SECOND-LARGEST GAS PRODUCER TO RUN HALF AS MANY RIGS LOCALLY
EnCana Oil & Gas (USA) next year plans to operate fewer than half as many drilling rigs as it has averaged for this year in western Colorado, and it will slash its capital spending in the region by nearly $200 million.
The cutback is expected to result in hundreds fewer contractors doing work for EnCana.
The company is the latest to announce reductions in natural gas development in western Colorado’s Piceance Basin. Most of its activity is in Garfield County, which for years has led the state in the number of wells drilled.
EnCana is the second-largest gas producer in the county. The largest, Williams Production RMT, previously said it will operate about 20 rigs in the Piceance Basin next year, down from 26 this year.
EnCana plans to run five rigs in the region next year, down from an average of 12 this year, and about 15 in some previous years. It recently has been running 10 rigs.
It plans to invest about $300 million next year in its Piceance Basin operations, down from a budgeted $485 million this year, and drill 140 wells locally, compared to about 300 this year.
Company-wide, Canadian-based EnCana Corp. plans to reduce capital spending next year to $6.1 billion, from a planned $7.4 billion this year, as a result of an uncertain economy and falling energy prices.
However, EnCana spokesman Doug Hock said the company’s operating plans in Colorado also are being affected by uncertainty surrounding the impacts of new, stricter oil and gas regulations in the state. The Colorado Oil and Gas Conservation Commission signed off on the rules Wednesday, and many of them are scheduled to take effect in the spring.
“It’s just one more layer added onto an already challenging economic situation,” Hock said.
EnCana says it isn’t laying off anyone as a result of its corporatewide cutback, but it is imposing a hiring freeze and reducing jobs through attrition. Hock said the company employs about 1,200 people in Colorado, including about 850 in Denver and the rest where it operates in western Colorado and on the eastern plains.
The company employs 150 to 200 people in Parachute, Hock said. It probably had about 1,000 contractors working for it in the Piceance Basin when it operated 14 or 15 rigs there, he said. Its downsizing is resulting in a corresponding drop in contractor levels.
Several other companies also have been cutting back operations in western Colorado for some of the same reasons cited by EnCana. Earlier this week, Berry Petroleum announced an overall 2009 capital budget of $100 million, about one-third of its budget for this year. It plans to spend only $10 million to $15 million in the Rockies next year. Its budget for Colorado operations this year was $122 million.
Berry Petroleum officials could not be reached Thursday to discuss their specific plans for the Piceance Basin next year. However, the company previously indicated it is scaling back from four rigs to one in the region for the winter, with plans to re-evaluate in the spring. It operates near Parachute.