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Shale oil production in Bakken, Eagle Ford little changed in Dec.

“It is survival of the fittest: the best and most efficient rigs and crews remain standing on the shale field.”

Shale

Statoil drilling in Eagle Ford Texas

Oil production from key shale formations in North Dakota and Texas dropped slightly in Dec. vs. Nov., according to Platts Bentek.

Oil production from the Eagle Ford shale basin in Texas was relatively unchanged in Dec., increasing about 11,000 barrels b/d, or less than 1 per cent, versus the previous month, the latest analysis showed.

This marks the first time since March 2015 that the Eagle Ford shale did not decline. Conversely, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin dipped by less than 1 per cent month over month in Dec., or about 9,000 b/d, continuing the trend of marginal decline that began in the summer.

The average oil production from the South Texas, Eagle Ford basin in Dec. was 1.5 million b/d. On a year-over-year basis, that is down about 7 per cent, or about 110,000 b/d, from Dec. 2014, according to Sami Yahya, Platts Bentek energy analyst.

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“The small increase in crude production in the Eagle Ford shale is attributed to a slight resurgence in drilling activity in the region,” said Yahya.

The average crude oil production from the North Dakota section of the Bakken in Nov. was 1.2 million b/d, about 6 per cent lower than year ago levels.

“In Dec., the number of active rigs in the Eagle Ford reached 80, an increase of five rigs over the previous month. The brief rebound of active rigs is likely due to producers balancing their drilling programs and budgets for the fourth quarter and meeting their goals for wells drilled for the year,” said Yahya.

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North Dakota production is second only to Texas.

Recapping the year-on-year production drop in the Eagle Ford shale, Yahya emphasized the importance of efficiency gains realized in 2015. Back in Jan. of 2015, the Eagle Ford shale utilized over 200 rigs, while now, in Jan. of 2016, the number of active rigs shrunk to under 70 rigs, a drop of over 65 per cent.

And yet, production did not meet a similar fate. Producers back in Jan. of 2015 could drill less than two wells per rig per month, compared to nearly three wells per month currently.

“It is survival of the fittest: the best and most efficient rigs and crews remain standing on the field,” Yahya noted. “The number of active rigs in the Bakken shale formation of the Williston Basin went from nearly 150 rigs in early 2015 to around 50 rigs currently. At the same time, producers were able to increase their drilling rates from about 1.5 wells per rig per month to about 2.2 wells per rig per month.”

However, Yahya explained that going forward, crude production would need more than just efficiency gains to grow: “Last year, optimization and hedging programs helped production stay largely afloat. But unless the pricing of the oil barrel improve, producers are in for a difficult year ahead. Based on latest Platts Bentek forecast data, both the Eagle Ford and the Bakken shales are expected to continue declining throughout most of the year. Certainly, the availability of wells in backlog inventory where drilling cost is already sunk would be a helpful factor in partially sustaining production volumes in both shales.”

“If prices remain sub-$40/barrel and producers are unable to further bring down completion costs, then they might defer completions until the pricing market makes a comeback,” said Yahya.

Platts Bentek analysis shows that from Nov. 2014 to Nov. 2015, total U.S. crude oil production has increased by about 265,000 b/d.

“Prices fell by the largest amount of the year in Dec. 2015, falling upwards of 10% month on month for both Bakken and Eagle Ford,” said Luciano Battistini, Platts managing editor of Americas crude.

“Eagle Ford prices fell below $37/b in Dec., the lowest point in 2015. Bakken shale oil fell to $30.04/b close to the wellhead.”

The Platts Eagle Ford Marker, a daily price assessment launched in Oct. 2012 and reflecting the value of oil out of the Eagle Ford Shale formation in South Texas, has dropped 18 per cent between Jan. and Dec. 2015, with an average price of $52.01/b for the year. That is down 35 per cent from year-ago levels. The marker ranged between $36.76/b and $66.23/b in 2015.

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Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

The price of oil out of the Bakken formation at Williston, North Dakota, dropped 16 per cent between Jan. and Dec., with an average price of $45.24/b, according to the Platts Bakken assessment. But when compared to the same month a year ago, the Platts Bakken price is down 35 per cent. The wellhead assessment has ranged between $30.04/b and $59.32/b in 2015.

The Platts Bakken, introduced April 22, 2014, is a daily assessment of price for oil closest to the wellhead prior to determination of transportation by rail or pipe.

The assessment reflects a sulfur content of 0.2 per cent or less and an American Petroleum Institute (API)** gravity of 42 or less, similar to the nature of North Dakota Light Sweet crude. The Platts Eagle Ford Marker reflects the value of a median 47-API Eagle Ford crude barrel, based on the crude’s product yields and Platts product price assessments, adjusted for U.S. Gulf Coast logistics.

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