Energy Futures: Price changes driving local optimism of the Piceance Basin

Attitude, price changes driving local optimism of the Piceance Basin

Some drill rigs at the Helmerich & Payne yard on G Road are idle today, but new optimism and perhaps a new price floor for natural gas may mean they see action sooner rather than later. Photo by Dean Humphrey.

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After years of sliding downhill, energy producers appear to have caught a toehold and have increased plans for drilling in the Piceance Basin.

As many as eight rigs could be operating this spring, according to industry officials who spoke to The Daily Sentinel.

Industry officials, however, also note that drilling activity is tightly tied to the price of natural gas and while they might have made drilling plans for a period of years, they now are making them on tighter schedules that are more tuned to costs and the prices that natural gas can fetch.

Laramie Energy is now running one rig and will go to two rigs in May.

“If gas prices hold up, we may add two more rigs in the fall,” said Robert Boswell, Laramie chairman and chief executive officer,

Terra Energy Partners plans to continue running two rigs in northern Garfield County, said company spokeswoman Susan Alvillar.

“Attitudes are changing already,” Alvillar said.

Ursa Resources Group II LLC has one rig working in Garfield County and it might bring in a second for Rio Blanco County, said Don Simpson, vice president of business development.

Caerus Oil & Gas LLC operated a rig in Garfield County during all of 2016 and plans call for that to continue, said Michael Rynearson, operations manager.

Encana, once one of the major players in the Piceance Basin, has shifted its focus to Texas and Canada, but does plan to drill two wells this year, said company spokesman Doug Hock.

The Piceance Basin once was the domain of major energy players that could plug in multi-year drilling programs, but those companies have largely been replaced by smaller, closely held companies that take into account immediate pricing trends and costs when they decide whether to drill a well, said David Ludlam, executive director of the West Slope Colorado Oil and Gas Association.

“These companies are assessing their drilling plans quarter by quarter,” Ludlam said.

The main driver is the price of natural gas, which has inched up toward $3 per unit and ended the week at $3.14.

Natural gas is priced per 1 million British thermal units.

If $3 proves to be the new price floor, energy companies are likely to undertake more ambitious drilling programs, Ludlam said.

SG Interests could begin running two rigs in the Bull Mountain unit on 20,000 acres northeast of Paonia once the Bureau of Land Management issues a final decision on the area, said Robbie Guinn, president and managing partner.

Development of the Bull Mountain unit has been nine years in the making and the installation of new leadership in the Interior Department could bring the project to a head, Guinn said.

Gunnison Energy, meanwhile, plans to complete a well it began last year and possibly start a second near Paonia Reservoir.

Price isn’t so much the driver in that case as is the need to keep service companies working, “so they’re ready when we’re ready,” said Brad Robinson, president.


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