Oil producer EOG Resources Inc has the lion’s share of an estimated 900 North Dakota wells waiting to be fracked, according to state data, showing that even major oil titans are mothballing operations while they hope for a rebound in oil prices.
For months the conventional wisdom in North Dakota’s Bakken shale formation had been that smaller producers with weak cash flow comprised the bulk of that estimate.
While the estimate had been published monthly, it was not clear until a Tuesday update from the state’s Department of Mineral Resources (DMR) who was dominating the list. Oilfield service companies have aggressively sought the information, hoping to drum up new business.
By late May, the number of wells waiting to be fracked is expected to breach 1,000, DMR officials said, fueled largely by cheap oil and a $5.3 billion industry tax break expected to hit in June.
Oil producers have up to a year to frack the wells before they must ask state officials to label them “temporarily abandoned.”
The fact that industry stalwarts like EOG are having to hold off on fracking new wells shows how much low prices make the remote Bakken far less economical compared to other U.S. shale plays.
Prices to transport oil from North Dakota to the U.S. Gulf Coast or coastal refineries add in some cases nearly $10 per barrel to the cost of crude, a steep price not faced for transport from Texas wells, which also are connected to a much-larger pipeline network.
One of the most-respected U.S. shale oil producers, Houston-based EOG said in February that it would pare back North Dakota production this year and focus more on Texas, also partly born from efforts to force oilfield service companies to cut their own costs.
Indeed, EOG has kept three North Dakota drilling rigs operating since January, though it has not fracked any of the wells that it has drilled. Most of the uncompleted wells are in the Bakken’s Parshall Field.
“These are tremendously productive wells,” said the DMR’s Lynn Helms. EOG is “able to drill a lot of wells and maintain production and still bank a lot of wells for future price increases.”
At the same time, EOG plans to make the Eagle Ford and Permian shale fields in Texas a core focus this year, aiming to increase the number of Permian wells this year by 53 percent.
EOG declined to comment beyond the information provided by Lynn Helms.
(Reporting by Ernest Scheyder; Editing by Chizu Nomiyama)
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