling rigs are needed to sustain production. He predicts the rig count to be around 150 by mid-year. However, if low oil prices persist, that number could drop to about 120 by the third quarter. Industry experts say that a single drilling rig supports approximately 120 jobs.