The number oil rigs operational in North Dakota declined to 49 indicating the lowest since August 2009 and may further drop in 2016. West Texas Intermediate (WTI) fell to the lowest in 12 years. The oil price drop is forcing oil drill operators to reduce the activity. Market analysts express concerns over possible bankruptcies following the decline in oil drilling North Dakota.
After Texas, North Dakota produces more oil than any state. North Dakota pumped 1.18 million barrels of crude a day in November as against the 1.17 million in October. WTI eased to $29.13 per barrel on New York Mercantile Exchange (NYME). This is the lowest price since November 2002.
North Dakota is the second biggest oil producing state in the US. The State Industrial Commission's Department of Mineral Resources has released a report on drilling activity. The number of oil rigs fell to less the quarter of number of rigs were at peak level. The number of oil rigs in North Dakota was dropped to 49, according the latest report, as published by Gulf News.
The US crude oil benchmark is hovering at $29.64 per barrel. Bakken producers are forced to sell at discount owing to limited pipeline network and high cost of shipping. Lynn Helms, Director of North Dakota's Department of Mineral Resources, said: "We are down in the bottom of the bottom of the tank in terms of cash flow and capital."
Meanwhile, North Dakota crude oil fell to $20 a barrel, a one-fifth of the price in 2012. It was on lines of previous expectations of $20 per barrel by analysts. The steep fall of oil price in North Dakota may trigger more bankruptcies and less drilling activity in 2016, as reported by Star Tribune. The oil rigs may further drop to 30 this year, forecasts Helms.
Oil producers are feeling the heat of lower prices. Seven of the 10 major oil producers in North Dakota have already posted losses during the third quarter. The top three oil producers -- Whiting Petroleum, Continental Resources and Hess Corp-- were also in the list of companies that announced losses.
The firm decision of Organization of Petroleum Exporting Countries (OPEC) on not to reduce production level is impacting North Dakota in more negative way. If oil price continues to drop, it'll result in reduce investment in Bakken. There would be further decline in number of oil rigs and potential layoffs as well, according to Valley News Live.
Smaller oil producers Samson Resources of Tulsa, Okla, and American Eagle Energy, filed for bankruptcy in 2015. However, despite all these adverse conditions, North Dakota witnessed 0.4 percent rise in oil production in November 2015 giving 1.18 million barrels per day.
Natural gas production was also marginally up. North Dakota recorded peak oil production of 1.2 million barrels a day in December 2014. North Dakota oil production may end at 1 million barrels a day by end of 2016.
Oil price fell 21 percent this year and 62 percent in the past two years. Helms further added: "Companies are reducing their drilling plans. There's a lot of pessimism in the near term."
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