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Bakken rigs slow as prices drop

On Monday the price of oil per barrel dipped to around $50, a five year low, causing stock prices to plunge and bringing new focus on how oil companies operating in the Bakken formation will respond.

The Bismarck Tribune reports that crude slated for delivery in February was listed on the New York Mercantile Exchange at $50.35 on Monday. Also that day, North Dakota’s active rig count dropped to 170, a decrease of 14 over several weeks. Though this might partly be due to seasonal lulls, many companies are slowing production while they watch recent oil market activity. Also, due to high shipping costs, crude oil produced in the Bakken formation is often discounted an additional $10 to $16, further cutting into producer’s bottom line.

Related: Eagle Ford production dips due to oil drop, relief is a waiting game.

Recently, Continental Resources announced that it would be cutting its budget for 2015 from $4.6 billion to $2.7 billion.  Continental Chairman and Chief Executive Officer Harold Hamm said, “This revised budget prudently aligns our capital expenditures to lower commodity prices, targeting cash flow neutrality by mid-year 2015.” Additionally, the company plans to decrease its current operating rig count from 50 to about 34, with only 11 operating in North Dakota’s Bakken formation.

The Tribune reports that Hess Corporation spokesman John Roper stated that the company currently has 17 rigs drilling in the Bakken. As of last week, the company was still hiring despite talks of pervasive layoffs throughout the oilfield. A company investor report stated that the company expects to have 14 rigs operating during 2015.

Last month, North Dakota Department of Mineral Resources Director Lynn Helms stated that a rig count drop is to be expected and could decrease by up to 30 to 45 over the coming months. As of Monday, the drop has reached half of the modest estimate. However, slowdowns are to be expected in a long-term play and as the market fluctuates. Drilling in the Bakken region is expected to persist for up to 25 years.

To read the original article by The Bismarck Tribune, click here.

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