Shale oil production in Bakken, Eagle Ford relatively flat in August

Flat graph chart
Source: DollarPhotoClub

Oil production from key shale formations in North Dakota and Texas increased marginally in August versus July, according to Bentek Energy, an analytics and forecasting unit of Platts.

Oil production from the Eagle Ford shale basin in Texas remained relatively steady in August, jumping 23,000 barrels per day (b/d), or less than 1%, from July, the latest analysis showed. Oil production in the Eagle Ford basin has been growing between 1% to 3% each month since January of this year when production showed the first (and so far only) sign of decline when it decreased 16,000 b/d month-on-month. Meanwhile, crude oil production in the North Dakota section of the Bakken* shale formation of the Williston Basin remained little changed, decreasing 6,000 b/d, or less than 1% in August from July.

The average oil production from the South Texas, Eagle Ford basin last month was 1.7 million barrels per day. On a year-over-year basis, that is up a little less than 240,000 incremental barrels per day, or about 17% higher than August 2014, according to Sami Yahya, Bentek energy analyst. The average crude oil production from the North Dakota section of the Bakken in August was 1.2 million b/d, or about 66,000 b/d from year ago levels.

“While the discussion of the positive impact of efficiency gains on production levels is important, it is worth highlighting the completion deferment,” said Yahya. “While the U.S. is able to drill more wells now with fewer rigs, some producers are opting to defer completing their wells until better economic conditions are present. In other words, production could begin to decline even if rig activity and number of drilled wells remain steady. This is a crucial risk to current production numbers.”

While in the short term completion deferment can hurt production levels, it can be viewed as an increasingly utilized cost-saving method in the present environment, said Yahya.

“In the past, producers tended to drill and complete wells one at a time, whereas now, more producers are drilling wells in large clusters and only after all wells are drilled do they complete them at a batch,” said Yahya. “By not having to bring completion rigs back and forth one at a time, they save money.”

Bentek estimates approximately 60% of the drilling and completion cost lies with the completion process, which alone is a significant capital investment. Delaying completion can help producers hone their budgets until higher rates of return come about.

Bentek analysis shows that from August 2014 to August 2015, total U.S. crude oil production increased by about 300,000 b/d.

The extra production is reflected in lower prices, noted Luciano Battistini, Platts managing editor of Americas crude.

“August was a month of bearish market sentiment,” said Battistini. “The outright market values of the two shale crudes hit their lowest points of the year. However, now that U.S. crude production has slowed, market sentiment has improved slightly, with expectations of some price recovery.”

The Platts Eagle Ford Marker, a daily price assessment launched in October 2012 and reflecting the value of oil out of the Eagle Ford Shale formation in South Texas, has decreased 4% between January and August, with an average price of $55.67 per barrel (/b) for the first eight months of 2015. But it is down 53% from year-ago levels. The marker has ranged between $41.42/b and $66.23/b since the beginning of this year, with the lowest value reached in August.

The price of oil out of the Bakken formation at Williston, North Dakota, was down 14% between January and August, with an average price of $47.40/b for the first eight months of 2015, according to the Platts Bakken  assessment. However, the Platts Bakken price is down 55% when compared to last year’s corresponding month. The wellhead assessment has ranged between $33.35/b and$59.32/b since the beginning of January, with the lowest value reached in August.

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% 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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