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Low oil prices force some operators to sell; but new ones see opportunity

WILLISTON, N.D. -- North Dakota oil producers are now selling off wells to stay active in the Bakken as low oil prices are projected to continue through the first half of 2016.

WILLISTON, N.D. - North Dakota oil producers are now selling off wells to stay active in the Bakken as low oil prices are projected to continue through the first half of 2016.

But the flipside is nine new operators are entering North Dakota to purchase 710 wells, showing a long-term optimism about the Bakken and the price of oil, the state's top oil regulator said Wednesday.

"Investors see it as a good play long-term," said Lynn Helms, director of the Department of Mineral Resources.

North Dakota oil production increased nearly 7,000 barrels per day in October, or about 0.6 percent, to nearly 1.17 million barrels per day, show preliminary figures released Wednesday.

Some operators worked to sell as much oil as they could in October and November in anticipation that already low oil prices would drop even further after the meeting of the Organization of Petroleum Exporting Countries, Helms said. Prices of Bakken stocks fell after OPEC members failed to agree on capping oil production to deal with the oversupply.

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"A lot of operators were pretty pessimistic about the OPEC meeting and they were right," Helms said. "They looked at October and November as an opportunity to produce and sell oil at what may have been the high price over the next six months."

Low oil prices have already prompted North Dakota companies to lay off employees, reduce the number of drilling rigs operating and delay hydraulic fracturing operations.

With prices projected to stay low through the first half of 2016, companies are now looking to sell older wells and some of their assets outside of the core Bakken and Three Forks zones as a "last line of defense" to continue operating, Helms said.

"They're using that as the last tool in their toolbox to keep cash coming in," Helms said.

Occidental Petroleum, which is exiting the Bakken, is selling 346 wells, more than any other company so far.

Whiting Oil & Gas is selling 122 wells, Corinthian Exploration is selling 92 wells and American Eagle Energy is selling 87 wells, according to paperwork submitted so far to the Department of Mineral Resources.

The price for North Dakota sweet crude oil was $27 a barrel on Wednesday, the lowest price since December 2008, according to Flint Hill Resources.

Helms said he's been asked whether the low prices mean "doom and gloom" for North Dakota, but he said he describes the situation as "belt-tightening."

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North Dakota had 65 drilling rigs operating Wednesday and companies say the rig count could drop by another 10 over the next six months, Helms said.

But Helms pointed out that the state's rig count in late 2008 and early 2009 was in the 30s.

"That's real doom and gloom," he said.

Under current prices, Helms projects the state's oil production, a key part of the state's tax base, to drop to around 1 million barrels a day through the biennium that ends in June 2017.

Helms said he is working on figures to help with a revised state revenue forecast. The state's oil production is 6 percent higher than projected so far this biennium, but the oil price is 23 percent below what was forecasted, Helms said.

"Overall, revenues are going to be significantly lower," Helms said.

The number of oil wells crews completed in October fell sharply to 43, compared with 123 that were completed in September.

Natural gas production increased 2.9 percent to 1.65 billion cubic feet per day in October. Helms said the increase is because companies are drilling in the core Bakken zones where the gas-to-oil ratio is higher.

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Companies flared 14 percent of natural gas in October, down from 19 percent in September.

Helms attributed the improvement in gas capture to additional processing capacity that the Oneok plant was able to provide.

Rail transportation of crude oil dropped from 49 percent to 47 percent in October, according to the North Dakota Pipeline Authority.

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