The company I work for is involved in ND work. In particular, I have been involved in development work (housing and other new infrastructure).
First, the locals point to two previous bust cycles within their lifetimes. So, the boom/busts haven’t been as pronounced or well known nationally, but they have happened there.
Second, the locals have been very reluctant to build too much, too fast. This is why its hard to get a hotel room near the oil patch...and why they have expanded schools with trailers, but resisted large scale projects to expand schools.
In a lot of ways, they are prepared for the bust in ways that Texas isn’t. We’ve worked on a few ‘man camps’...very temporary housing - compare that to all the new apartments in Midland. One of the subdivisions I did work on was unusual - the roads were gravel, and the developer planned on putting in pre-fab homes - so when the day came and the oil workers left, he could buy back the lots, drag the houses off, and return the area to its used as a hay field.
I think ND will weather this as well as Texas.
Also, there’s a differentiating factor which makes this different than previous busts. When a well is fracked, I am told, it does not harm the well or reduce its ultimate production if you let it sit for a year - almost like turning a faucet on and off. So even if a bunch of companies go broke, when all the dust settles, somebody will sill own a well that can be ‘turned back on’ when the price rises again. So the region can almost instantaneously respond to a price increase...no dragging feet to see how long the next boom might last. Almost as good as owning a bunch of oil in a storage tank, and just waiting for the price to go up.
I believe you have false information.
Thanks: your anecdotes are my understanding as well.
I’m sure hoping there was some savings discipline among the guys that caught the boom.. and investment. I’m hoping the glut will dry up in 6 months or so, and prices go to 75bbl, and stay there.
Good info here:
http://www.freerepublic.com/focus/chat/3236160/posts?page=82#82
http://www.freerepublic.com/focus/chat/3233396/posts?page=102#102
Shut-in prices refer to the minimum wellhead price operators need to continue producing from a hole which has already been drilled and completed and is in production.
Prices at the wellhead must be sufficient to cover the ongoing costs of operation and maintenance, including pumping and artificial lift, as well as water, gas and steam flooding and other stimulation measures for older reservoirs.
Shut-in prices are as low as $15 per barrel in North Dakota’s Bakken, according to North Dakota’s Department of Mineral Resources. Elsewhere, however, operating costs and corresponding shut in prices are much higher.
http://www.reuters.com/article/2015/01/13/oil-shale-prices-kemp-idUSL6N0US2GE20150113
Shut-in prices are only relevant for existing wells. New wells must cover their full life-cycle costs, including drilling, completion and operating costs, plus an acceptable rate of return, before a production company will authorise drilling.
North Dakota’s Department of Mineral Resources put breakeven prices at between $30 and $75 in different parts of the Bakken in a presentation to state lawmakers. These are the prices producers must expect to receive at the wellhead before they will authorise drilling.
On this average measure, the approximate wellhead price for North Dakota’s oil producers was just $38 per barrel on Jan. 12, making production in all peripheral areas of the Bakken play uneconomic and only marginally profitable in three core counties (Dunn, McKenzie and Williams).
Breakeven rates are critical because production from existing wells is not stable. Output declines over time in a fairly predictable way, a phenomenon known as the decline curve.
Output from existing fields around the world would decline around 9 percent per year in the absence of new drilling or other capital expenditure to increase recovery, according to the International Energy Agency’s World Energy Outlook 2013.
North Dakota’s Department of Mineral Resources estimates output from a typical Bakken well falls 65 percent by the end of the first year, another 35 percent by the end of the second, 15 percent more by the end of the third, and 10 percent per year thereafter.
(Selected paragraphs above, more at the link)
Leases aren’t perpetual they are held by production.
If the lease owner doesn’t continue to produce something to hold the lease or pay shut in fees to hold the lease they loose the lease.
Paying shut in fees can get real expensive when you have no income coming in.
They might be able to put the wells on timers, depending on the lease terms, but even that can get expensive without income coming in.
Loose the lease, you plug the wells and you loose everything, so the only alternative is to sell the lease to someone at a lose.
If someone can pick up leases at a price figuring on $45 oil, then you can turn them back on, but not buying a lease based on $85 when you can only get $45-$50.
The good news if the wells are P&A’d, someone can get a new lease and do a reentry on the well at a much cheaper cost than new drilling.