Yesterday, Lynn Helms, the director of the NDIC Department of Mineral Resources, released his "Director's Cut" providing production figures and analysis for the month of October 2015. Some of the numbers he presented are pretty startling.
Though we all have heard about rig count declines in North Dakota and elsewhere, October oil production showed an INCREASE over the prior month of around 6,000 barrels per day. Similarly, though (as with oil) not at all-time highs, natural gas production climbed in October by more than 46,000 MCF per day over September production.
Moreover, the number of producing wells in the state increased to a total of 13,174 representing an all-time high in the state. Of these, 80% were unconventional Bakken or Three Forks wells. Finally, it was reported that as of the end of October, there were 975 wells drilled but waiting to be completed.
The report noted that drilling permit activity "fell sharply in November as operators continued to position themselves for low 2016 price scenarios." The problematic part, from a production/pricing standpoint is the further comment that "[o]perators have a significant permit inventory should a return to the drilling price point occur in the next 12 months."
What does this mean overall? We see nothing in these production figures to provide any optimism that domestic supply will decrease materially any time soon. To the extent commodity prices are driven by the supply coming from American shale, as opposed to just OPEC, that keeps us (unfortunately) generally pessimistic on prices for the foreseeable future.
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