Energy firm plans to operate 5 rigs in Piceance Basin in 2013

WPX Energy said Thursday it plans to operate five drilling rigs in the Piceance Basin this year, and increase local capital spending.

The company’s announcement means the two chief producers of natural gas in the Piceance plan to operate at rig levels comparable to last year. Encana USA also has indicated it’s planning a five-rig program this year.

WPX said in a news release that it spent about $325 million drilling more than 200 wells in the Piceance last year, and this year expects to spend about $340 million on the Western Slope, and possibly as much as $380 million if prices for natural gas and natural gas liquids improve.

WPX is the largest natural gas producer in the state. Its average daily production in the Piceance last year dropped 1 percent from 2011, to 673 million cubic feet per day, while average fourth-quarter daily production was down 7 percent from the same period in 2011, at 637 million cubic feet.

“However, the basin’s total volumes from more than 4,100 wells continue to drive approximately 60 percent of WPX’s overall production,” the company said.

WPX reported a net loss of $223 million for 2012. It said a 22 percent drop in domestic natural gas prices contributed to the loss.

In the face of such prices, WPX has sought to continue improving its operational efficiencies. It said it set a record in the Piceance last year by drilling a well in 3.7 days. Piceance wells that took 20 days to drill a decade ago now are drilled on average in eight days, it said.

WPX’s local drilling plans this year include four wells almost two miles deep into the Niobrara formation, where WPX last year said it made a major natural gas discovery from a test horizontal well in Garfield County. The four wells are up from its previously announced plans to drill two more of the wells this year as it continues to try to better characterize the local extent and volume of gas in the formation.

Encana also says it plans to do more Niobrara drilling this year, and also drill 170 wells in the Williams Fork sandstone formation, where it drilled 174 wells last year.

Encana’s local drilling program is supported by joint ventures, including one announced last year in which Nucor Corp. plans to participate in the drilling of as many as 4,000 Piceance wells over 20 years. The deal acts as a hedge against potential increases in the price of gas that powers Nucor’s steel-making operations.

WPX offered more details regarding its horizontal Niobrara test well. It said it had to use specialized drilling mud motors, measurement tools, pump parts, batteries and other equipment to deal with temperatures up to 300 degrees in the well. It also used ceramic hydraulic fracturing sand because ceramics don’t crush under gas pressures that reached 10,000 pounds per square inch, and continue to prop open fractures so gas can flow.

WPX said it paid $121 million in royalties to private landowners, $48 million in federal and Indian royalties, and $62 million in ad valorem and property taxes for its energy production in Colorado last year.

It employs 425 people in Colorado, including 200 people at its Parachute office.


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