North Dakota Expects Upstream Rebound

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Upstream activity is on something of a decline, though North Dakota's government is expecting a rebound in exploration and production in the Bakken shale reserve.

The North Dakota Industrial Commission (NDIC) published its Director's Cut for July, highlighting upstream data through May. The commission put May production levels at 1.2 million barrels per day (BBL/d), nearly 4% below prior month levels. Gas production, meanwhile, was about 0.5% higher than April levels.

North Dakota oil production hit an all-time high of 1.5 million BBL/d in November 2019. Nearly all of the state's production comes from the Bakken shale formation, which is the second-largest crude oil producer, but the lowest gas producer in the Lower 48 states.

Mark Bohrer, the assistant director for the oil and gas division at the state's Department of Mineral Resources, said the lull is expected to end as operators have permit inventories stretching out some 12 months.

"The drilling rig count remains low due to mergers and acquisitions, but is expected to return to the mid-forties with a gradual increase expected over the next two years," he said Tuesday.

The NDIC said there were currently 39 rigs in service in the state. While extended laterals and improved efficiencies diminish the importance of rig counts, they still serve as something of a barometer for future trends.

The federal government estimated that Bakken oil production improved to around 1.3 million BBL/d by June, though gas production remained stable at around 3.5 billion cubic feet per day.

Mergers and acquisitions, meanwhile, could be limiting activity as companies strive for a better shareholder return over new resources. Last year was something of a record-setter in terms of consolidation and this year looks to be no different.

Silver Hill Energy Partners (Dallas, Texas) in January moved to acquire Bakken acreage controlled by Liberty Resources II (Denver, Colorado), which boasted net production of around 13,000 barrels of oil equivalent per day.

More recently, Devon Energy Corporation (NYSE:DVN) (Oklahoma City, Oklahoma) in a $5 billion stock and cash deal earlier this month bid for Grayson Mill Energy (Houston, Texas), which holds acreage in the Bakken.

The deal is expected to increase Devon's net oil production by around 100,000 BBL/d to 375,000 BBL/d, though Devon also said it may increase dividend payouts and share repurchases yet this year.

The U.S. Energy Department revised its estimate for proved crude oil reserves in the country by 9% to 48.3 billion barrels. North Dakota placed third behind Texas and New Mexico, respectively, with an estimated 13 billion barrels of proved oil reserves.

The government defines proved reserves as "estimated volumes of hydrocarbon resources that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).