Rig count in Piceance takes plunge

The rig count in the Piceance Basin has dropped more steeply than the entire state of Wyoming and more than in the neighboring Uinta Basin.

Last October, 102 rigs were drilling into the rock of northwest Colorado in search of natural gas. The number has fallen steeply, to 30 rigs, or by 71 percent, according a compilation by Carter Mathies, a partner in Arista Midstream Services.

Rig counts in other regions also have dropped steeply in the past six months, but none as steeply as that of the Piceance Basin.

Industry officials said that all other things being equal, the reason for the steep drop in Piceance Basin drilling was the pending adoption of new rules governing drilling in Colorado.

State officials, who have maintained that the new rules pose no threat to the drilling industry, said the drop is attributable to the expense of capturing Piceance Basin gas, which is known for being difficult to harvest.

In Wyoming, the rig count is down 54 percent, including 10 rigs that stopped drilling last week, from 78 rigs to 36.

The Uinta Basin, where 55 rigs once drilled, is now down to 21, or a drop of 62 percent.

In the Rockies region overall, the rig count is down 57 percent, a drop of 447 active rigs to the current 191, according to the Arista compilation.

The Piceance Basin “was a hotbed until this perfect storm of circumstances,” said Nate Strauch of the Colorado Oil and Gas Association.

Drilling drops overall are attributable to the falling price of natural gas and the credit freeze of the economic downturn.

An additional factor in Colorado is the rulemaking being carried out by Gov. Bill Ritter’s administration through the Colorado Oil and Gas Conservation Commission, Strauch said.

New rules go into effect April 1, “but what is on paper is of grave concern to the industry,” he said.

Natural gas from Colorado at the distribution hub in Opal, Wyo., was getting $2.40 per 1,000 cubic feet, or mcf, said Theo Stein, spokesman for the Colorado Department of Natural Resources, the umbrella agency that includes the commission writing the new rules.

Figures supplied by the state geologist suggest that the price fetched by Piceance gas is less than a third of what drilling companies need to make a 10 percent profit.

EnCana, one of the most active drilling companies, needs a price of about $7 per mcf to clear a profit.

IHS, an energy analysis company with offices in Englewood, estimates that a drilling company needs $10 per mcf, Stein said.

Based on those numbers, “One could surmise that the Piceance is no longer economical to drill,” Stein said.


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