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Platts Bentek: shale oil production holds steady in Bakken, Eagle Ford

Year-over-year, output from these two prolific shale plays fell less than 1% from November 2014.

Oil production from key shale formations in North Dakota and Texas remained relatively flat in November versus October, according to Platts Bentek, an analytics and forecasting unit of Platts, a provider of energy, petrochemicals, metals and agriculture information.

Oil production from the Eagle Ford shale basin in Texas was relatively unchanged in November, decreasing about 1000 b/d, or less than 1%, versus the previous month, the latest analysis showed. Similarly, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin dipped by less than 1% month-over-month in November, marking the fifth consecutive month of marginal decline that began in the summer.

The average oil production from the South Texas, Eagle Ford basin in November was 1.5 MMb/d. On a year-over-year basis, that is up nearly 40,000 incremental b/d, or about 3%, from November 2014, according to Sami Yahya, Bentek energy analyst. The average crude oil production from the North Dakota section of the Bakken in November was 1.1 MMb/d, about 3% lower than year ago levels.

“Platts Bentek recently completed an analysis of the impact of reduced drilled activity in the Eagle Ford on crude production, and the results were very interesting,” said Yahya. “Currently, Platts Bentek forecasts a slight production growth of 8% by 2020 in the Eagle Ford, with output reaching 1.6 MMb/d. If drilling activity in this basin is cut by 25%, then crude production would decline by 12% by the end of the decade. If the rate is cut by 50%, crude production would decline by 33%.”

Based on this analysis, Yahya said it is clear that even if producers half their drilling activities in the Eagle Ford, production would not necessarily plummet. Reason: Efficiency gains attained by producers this year, which include maximizing initial production rates and improving ultimate recovery from each new well.

A different kind of analysis was done for the Bakken shale formation of the Willison Basin, which revolved around answering the question of how much production would grow if a certain percentage of current wells in backlog inventory are completed.

“Assuming current drilling rates, crude production in the Bakken can grow by as much as 200,000 b/d and reach 1.4 MMb/d by mid-2017 if producers completed 5% of the backlogged wells starting in June of 2016,” Yahya said.

There is a large number of drilled but uncompleted wells in the Bakken shale that have been building up over the past few years. The Platts Bentek analysis shows the big risk to the outlook lies with the strength of prices.

“If prices remain sub-$40/bbl and producers are unable to further bring down completion costs, then they might defer completions until the pricing market makes a comeback,” said Yahya.

Bentek analysis shows that from November 2014 to November 2015, total US crude oil production has increased by about 265,000 b/d.

In terms of the US physical spot markets, Luciano Battistini, Platts managing editor of Americas crude, said, “Prices continued to tumble in November, falling upwards of 5% month-on-month for both Bakken and Eagle Ford. Eagle Ford prices fell below $45/bbl in November, while Bakken shale oil could barely fetch around $40/bbl close to the wellhead.”

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 dropped 8% between January and November, with an average price of $53.22/bbl during that time. That is down 43% from year-ago levels. The marker has ranged between $40.68/bbl and $66.23/bbl since the beginning of this year.

The price of oil out of the Bakken formation at Williston, North Dakota, rose 2% between January and November, with an average price of $46.36/bbl, according to the Platts Bakken assessment. But when compared to the same month a year ago, the Platts Bakken price is down 39%. The wellhead assessment has ranged between $33.35/bbl and $59.32/bbl since the beginning of January.

The Platts Bakken, introduced 22 April, 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 US Gulf Coast logistics.

Image from iStock.

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