North Dakota Department of Mineral Resources Director Lynn Helms, the state’s top oil regulator, says drilling is still very profitable in the Bakken’s core of Dunn, McKenzie, Mountrail and Williams counties.
As reported by the Williston Herald, Lynn Helms said these core counties were home to more than half of last Thursday’s 73 active drilling rigs. Despite the current average breakeven wellhead price hovering around $31 per barrel of oil, not far below the West Texas Intermediate price of about $45 per barrel, companies are still able to produce at a profit.
Helms told the Herald, “We are in the mode where we are just sustaining production,” adding that the current “turnaround cost” is about $65 per barrel. Production is remaining at a steady 1.2 million barrels per day even though rig counts and oil prices have declined sharply since late last year. Helms attributes this to oil producers and service companies figuring out how to maintain production levels by reducing costs and increasing recovery efficiencies.
Whiting Petroleum, for example, recently opted to increase the amount of sand used during well completions and saw production from older offset wells in the Williston Basin increase by up to 50 percent. During the company’s second quarter conference call, Whiting President Jim Volker said, “We’re doing a much better job of breaking up the reservoir and accessing a lot more of the reservoir upfront, and that’s what’s responsible for the increase in rates.”
Helms also attested to company’s improved drilling abilities, allowing for about 24 wells to be drilled per year compared to the 10 wells in 2010. Drilling at faster rates and with fewer rigs has prompted state officials to consider the possibility that the currently low rig count will be able to maintain production levels, if not increase them. He said, “With the current drilling rate, the inventory could last two years. The current rig count with the efficiency of the rigs is capable of doing that.”