Analyst: Drilling doldrums to persist
Low natural gas prices that led to drilling in Garfield County falling to the lowest level in about a decade will likely persist, an industry observer says.
In Garfield County, drilling started on roughly 500 wells last year, the lowest number since 2003.
Ryan Smith, a senior energy analyst with Bentek Energy, which keeps tabs on the oil and gas market, said drilling in northwest Colorado’s Piceance Basin is highly influenced by natural gas prices.
“We don’t see a huge rebound in prices in the next few years,” he said. “So expect activity to remain lower (with) those prices.”
The Colorado Oil and Gas Conservation Commission reports 492 well starts in the county last year as of Dec. 20. Year-end well-start figures from the commission weren’t available, but Bentek Energy counts 528 starts in the county for the year as a whole. According to state data, the last time the county’s well starts were lower was 2003, with 417 wells.
Year-end drilling permit information is available from the state, and shows 1,046 permits being issued in Garfield County last year, the least since 796 were approved in 2004.
Statewide, 3,775 permits were issued, the fewest since 2,917 were approved in 2004. With 2,130 statewide well starts through Dec. 20, the year’s well starts will be almost as few as during the worst of the state’s recent drilling slump, when drilling on 2,067 wells began in 2009.
Garfield came in second, far behind Weld County, last year in drilling permits and activity. The state issued 1,826 permits in Weld County last year, down from 2,262 the previous year. The county’s 1,350 well starts through Dec. 20 compared to 1,640 for all of 2011.
Energy companies have been focusing on more lucrative drilling in Weld County for oil and for gas richer in liquids such as propane and ethane. But Smith said drilling there has been recently constrained by limited processing facilities, something that should change as more processing capacity comes on-line.
Mesa County was third statewide in permits last year, with 150, followed by Rio Blanco County, at 117, the state reports. But it reports just four well starts in Mesa County last year through Dec. 20, and 47 in Rio Blanco, which was edging out Phillips County as the third-busiest county for drilling activity.
Smith said Bentek expects nationwide gas production to keep rising, which will contribute to continued low prices.
The rise is due to factors such as production of associated gas while targeting liquids in places like Weld County; a backlog of wells that have been drilled but not yet completed and so aren’t too costly to bring on-line as pipeline capacity becomes available; and the fact that drilling for gas remains economical even with low prices in places such as the Northeast.
That region is close to major markets and has highly productive wells.