North Dakota Oil Production Falls, but Drilling Activity Seems to Have Stabilized

An oil pumping station in western North Dakota is seen in this 2010 file photo. John M. Steiner / Forum News Service

The latest report on oil and gas activity in the State of North Dakota is out from the Department of Mineral Resources.

You can read the entire “director’s cut”, as well as past reports, right here.

Not surprisingly, the report details a continued drop in North Dakota’s oil output. For the first time in 28 months daily oil production is below 1 million barrels per day. That’s to be expected with oil prices still in the tank. Drilling activity in the state simply hasn’t been sufficient to maintain such high levels of production.

All oil wells decline in their output as they age, and without new wells to replace that production, the overall oil output falls.

What is perhaps more interesting than the oil production number, though, is the rig count. It seems the state’s drilling activity has stabilized at a count just north of 30. For the month of September, the rig count was 34.

This graph compares the oil output trend to the monthly rig count. Remember that the all-time record for daily oil production in North Dakota was set in December, 2014. The August production number is down just over 20 percent from that peak:

image

State lawmakers may be pleased at the news of a stabilizing rig count. The decline in oil prices, and oil activity, has hit the state’s budget hard.

While the oil production number is an important one for the state, it’s worth remembering that most of the revenues from taxes levied on production do not go into the general fund but rather into the state’s various reserve funds. What has really hit the state’s general fund revenues hard is the decline in revenues from the sales tax and income taxes.

Those were heavily impacted by drilling activity. One would assume that, with drilling activity stabilized, those revenue streams would stabilize as well.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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