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North Dakota Oil Output Suffers Record Monthly Drop
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As per North Dakota’s oil regulator, the state’s crude output fell 6.3% in April – the biggest in its history. The North Dakota Department of Mineral Resources’ (‘DMR’) latest data said that oil production in April was 1,041,007 barrels a day, down 70,414 barrels a day from March.
Reasons for the Large Drop
The steep monthly fall highlights oil’s horror show that has seen prices come down from $110 per barrel in mid-2014 to around $50 now, in between falling to a 12-year low of $26.21 in Feb. The commodity’s collapse has fueled spending cuts and layoffs while threatening the industry’s creditworthiness by hurting cash flows, drying up liquidity and narrowing profit margins.
Apart from low oil prices, the state regulator also blamed inclement weather through much of April – which meant producers had to postpone new well fracking and cut back on drilling – as part of the production decline. Moreover, state-imposed road restrictions were in force all month, limiting the supply of water, sand and chemicals for fracking.
Just 28 drilling rigs were active in the state in April, down considerably from the year-ago number of 77 and a far cry from the peak of May 2012 when North Dakota had 218 rigs drilling. And there were no drilling rigs operating in Williams County, the epicenter of the state's oil industry.
What’s more, economic hardship forced producers like Continental Resources Inc. , EOG Resources Inc. (EOG - Free Report) , Hess Corp. (HES - Free Report) , Marathon Oil Corp. (MRO - Free Report) , QEP Resources Inc. , SM Energy Co. (SM - Free Report) , Whiting Petroleum Corp. to put 1,590 wells on inactive status in April, up 67 from the previous month.
With April production levels barely above the one million barrel a day mark, there are chances that output in the second-largest oil producing state could fall below that figure before the end of 2016 if prices remain under $50 a barrel. However, a significant further decline in output is ruled out though the slide may continue into the summer. In fact, North Dakota’s pumped volume is expected to stabilize from here on and could even rise if oil breaches and stays above $50.
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North Dakota Oil Output Suffers Record Monthly Drop
As per North Dakota’s oil regulator, the state’s crude output fell 6.3% in April – the biggest in its history. The North Dakota Department of Mineral Resources’ (‘DMR’) latest data said that oil production in April was 1,041,007 barrels a day, down 70,414 barrels a day from March.
Reasons for the Large Drop
The steep monthly fall highlights oil’s horror show that has seen prices come down from $110 per barrel in mid-2014 to around $50 now, in between falling to a 12-year low of $26.21 in Feb. The commodity’s collapse has fueled spending cuts and layoffs while threatening the industry’s creditworthiness by hurting cash flows, drying up liquidity and narrowing profit margins.
Apart from low oil prices, the state regulator also blamed inclement weather through much of April – which meant producers had to postpone new well fracking and cut back on drilling – as part of the production decline. Moreover, state-imposed road restrictions were in force all month, limiting the supply of water, sand and chemicals for fracking.
Just 28 drilling rigs were active in the state in April, down considerably from the year-ago number of 77 and a far cry from the peak of May 2012 when North Dakota had 218 rigs drilling. And there were no drilling rigs operating in Williams County, the epicenter of the state's oil industry.
What’s more, economic hardship forced producers like Continental Resources Inc. , EOG Resources Inc. (EOG - Free Report) , Hess Corp. (HES - Free Report) , Marathon Oil Corp. (MRO - Free Report) , QEP Resources Inc. , SM Energy Co. (SM - Free Report) , Whiting Petroleum Corp. to put 1,590 wells on inactive status in April, up 67 from the previous month.
Oils-Energy Sector Price Index
Oils-Energy Sector Price Index
Will Production Fall Further?
With April production levels barely above the one million barrel a day mark, there are chances that output in the second-largest oil producing state could fall below that figure before the end of 2016 if prices remain under $50 a barrel. However, a significant further decline in output is ruled out though the slide may continue into the summer. In fact, North Dakota’s pumped volume is expected to stabilize from here on and could even rise if oil breaches and stays above $50.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>