Troubling Signs At Bakken As Oil Production Growth Stalls

The euphoria of rising U.S. oil production continues in the Mainstream media while troubling signs are now taking place at the Bakken.  Even though overall U.S. oil production has climbed due to an increase in drilling rig activity, supply from the Bakken has stalled.

According to the most recently released Drill Productivity Report from the EIA – U.S. Energy Information Agency, oil production at the Bakken is forecasted to decline in May:

The data from the Drilling Productivity Reports states the Bakken will add 43,000 barrels per day (bd) of new oil production in May, but its Legacy Decline will be 44,000 bd.  Thus, overall oil production at the Bakken will decline a modest 1,000 bd in May.  As we can see from the chart above, the Bakken’s overall trend is heading lower.

Furthermore, the peak of Bakken oil production took place at the end of 2014 at 1.2+ million barrels per day (mbd), and is now a little more than 1 mbd.  You would think with an oil price now trading in the $50 range, much higher than the $30 range in the beginning of 2016, oil production would be growing once again at the Bakken.  However, it is not.  Actually, the Bakken was producing more oil in the beginning of 2016 when the price was in the $30’s than it is today with the price in the $50 range.

Now, the reason for the increase in U.S. oil production is largely due to the growth in the Eagle Ford and Permian Region:

The Eagle Ford in Texas is forecasted to increase its oil production by 38,000 bd in May, however its production has not increased all that much from its bottom at the end of 2016.  Furthermore, Eagle Ford’s oil production is still 500,000 bd lower than its peak set in the beginning of 2015.

Now, the region in the United States that has seen its oil production increase the most, is the Permian:

Oil production growth at the Permian is estimated to increased 76,ooo bd in May.  However, for the Permian to increase its production in May, it will have to add 205,000 bd of new production as its Legacy decline will be 129,000 bd.  Which means, the Permian is now losing 129,000 bd of oil production each month (and this figure is growing).

The Permian is the new place where a lot of drilling and capital expenditures are now taking place.  Some companies have stated they can produce oil in the Permian for $40… and even $20 a barrel in the future.  It will be quite interesting to see if this takes place.  While some production costs have declined, mostly due to lower oil prices and the gutting of the oil services industry, these companies aren’t going to be making the profits they used to years ago.  That is a fantasy.

Troubling Signs At The Bakken

If there is one chart individuals need to see, its the Bakken oil production profile by Enno Peters at  Enno does some excellent work on oil production data.  Here we can see just how just how steep the annual declines have increased at the Bakken:

Each color represents a different year.  As Bakken oil production continued to grew each year, the steepness in its declines, also increased.  If we look at 2014 (in orange), we can see that production peaked at nearly 1.2 mbd.  However, 2014 production would have declined to 500,000 bd (follow it down to right side of chart), if no new production was added.  But, because there were new wells added in 2015, 2016 and part of 2017, production has been kept at 1 mbd.

That being said, growth died in 2015 and then declined in 2016.  While it is true that the oil price was partly the blame for lower drilling rig activity in the Bakken, the steep annual decline in production was going to peak sooner or later.  It just happened to be sooner.  You can check out Enno Peters Bakken production profile here: North Dakota Update: Update Through Feb 2017.

Lastly, while U.S. oil production will likely increase as gains in the Permian and other areas continue, the Bakken is providing the market with a troubling sign.  And that is… it’s production has stalled due to high decline rates and lower drilling activity.  I highly doubt oil prices are going to increase significantly… AND STAY THERE.  That is the important factor… STAY ELEVATED.

There is just way too much debt and leverage in the system propping up a highly inflated economy.  When the markets crack… so will the price.  This will put another NAIL in the U.S. OIL INDUSTRY COFFIN.  As I have stated several times, I believe the U.S. oil industry will have disintegrated to a much lower level within the next 5-10 years.

Why is this bad news?  Because 99% of investors who have their funds in the market, are in STOCKS, BONDS and REAL ESTATE.  Those assets need a growing oil supply to keep from collapsing.  Unfortunately, when oil production does decline… so will the asset values of most Americans.  This isn’t a matter of decades, rather a matter of years.

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18 Comments on "Troubling Signs At Bakken As Oil Production Growth Stalls"

  1. What’s the plan with your YouTube channel?

    • Adam,

      Could you be more specific?? If you are referring to the new INTRODUCTORY VIDEO, that was an idea and video done by my webmaster, Peter, to give new visitors an idea what we do at the SRSrocco Report. I thought Peter did an excellent job on it.


  2. Hi Steve, What you are saying about EROI is very interesting and makes sense, however could you elaborate on the idea of falling EROI impacting on the oil price. You have mentioned in your videos that this concept is counter intuitive and this is how I feel. Specifically, if I buy a litter of petrol it will have the same energy content whether EROI is high or low. I still need the petrol to run my car. So if there is less of petrol due to falling EROI, the price of petrol has to go up due to scarcity. I guess the rising petrol price would impact negatively on the economy is this what you meant? Would be great if you elaborated on this issue why oil price would go down as part of fall in EROI.


    • Ivan, what would happen with TSLA when the radius of a Tesla decreases with 20% p.a.?

    • Ivan,

      My understanding is that as oil production declines so does economic production. When economic production declines, fewer people have jobs and those with jobs engage in belt tightening. Therefore demand for oil declines. Less demand for oil results in a lower price despite scarcity of supply.

  3. I think it’s insane how much energy is used up by the tar sands in the form of natural gas.

    • C,

      Yes, I call it… TURNING GOLD INTO LEAD. Taking high quality natural gas and producing low quality tar sands is a desperate attempt by the energy industry to continue BAU- Business As Usual as long as we can.


  4. If a liter of petrol requires a liter to produce it, there is no net output. If the output ratio stays above one (par), then it comes down to economics.

    The catastrophe involves the sweet spots being drilled out first. The more marginal wells come on stream later. In some countries, there may be a better grade of well remaining. I heard Qatar still has high quality reserves.

    In terms of the economics, the higher grade wells like Permian require a lower oil price to remain profitable. As long as companies have enough high grade wells and produce below the oil price, they will stay in business.

    Thermodynamic collapse is about lower grade wells requiring too much oil to remain economical. This is engineer’s logic. So long as profits arise, firms will continue to pump out oil. Even if they don’t, finance will always head towards oil as its essential, a virtual necessity in our modern age.

    The decline in the quality of oil reserves is a cause for concern.

  5. You may cut me off Steve but your “oil scenarios” are 20 to 30 years too soon. You keep forgetting to consider the “innovation” in the USA. We have Solar Energy growing, electric cars and with Toyota trucks, the new hydrogen cell. The coal industry is converting coal to liquid fuels. Propane is being converted to gasoline fuel. With the Trans Canada Keystone pipeline,a massive source of fuel,is coming our way in 6 months. Alternative energy sources abound. Soon, as you writers say, we will be less dependent on oil to the point we won’t need imports except maybe from Canada. Therefore, as a silver buyer, I see a supply demand problem from day one when I first started reading your site. It will always be unless we have a currency collapse. I see that 18 wheeled trucks are converting to natural gas. And soon cars will go that way too. Write articles that help us silver buyers to create DEMAND for silver.
    All this hype these past 10+ years has not created any demand. Are all the “rich” people in
    the USA unaware of your “oil scenario?” Are they all that blind and they all can’t see that
    silver is going to explode upward as it has been said since 2000 by every silver guru” on the
    planet. We need buyers of silver and I can honestly say, I don’t know what to say or write that can get people to buy silver. Who are the dumb ones, people like me who bought silver or
    people who will wait for supply demand dynamics to show them it’s time to buy?

    • Hi joe, we need $6,- in debt to create $1,- in gdp on a worldwide basis. 10 years ago it was $2,- for $1,-

      Opec jawboning loses its charm as we speak. Squeezing coal to liquids is a net energy sink. Can you not smell the desparation? If you’re a paid troll they should put you on a minimum wage.

      • Houtskool,

        Now, that was Fricken hilarious.


        • Houtskool: No I’m not a troll. I’m just trying to find out why, with all that Steve says is going on, why silver sucks? Why hasn’t demand risen? Why isn’t any group of investors concerned? The US Mint sales are down not up. If what Steve says is correct,why isn’t anyone hearing him. Must the economy of the USA collapse for silver to rise in value? What kind of economic world will that be when 99% of the USA citizens don’t own gold
          or silver? In a matter of days there would be riots in every city.And
          you want to call silver insurance against the collapse of the USA economy. Would you dare leave your house to spend an ounce?

          • Thanks for your reply joe. We all are inside the Matrix. We depend on the system. I will go a few steps further: if i were really smart, i would go to Papua New Guinea and try to marry a local girl with a bone up her nose. These people live outside the Matrix and have a good chance to survive the coming collapse.

            I’m not that smart so my bet is on stored energy, like good quality handtools, phyz and some prep stuff. We all live in certain layers within the Matrix. We make decisions.

            Most people live like me, we depend on the system.

            The majority doesn’t know the difference between ‘money’ and ‘currency’. I do. Owning physical gold and silver is one option to leave a part of the Matrix behind me. Doing nothing is NOT an option.

            Have a good time with your loved ones joe.

          • Joe,

            I will answer your comment if you let me know what percentage of your wealth is in silver. I would imagine it is less than 5%? Correct?


  6. This might add something to the analysis.
    Once QE was tapered the price of oil collapsed from $95 to <$50.
    So with out subsidies prices collapse. If prices stay low too long there will be bankruptcies and bailoutsin the oil patch
    Sound like we're in a predicament.

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