Energy firms wait for better times

RIFLE — Energy companies say they still are waiting for natural gas prices and economic conditions to improve so they can resume more aggressive local drilling operations.

“We’re not anticipating any additional drilling activity until the picture looks better going forward,” Cary Baird of Chevron said Thursday at the quarterly Northwest Colorado Oil and Gas Forum in Rifle.

In fact, Chevron, which is operating near De Beque, plans to lay down its last drilling rig for the time being, Baird said. She said Chevron figures gas needs to be priced at about $5 per thousand cubic feet for its local drilling program to make financial sense.

Current prices per million British thermal units, an almost identical per-dollar form of measurement, are below $4 at a key Louisiana trading point, and the price for Rockies gas is below $2.60, according to the U.S. Energy Information Administration.

Still, Baird said Chevron considers its local natural gas holdings to be a “very valuable asset in the long term.” Chevron plans to use the down time to learn more about the geology it is working with so it will be ready to take advantage of the situation when prices go back up, she said.

Representatives of Oxy and Petroleum Development Corp., both of which have suspended their local drilling programs, said they are evaluating the economics of the natural gas market and waiting to see when it makes sense to put rigs into operation again.

Antero Resources is doing no drilling for now but plans to drill two wells later this year within the Battlement Mesa residential development, where it recently announced plans to eventually drill as many as 200 wells from 10 pads.

Marathon Oil and Laramie Energy II each continue to operate one rig locally. EnCana Oil & Gas (USA) is running four rigs, and Williams Production is operating eight.

Bill Barrett Corp. has two rigs drilling south of Silt and plans to move in a third. But Bill Barrett representative Scot Donato said the company has that rig under a long-term contract and is only temporarily bringing it in from another area of the state where it is awaiting data before doing more drilling.

Dave Neslin, director of the Colorado Oil and Gas Conservation Commission, said the state continued to see a significant drop in permit applications over the past two months, since its new rules went into effect.

The state received a record 1,470 applications in March as companies rushed to submit applications that would be grandfathered under the old rules. Only 34 applications followed in April. Neslin didn’t have figures available Thursday, but said he thought applications were up slightly in May.

As of the start of this month, the state had approved 2,461 permits statewide this year, up from 2,160 through April. So far this year, Weld County is edging out Garfield County,
759-742, in approved permits. Garfield County led the state in annual permitting activity from 2005-2008, after supplanting Weld County .

The state approved a record 8,027 permits last year, but Neslin said the number of wells drilled per year typically may be half of what was permitted. Companies often seek renewals of some of their permits after they expire in a year, he said.

Neslin said companies probably have about 8,000 drilling permits outstanding, which would be enough for about two and a half years of drilling based on 2008’s drilling rates.

He said the slowdown in drilling activity in Colorado is similar to elsewhere in the country.


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