Growth expected to slow after 2019 gains, some operators expected to perform better than others
Austin, TX – Enverus, the leading oil & gas SaaS and data analytics company, has released its latest FundamentalEdge report focused on oil, gas, and natural gas liquids production, pipelines and prices in the Rockies and the Bakken. This report, Rockies & Bakken in Focus, reviews upstream and midstream activity in these two key basins.
“Like all U.S. basins, the Rockies and Bakken are expected to slow down due to lower prices and pipeline takeaway constraints, but that doesn’t mean there aren’t some glimmers of hope,” said Jesse Mercer, Senior Director of Crude Market Analytics at Enverus. “Operators who continue to scrutinize cost savings, efficiencies and prioritization of crude oil over natural gas will fare better than others,” said Mercer
“The Bakken is also a great case study in crude oil production versus takeaway – although the Williston basin has ample takeaway capacity on paper, not all end markets offer desirable netbacks. As the U.S. continues to focus on new pipelines and their impact, this is an important region to watch,” said Mercer.
Key Takeaways From The Report:
- Crude oil production in the Rockies and Bakken made gains in 2019 compared to 2018, but growth has slowed to a crawl in recent months amid lower prices and emerging takeaway constraints. In our view, this low-growth outlook for production is likely to persist through 2020 based on operator guidance and current drilling and completion trends. Significant increases in outbound pipeline capacity are in the works for early to mid-2021, with the planned expansion of the Dakota Access pipeline and the start of the Liberty pipeline from Guernsey to Cushing. Both pipelines’ additions as well as modest gains to capacity on the existing Pony Express pipeline, bode well for differentials next year, but right now pipelines ex-Guernsey remain constrained, and Bakken is pricing lower alongside competing Western Canadian grades.
- Natural gas breakeven costs to produce in the Rockies and Bakken are well above current Henry Hub prices and typically north of $3.00/MMBtu. Therefore, any production gains in these plays are purely coming from associated production. The Rockies, a traditional gas play, will be able to offset some of the declines from gas-directed plays with increases from oil-directed activity in the Denver-Julesburg (DJ) and Powder River. However, the region is expected to see a net production decline over the next five years, while very small gains are expected from the Bakken, also thanks to oil-directed activity.
- Natural gas liquids production in the Williston and Rockies increased during 2019, but the growth is expected to slow in 2020. Williston Y-grade production is expected to grow between 2019 and 2024, with most of the growth being shipped to the Rockies via the new Elk Creek pipeline. However, the amount of growth will be reliant on crude prices. While Front Range Y-grade production is expected to remain relatively flat between 2019 and 2024, much-needed takeaway capacity in Elk Creek and White Cliffs was added to the region, providing an outlet for imported volumes from the Williston.
Enverus Basin Reports combine various products to investigate the activity and performance of key plays. Each individual Basin Report includes a basin overview, operator positions and transaction analysis, type curve and economic analysis, and a geological overview. Readers can view area economics, type curves, and activity for the Midland, Delaware, Eagle Ford, STACK, and SCOOP basins with our Basin Reports.
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