Industry Trend Analysis - Bakken Play On The Mend - APR 2018

BMI View: The Bakken shale play will achieve notable crude production gains in 2018, reaching a new all-time high. Stronger oil prices will increase investment, accelerating drilling activity, though demand for equipment and services in the Permian will cap growth.

  • Crude production out of the Bakken has bottomed out, as targeted drilling campaigns help stabilise decline rates across the play;
  • Output will recover over 2018 as oil prices strengthen and capex into the play rises;
  • An abundance of takeaway will encourage further development of the play, with the majority of growth coming from McKenzie and Dunn counties;
  • Development will be held back by a heavy focus on West Texas acreage, drawing equipment and services

The Bakken shale play is undergoing a turnaround. After bottoming out in December 2016 at 942,000b/d - a 25% decline from its 2015 peak - upstream development began to accelerate in 2017 as crude prices strengthened and investment returned into the core of the play. Due to start-up delays at midstream projects, a shortage of skilled labour and strong decline rates at mature wells, overall growth was limited in 2017, adding just over 40,000b/d y-o-y (see 'Bakken Production Approaching A Wall', July 18 2017). By H217, well productivity began to improve, with output per well having bottomed out in July 2017.

Rising oil prices are boosting investment into the Bakken. As WTI prices appreciate on the back of a tightening oil market, capex into the play has also begun to recover. Accessing a basket of five Bakken-focused producers, investment into the play bottomed out in 2016 at USD4.63bn before rising to USD6.36bn in 2017. We expect capex will reach upwards of USD7.0bn this year as oil prices hold above the USD60.0/bbl mark and producers increase drilling activity within the most profitable sections of the play.

Productivity Coming Back
Bakken - Number of Producing Wells and Daily output per well
Source: NDMR

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