A new analysis of North Dakota’s state-owned minerals puts their value at $2.4 billion, nearly $1 billion more than an estimate provided last year amid the oil downturn brought on by the coronavirus pandemic.
The previous valuation of $1.45 billion came “in the middle of an unprecedented time for the oil and gas industry” marked by uncertainty and low prices as demand for oil tanked, said Joel Brown, mineral services manager with Watford City-based MineralTracker, part of First International Bank & Trust. He presented the data to the North Dakota Board of University and School Lands last week.
Oil prices have rebounded considerably since the 2020 downturn and even exceeded $80 per barrel this fall -- a seven-year high -- before dropping somewhat in recent days as fears about the omicron coronavirus variant emerged. West Texas Intermediate, the U.S. crude pricing benchmark, was trading for about $66 per barrel Friday.
The new valuation takes into consideration factors such as oil prices and the decline expected in a well’s production over time. MineralTracker’s modeling examines each of the 8,000 wells in which the state holds an interest. There are 17,000 wells operating in North Dakota.
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Brown told members of the Land Board about several trends he observed in the latest modeling. Most wells temporarily idled during the early days of the pandemic have started operating again now that oil prices have improved, but the rate at which companies are drilling new wells has not kept pace with the price uptick.
Brown added that recent drilling has focused less on the “core” area of the Bakken around Watford City where it concentrated following the previous oil price collapse in 2014 and 2015. There are more opportunities for drilling along the region's "fringe" where oil fields are less crowded, and advances in drilling techniques are helping producers see a bigger return on investment in those areas, he said.
Natural gas production is growing at a faster rate than oil production, though oil generally remains the sought-after commodity in the region.
“As I look at wells on an individual basis, I’m blown away by the amount of gas that is being produced,” Brown said. “With gas prices where they are today, it’s nice to be realizing some value for that.”
Natural gas prices have increased in recent months after spending years at lower levels amid an uptick in gas production across the U.S.
Gov. Doug Burgum, who chairs the five-member Land Board, said the trend toward higher gas production rates could create a scenario down the road in which the industry must hold back oil production if the state does not have enough processing facilities and pipelines to accommodate more gas. State leaders should direct resources toward adding value to gas within the state, something that “could have a huge payback for the state of North Dakota and for this board,” he said.
Reach Amy R. Sisk at 701-250-8252 or email@example.com.