Rigs: The total US rig count decreased during the week of April 5 from 519 to 518.
Infrastructure: East Daley has revised our Bakken outlook higher in anticipation of a drilling recovery on higher crude oil prices.
Rigs:
The total US rig count decreased during the week of April 5 from 519 to 518. Liquids-driven basins decreased W-o-W from 396 to 395.
- Permian
- Delaware (-3): EOG Resources
- Midland (+3): Permian Resources
- Uinta (-1): FourPoint Energy
Infrastructure:
Fallout from the Iran conflict has pushed crude prices higher and renewed focus on oil-weighted basins like the Bakken. We recently revised our Bakken outlook higher in anticipation of a recovery in drilling activity. While producers have been cautious in the recent month, improved price signals should prompt a measured return to growth.
With the Bridger and Enbridge North Dakota pipelines effectively full, we anticipate incremental barrels will move onto Dakota Access Pipeline (DAPL), consistent with East Daley Analytics’ Crude Hub Model. We project DAPL throughput will increase ~20% by December 2027, or ~97 Mb/d. Some additional volumes could move north on ENB’s Bakken system, though utilization has remained low, averaging only about 21% over the past year.
Bakken gas production also grows as producers increase drilling. Residual gas volumes grow up to 95 MMcf/d more in our revised, with the most additional growth hitting the market in December 2027 (see figure below).
Additional Bakken gas takeaway capacity is set to come online later this year from the Bison reversal project, which will add ~300 MMcf/d of egress capacity into the Powder River Basin. The expansion will likely be filled in part by currently flared gas. However, while we estimate average utilization around 250 MMcf/d annually, weaker downstream demand could temper throughput. Although early months in the April forecast show increases relative to March, overall production later in the outlook trends below the prior forecast. At the same time, flaring is expected to decline further as in-basin demand grows, supported by new gas-fired power generation serving North Dakota.
Producers were initially hesitant to drill into the higher forward curve, but that concern may be starting to ease. Continental Resources recently announced plans to increase its capital budget and production across its Bakken and Permian positions. Chord Energy (CHRD) also has returned a rig to the Bakken, raising its rig count from 4 to 5 in March.
Bottom Line: The Bakken is positioned for a modest rebound as stronger prices begin to pull producers back into the basin. Infrastructure capacity appears sufficient to handle incremental volumes, and while activity is picking up, long-term expansion is likely to be limited by disciplined capital spending.