Shell, Quicksilver sell Colo. drilling project

The fourth-largest natural gas producer in the continental United States has completed a $180 million acquisition of Moffat and Routt county oil and gas assets jointly held by a Shell subsidiary and a second company.

Houston-based Southwestern Energy Co. acquired interests in about 312,000 acres in the Sand Wash Basin from Quicksilver Resources, which is headquartered in Fort Worth, and from Shell Western Exploration and Production, also known as SWEPI. Southwestern plans to follow up its initial investment with a $50 million program this summer to drill four vertical test wells and one horizontal well.

Southwestern will be targeting oil, natural gas liquids and natural gas in the Niobrara shale formation, which is being extensively developed for oil in northeastern Colorado and has produced high volumes of natural gas in test wells near Parachute and nearby areas of western Colorado.

Southwestern has been heavily involved in shale drilling in Arkansas and Pennsylvania.

Shell and Quicksilver had closed on their joint venture at the end of 2012. Last year, however, Shell announced plans to sell its interest in the drilling project due to a corporate earnings decline and a desire to focus on projects it considered to have more growth potential.

Shell subsequently also announced the shutdown of its long-running oil-shale research and development project in Rio Blanco County. That project entailed trying to produce oil from kerogen through heating, as opposed to shale oil drilling projects in which oil typically is produced through horizontal drilling and hydraulic fracturing.

Shell had drilled at least 26 exploratory wells in Moffat and Routt counties with mixed results. Late last year Quicksilver reported having an interest in 10 producing wells in the area, and proven reserves there of 85,000 barrels of oil.

Oil drilling in that area dates back many decades.

Quicksilver said in its 2013 annual report that its decision to sell its share in the project was “largely rooted” in Shell’s decision to exit its North American shale projects, including the joint venture.

Shell spokeswoman Carolyn Tucker said when the company announced its Sand Wash Basin sale plans, “We believe that there’s an opportunity for the right type of organization to have some success up here.”

Said Southwestern spokeswoman Christina Fowler, “We’ve got a pretty good hunch, but at the same time as far as saying what it’s going to take to be able to tap that potential there, that’s where it gets a little tricky. There’s a lot of engineering decisions that are involved in that.”

Moffat County Commissioner John Kinkaid said that with Southwestern’s drilling activity this year being modest, the same will go for its initial impact on the local economy.

“My hope is that Southwestern cracks the code to unlock our vast gas and oil reserves in Moffat County,” he said.

He said the county has 72 trillion cubic feet of proven, technologically recoverable gas reserves. “That’s enough to meet the needs of a city the size of Denver for 4,580 years,” he said.


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