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Between December 2019 and May 2020, crude oil output in North Dakota fell from an average of 1.5 million barrels per day (b/d) to 0.9 million b/d, a decline of more than 615,000 b/d (41.6%). This production decline is greater than it would have been if producers solely halted new drilling and allowed production from current wells to naturally decline.

With only natural declines, the U.S. Energy Information Administration’s (EIA) analysis of Enverus’s data (which covers most, but not all, wells operating in North Dakota) indicates that crude oil production for most of North Dakota would have been approximately 1.1 million b/d in May 2020, 0.4 million b/d more than those wells actually reported. This difference suggests that many producers decided to reduce production from their existing wells beyond the volume the wells would have naturally declined.

The principal driver of North Dakota’s production decline was low crude oil prices. After averaging $55.70 per barrel (b) throughout 2019, monthly prices in North Dakota (defined as the average of the Bakken Clearbrook and the Bakken Guernsey prices) averaged $29.82/b in May 2020 after having declined as low as -$38.13/b on April 20. According to survey data from the Federal Reserve Bank of Dallas, the region’s producers need prices of at least $28/b on average to cover their operating expenses and $51/b to drill new wells.

In response to these price signals, most North Dakota producers reduced production, which was accomplished in at least one of three ways. First, some operators chose to completely halt production at some of their wells. As a result, although North Dakota had an average of 16,000 producing wells in December 2019, by May 2020, that number had fallen to 12,800 wells, the lowest level in more than four years.

Second, many producers elected to stop or reduce drilling new crude oil wells, which is normally required to offset the natural decline in production volumes from mature wells. According to Baker Hughes, an average of 12 oil and natural gas rotary rigs were actively drilling new wells in North Dakota in May 2020, which is significantly fewer than the 50 operating in December 2019 and is the lowest level in at least 12 years.

Finally, some producers opted to reduce, but not completely halt, production from some of their wells. This trend is observable in the changing productivity of North Dakota oil wells, which fell from an average production rate of 94 b/d per well in December 2019 to 70 b/d per well in May 2020, the lowest level since May 2011.

EIA does not expect North Dakota crude oil production to decline further, however. In its August 2020 Short-Term Energy Outlook, EIA forecasts that a combination of higher crude oil prices and increased refinery demand for crude oil inputs will increase oil production in North Dakota to an average of about 1.2 million b/d between August 2020 and July 2021 (83% of the December 2019 level).

Principal contributor: Jesse Barnett