Posted 11/01/16 (Tue)
By Kevin Killough
As 2017 approaches and oil remains at around $50 per barrel, defying some predictions of a recovery by the end of the year, forecasters are presenting a wider range of considerations for the coming year.
Director of Mineral Resources, Lynn Helms last week addressed the North Dakota Association of Oil and Gas and Coal Producing Counties (NDAOGCPC) and provided a county-by-county forecast of projected rigs, wells, and oil industry related jobs.
These projections include forecasts if oil remains at $50 per barrel, as well as higher ranges.
“Each year I look forward to providing this outlook to county leaders. Now that lower oil prices have held on for an extended period of time, I’ve included a ‘lower for longer’ and a ‘price shock’ forecast to give leaders an idea of how to plan for growth under suppressed drilling conditions as well as rapidly increased drilling activity,” Helms said in his address.
The break-even prices for the second quarter of 2016 show Williams County wells at $23 per barrel.
These prices are all based on West Texas Intermediate prices.
Divide County has one of the highest break-even prices, at $86 per barrel. While the countywide average is among the highest, it doesn’t present the full picture.
The county has maintained at least one drilling rig throughout much of the slowdown, as was the case last week.
So there are parts of the county that remain profitable, even at the current low prices.
Williams County had five rigs of the 35 currently operating in the state, and 29 of those rigs are in the core areas of Dunn, Mountrail, Williams, and McKenzie counties.
Sixteen western North Dakota counties are actively producing oil and natural gas.
The lowest break-even price is in Dunn County where operators enjoy a $16 per barrel break-even price.
Bowman and Bottineau counties have break-even prices exceeding $100 per barrel.
Lower for longer
Under the “lower for longer” scenario, Divide County continues with one rig for the next decade.
Jobs within the industry under that scenario remain below 2,000 total jobs, and most of them are on the production side.
A smaller portion is within the gathering activities, often called the midstream, where smaller production activities are gathered to bring to major hauling or processing facilities.
Those taper off by the end of the decade, leaving almost all jobs on the production side.
At the same oil prices, Williams County has about four times the activity as Divide County, with about five rigs operating through the decade.
Jobs projections under this scenario show Williams County maintaining about 6,000 jobs. As with Divide County, most of these will be on the production side.
Mountrail County shows about the same activity as Williams County -- 5 rigs and about 6,000 jobs, mainly in production.
Under this scenario, Burke County is projected to have no drilling activity and just over 1,000 jobs.
The projections the department released include what it considers the “expected” oil price of $60 per barrel and the “price shock” scenario where oil climbs above $70 per barrel.
Under the expected range, Divide County will see about five rigs operating and 3,000 to 4,000 jobs in the industry. A larger portion of these will be drilling jobs, but most of them remain on the production side.
Under the “price shock” scenario, Divide takes on as much as 10 drilling rigs and over 5,000 jobs -- basically, a return of the oil boom.
Within the expected range, Williams County is projected to have 15 drilling rigs and 8,000 to 10,000 jobs.
With oil prices of over $70 per barrel, Williams County ramps up to 30 rigs over a five-year span but drops back down to 25.
Jobs rise from 12,000 to 20,000 under this scenario, with a hefty portion of about 1 in 8 jobs going to the drilling side of things.
Under the expected scenario, Mountrail sees its rig count jump from 20 to 25 rigs operating through the next decade. Jobs in the industry start at about 8,000 and double within 10 years.
Under the best-case scenario, rig counts go to 30 before dropping down to 25 after about five years, and the county sees a job growth rate of up to 25,000 jobs in the industry.
Under the expected scenario, Burke County sees about four to six rigs operating and 2,000 to 3,000 jobs.
The best-case scenario doesn’t impact rig counts in Burke County, according to projections, but it does increase projected jobs to the 3,000 to 5,000 range.