EnCana envisions active year for drilling in basin

EnCana Oil & Gas (USA) expects to maintain a stepped-up level of drilling in the Piceance Basin this year, a company spokesman says.

The company has raised its rig level to about 10 from the six it was operating late last year, Doug Hock said.

“I don’t know that budgets have been totally finalized, but I would anticipate that we will be roughly at that (10-rig) level this year,” Hock said.

That would nearly match Williams as the drilling leader in the Piceance Basin. Williams’ announcement Wednesday that it plans to spin off its exploration and production business into a separate company resulted in no change to its plans to operate 11 rigs locally this year. In a conference call with stock analysts Thursday, the company reiterated its intention to stick to that plan. Last fall, low gas prices caused Williams to back away from a previous plan to boost the Piceance rig count to 22 this year.

Williams is the largest natural gas producer in the basin. Its production last year averaged 674 million cubic feet per day. That’s down from 697 million cubic feet per day on average in 2009. However, its average daily production for the fourth quarter was 730 million cubic feet per day.

EnCana averaged production of 458 million cubic feet per day last year, up substantially from 373 million cubic feet per day in 2009.

Hock said EnCana was running about five rigs after companies sharply reduced drilling in the Piceance Basin around the start of 2009.

“We’ve doubled our activity since then. We’ve definitely seen a change since the beginning of the recession,” he said.

Low natural gas prices resulting in part from that recession were the main factor in the region’s 2009 drilling slowdown. Despite those prices remaining low, EnCana more recently set a companywide goal of doubling its gas production over five years.

“We’re very focused on being a low-cost operator, using efficiencies in how we drill, and we’re really getting our well costs down, so that even in a low-gas-price environment we can still be profitable,” Hock said.

EnCana also has been able to attract third-party partners to put up capital to help develop EnCana’s assets, versus having to rely only on its own capital, he said. A recently announced example of that is a joint venture with an affiliate of PetroChina to invest in holdings in British Columbia.

“We’ve been able to make similar third-party deals in the Piceance Basin,” he said.

Companies that continued to drill locally following the slowdown had benefited from a drop in the costs of getting rigs, well-completion services and the like. But more recently there has been more competition for drilling-related services as companies have become more involved in developing gas in shale formations in other parts of the United States and pursuing new domestic oil projects, Hock said.


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