A leading North Dakota oil producer is pausing new drilling amid low oil prices, but state regulators emphasized Tuesday the company is not exiting the Bakken.
Continental Resources Founder Harold Hamm said in a recent interview it will be the first time in 30 years the company will not operate a drilling rig in the state. But the company, the No. 2 oil producer in North Dakota, will continue to operate existing wells and likely reevaluate the economics of drilling in a few months.
“Continental is not pulling up stakes and leaving the state,” Gov. Kelly Armstrong said during Tuesday’s meeting of the North Dakota Industrial Commission.
Continental Resources had been operating three drilling rigs in North Dakota, but one has ceased operations, said Nathan Anderson, director of the Department of Mineral Resources. The two other rigs are expected to go offline by early March, Anderson said.
Hamm told Bloomberg News that oil and gas companies are reassessing their drilling activity in all oil fields, not just North Dakota’s Bakken, due to thin profit margins.
“There’s no need to drill it when margins are basically gone,” Hamm said in the article.
A public relations representative from Continental Resources did not return a phone call seeking comment Tuesday.
The breakeven price for companies operating in North Dakota ranges from $50 per barrel to $65 per barrel in West Texas Intermediate prices, depending on the geographic location, Anderson said. The price of WTI oil was $60 per barrel as of Tuesday morning.
Low oil prices are likely to continue unless the supply of crude oil on the international market drops significantly or if demand grows quickly.
“It’s a world problem. It’s not just a North Dakota issue,” Anderson said. “We’re oversupplied by 2 (million) to 3 million barrels right now.”
There are 30 active drilling rigs in North Dakota, three fewer than a year ago at this time, Department of Mineral Resources data shows. By comparison, the state had 27 drilling rigs operating during a downturn in 2016 and 11 rigs operating amid the COVID-19 downturn in the summer of 2020.
“To be clear, this isn’t the first time an oil company has laid down rigs,” Armstrong said. “It’s happened a lot.”
Anderson said he has heard from two other companies that have indicated they plan to halt drilling in the Bakken.
Ron Ness, president of the North Dakota Petroleum Council, said a divide has been developing between privately-owned companies and public companies traded on the stock market.
“The private companies have taken similar actions, or are in the process of taking similar actions,” Ness said. “The public companies have maybe gone from three rigs back to two rigs, tapping the brakes a little bit.”
North Dakota produced an average of 1.1 million barrels of oil per day in October, the most recent figures available. Only Texas and New Mexico produce more.
While companies will sometimes shut in production due to low prices, Ness said he has not heard of that happening at this time.
“You’re still producing the wells that you have,” Ness said. “We’re still going to make 1.1 million barrels a day for a while, but it will decline the longer this goes on.”
Sen. Brad Bekkedahl, R-Williston, said if other operators stop drilling, that impacts state oil tax revenue as well as sales tax revenue.
Many drilling and hydraulic fracturing crews are based in Williston, Bekkedahl said, which means downturns in activity have a significant impact on the local community.
“As they start to downsize their operations, we take significant reductions in population to the city of Williston,” he said.
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