Last Friday, director of the North Dakota Department of Mineral Resources Lynn Helms expressed his confidence in oil price recovery and avoiding the large tax trigger.
According a report by The Bismarck Tribune, the Department of Mineral Resources released state’s preliminary oil and gas production figures for the month of December. The numbers indicate that 1.23 million barrels of oil were produced per day, up from November’s final figures of 1.19 million barrels per day. Helms stated that the 39,000 barrel per day increase was likely due to year-end production goals and moderate weather.
As reported by The Tribune, Helms said the month of “December was a tug-of-war” due to falling rig counts and companies trying to meet new flaring requirements. Drilling activity has now shifted to focus on the core counties of the Bakken formation (Dunn, McKenzie, Mountrail and Williams). With oil prices beginning to climb again, he said the chances of a gradual increase in activity is likely. He also said, “We’ve seen renewed confidence that the large trigger is likely not going to hit.”
State law mandates that two oil price tax triggers be implemented in the event that oil prices, based on the West Texas Intermediate benchmark, remain below a certain level for an extended period of time. If this happens, the 6.5 percent extraction tax will be reduced until prices recover. The low tax trigger was put into effect at the beginning of the month after average prices remained below $57.50 per barrel the month prior. After dropping to near $40 lows, the price has stabilized and has risen above the $50 per barrel mark in the past week. If the large trigger price had been hit, the reduced tax rates potentially could have cost the state billions in oil tax revenue over the next two years.
Additionally, the number of wells awaiting completion dropped from 775 in November to 750 in December. Natural gas production for December is currently estimated to be about 1.51 billion cubic feet per day compared to the final figure of 1.43 billion cubic feet per day in November. For December, there was a total of 12,124 wells producing across the state, up from the 11,951 reported in November. Statewide production for December reached 38 million barrels, up from the final November figure of 35.6 million.