North Dakota Oil Production and Rig Count Trends: A Harbinger of U.S. Shale Peak?

North Dakota's oil production has long been a bellwether for the U.S. shale industry. In Q2 2025, the state's performance offers a mixed signal: a rebound in March 2025, followed by a sharp decline in April, coupled with a shrinking rig count. These dynamics raise critical questions: Are these trends indicative of a broader U.S. shale peak, or are they temporary headwinds in a sector poised for long-term resilience? For contrarian investors, the answer could unlock strategic entry points in a market poised for volatility and eventual recovery.

Production Volatility: A Seasonal or Structural Concern?

March 2025 marked a rebound for North Dakota, with production rising to 1,193,000 barrels per day (kb/d), a 2.4% increase from February. This surge was attributed to milder weather following the extreme cold of February, which had disrupted operations. However, April 2025 saw a 4.54% monthly decline, with output falling to 34.52 million barrels for the month. This dip, while modest, aligns with a broader pattern of seasonal volatility.

Yet, the decline is not solely weather-related. The state's rig count dropped to 31 in May 2025 (from 33 in April), reflecting a sector-wide cost-cutting response to oil prices hovering below $60 per barrel. Operators like Empire Petroleum (EPM) have scaled back frac crews and deferred non-essential projects, signaling a shift toward efficiency over expansion.

Rig Count and Infrastructure: A Tale of Two Challenges

The rig count decline underscores the sector's sensitivity to price volatility. With breakeven costs for North Dakota operators estimated at $55–$60 per barrel, the current price environment has forced a reevaluation of capital expenditures. By August 2025, rig counts are projected to fall to 27, a 19% drop from March levels. This aligns with a broader industry trend of “profit over growth” strategies, as seen in the U.S. rig count falling to 550 in June 2025 from 650 in January 2025.

However, infrastructure developments offer a counterbalance. The Baker Storage Field project, aiming to add 10 billion cubic feet (BCF) of gas storage capacity, and the expansion of CO₂-enhanced oil recovery (EOR) infrastructure by companies like Continental Resources (CLR) and Chord Energy (CRD), suggest long-term investment in North Dakota's oil potential.

EOR and Carbon Utilization: The Long Game

Governor Kelly Armstrong's push for CO₂-EOR infrastructure highlights North Dakota's strategic pivot. By 2025–2026, EOR projects are expected to unlock an additional 5–8 billion barrels of oil in the Bakken Formation. This technology not only extends the life of existing wells but also aligns with global demand for low-carbon oil. The state's tax incentives and in-state CO₂ sources give it a competitive edge, though federal policy alignment remains a hurdle.

For investors, this represents a unique opportunity. While short-term pain persists, EOR projects are capital-intensive but high-margin once operational. Companies like Energy Transfer (ET) and Enbridge (ENB), which manage key pipelines and gas processing facilities, stand to benefit from increased throughput as EOR gains traction.

Strategic Entry Points for Contrarian Investors

The current selloff in North Dakota's oil sector, driven by near-term price pressures, may present undervaluation opportunities. Here's a roadmap for contrarians:

1. Undervalued Producers: Companies with strong EOR pipelines, such as EPM and Chord Energy (CRD), are trading at discounts to their intrinsic value. These firms are poised to capitalize on long-term production gains once EOR infrastructure is fully operational.
2. Midstream Infrastructure: Energy Transfer and Enbridge are key players in transporting oil and gas from the Bakken. As EOR adoption accelerates, their pipeline capacity utilization is expected to rise, driving cash flow growth.
3. Policy Plays: The state's push for tax incentives for non-Bakken drilling and a proposed non-completion waiver could create regulatory tailwinds. Investors should monitor legislative updates and their impact on exploration budgets.

The Broader Shale Outlook: Peak or Resilience?

While North Dakota's Q2 2025 data suggests a slowdown, it does not necessarily signal a U.S. shale peak. The sector's adaptability—through EOR, lateral drilling innovations, and midstream efficiency—ensures its relevance in a low-price environment. However, the decline in rig counts and deferred projects may delay the next production cycle. For contrarians, this creates a window to invest in undervalued assets with strong long-term fundamentals.

In conclusion, North Dakota's oil sector is navigating a complex landscape of near-term headwinds and long-term potential. For investors with a multi-year horizon, the current volatility offers a chance to position for a recovery driven by technological innovation and strategic infrastructure. As always, patience and a focus on value will be key in this high-risk, high-reward arena.