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Montana oil activity perks up after months of dormancy

oil rig.JPG
Posted at 8:06 AM, Aug 18, 2021
and last updated 2021-08-18 10:06:58-04

For the first time since the pandemic began, Montana's oil industry is seeing renewed activity.

In August, two drillling rigs set up shop in eastern Montana. Both are horizontal rigs targeting oil production for Kraken Oil & Gas. It's been more than 16 months since Montana reported any oil rig activity along the western edge of the Williston Basin.

"It's all about the economics," said Alan Olson, executive director of the Montana Petroleum Association. "With $65 - $70 barrel oil prices, that will defintely generate some interest, we're optimistic."

News of the renewed activity in Montana was included in this month's oil production report from the North Dakota Department of Mineral Resources.

As recent as May, Montana produced 46,425 barrels of oil per day, down slightly from January's high of 50,140 barrels per day. By comparison, in that same month, North Dakota produced 1,128,042 barrels per day.

Olson also credits Montana's drilling incentive tax rate for sparking the recent uptick in activity. The state of Montana offers producers a reduced tax rate for the first 12 to 18 months of production to promote new exploration and production.

Across the border in North Dakota, oil activity across the Bakken this summer has been as flat as ever.

"It's a sleeping giant," said Lynn Helms, director of the North Dakota Department of Mineral Resources. "The COVID pandemic put the industry to sleep, and it's struggling to wake up."

North Dakota's crude oil production in June changed by only 143 barrels a day from May, one of the smallest changes Helms can recall.

"We thought it was flat last month, but it's flatter yet this month," said Helms.

During his August Director's Cut briefing, Helms said the industry in the Bakken has the potential to see production levels above 1.5 million barrels a day, but operators are being conservative.

"Operators are being very disciplined about ramping up activity. They're paying down debt, buying back stock, and paying back investors," said Helms. "It looks like we won't see rig count increases until next year."

Helms said he does expect to see a few rigs added during the third and fourth quarters of this year.

"Still that only gets us to 25 rigs," Helms said. "At this oil price, we should be seeing 60 drilling rigs operating, it would be economic to drill and complete that many wells."