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Low Oil Prices ‘Slams Brakes’ on North Dakota Production


As per North Dakota’s oil regulator, the state’s crude output remained essentially flat in Jul after dropping to more than two-year lows in the previous month. The North Dakota Department of Mineral Resources’ (‘DMR’) latest data said that oil production in Jul was 1,029,507 barrels a day, up slightly (by 2,376 barrels a day) from Jun.

Despite the Small Increase, Production Remains Sluggish

Notwithstanding the miniscule increase, the newest numbers confirm the slowdown in volumes extracted from North Dakota, centered on the Bakken Shale formation. Churning out as high as 1,227,483 barrels/day in Dec 2014, the current production statistics highlight oil’s horror show that has seen prices come down from $110 per barrel in mid-2014 to around $45 now, in between falling to a 12-year low of $26.21 in Feb.

The commodity’s collapse has fueled spending cuts and layoffs while threatening the industry’s creditworthiness by hurting cash flows, drying up liquidity and narrowing profit margins.

Oils-Energy Sector Price Index

Oils-Energy Sector Price Index

Rig Count Still a Shadow of the Oil Boom Times

Just 31 drilling rigs were active in the state in Jul, down considerably from the year-ago number of 73 and a far cry from the peak of May 2012 when North Dakota had 218 rigs drilling.

What’s more, economic hardship forced producers like Continental Resources Inc. CLR, EOG Resources Inc. EOG, Hess Corp. HES, Marathon Oil Corp. MRO, QEP Resources Inc. QEP, SM Energy Co. SM to put 1,472 wells on inactive status.

Buying any of the aforementioned stocks at this time would present significant risks. But in case you are looking for energy names for your portfolio, one could opt for Carrizo Oil & Gas Inc. CRZO. It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

No Quick Resurgence in Sight

As one can conclude from the above discussion, the small improvement in North Dakota's Jul production does not mean much with the oil bust now anticipated to last through this year and well into 2017. In fact, with Jul production levels barely above the psychologically important one million barrel a day mark, there are chances that output in the second-largest oil producing state after Texas could fall below that figure before the end of 2016 if prices remain under $50 a barrel.

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