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North Dakota Production Tops 1 Million Barrels a Day

North Dakota, home to the Bakken shale formation, became the fourth state in U.S. history to produce more than 1 million barrels of oil a day in April.

Output increased by 2.5 percent from March to 1,001,149 barrels a day, the state’s Department of Mineral Resources reported today. Texas, California and Alaska have crossed the million-barrel mark. Only Texas remains above it, at almost 3 million barrels a day.

Production will increase through the summer as better weather allows crews to finish more wells, Lynn Helms, the department’s director, said during a conference call with reporters today.

“Permitting and drilling activity indicates that we’ll continue to see production grow and build well above 1 million barrels a day,” he said.

Oil and gas from the Bakken and other shale formations helped the U.S. produce the equivalent of 87 percent of its energy needs in 2013, the highest level since 1985, according to data from the Energy Information Administration. The U.S. imported 7.7 million barrels of crude a day in 2013, the least since 1996.

Most oil produced in North Dakota comes from the Bakken and Three Forks shale formations, layers of hydrocarbon-rich rock more than a mile beneath the Earth’s surface. High crude prices and improvements in drilling technology have helped companies like Continental Resources Inc. (CLR) and Whiting Petroleum Corp. (WLL) tap into the previously inaccessible shale.

Two-Step Process

Creating wells in the Bakken is a two-step process. Drillers make horizontal bores along the shale, and then completion teams inject a high-pressure mixture of water, chemicals and sand to create micro-fissures in the rock through which gas and oil can seep.

Output from shale wells declines by 60 percent to 70 percent in the first year, according to Austin, Texas-based Drillinginfo Inc., faster than traditional wells. Because of the steep decline rate, companies need to finish new wells constantly. Bad weather can slow the completion process, curbing production growth.

April work was hampered by some lingering bad weather, Helms said. Roads were shut for three days because of heavy rain, and there were nine to 11 days of wind blowing faster than 35 miles per hour, too strong for completion work.

The weather in May and June has been much more benign and should lead to stronger growth, he said.

“Every month with an ‘R’ in it is winter in North Dakota,” he said.

Clearbrook Hub

Bakken crude priced at Enbridge Inc. (ENB)’s pipeline hub at Clearbrook, Minnesota, weakened by 25 cents a barrel to a discount of $6.50 less than West Texas Intermediate in Cushing, Oklahoma, at 3:46 p.m. New York time, according to data compiled by Bloomberg.

About 30 percent of North Dakota’s oil left the state by pipeline and 63 percent by rail, according to the state’s pipeline authority. It’s the lowest percentage of rail transportation since September.

It costs $9 to $10 a barrel to transport oil by train to East Coast refineries, and $6 to $7 a barrel to rail crude to Washington plants, Tesoro Corp. (TSO) said in a February presentation to investors.

The discount of Bakken crude priced at the wellhead to Brent crude, the benchmark for global waterborne crude, widened by $1.10 a barrel to $20.54 from yesterday, according to data compiled by Bloomberg.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe, Stephen Cunningham

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