MORE DRILLING CUTBACKS AHEAD

Antero, Laramie Energy, Marathon, ConocoPhillips ratchet down rig numbers

RIFLE — More natural gas developers said today that they are scaling back local operations, citing the same factors that already have led other energy companies to reduce the levels of their investments in western Colorado.

The latest announcements came at the quarterly Northwest Colorado Oil and Gas Forum in Rifle. Companies have said falling natural gas prices, the nation’s lending crisis and stricter state oil and gas development regulations that are scheduled for final approval next week all have affected their plans in a region where it already is costly to drill.

“Corporately, Antero’s downscaled from nine rigs in two states down to three, with two rigs now operating in the Piceance (Basin),” said Jon Black, local operations manager for Antero Resources.

The company’s operations in western Colorado’s gas-rich Piceance Basin are in the Silt to Rifle area.

He said the company expects to drill 37 to 40 wells in the area next year, compared to as
many as 86 by this year’s end.

Ken Leis, director of land for Laramie Energy II, said that company had been running three drilling rigs in the Rifle area.

“We let a rig go about a month ago and also plan on dropping another rig in about another month,” Leis said.

A representative for Marathon Oil, which operates north of Parachute, said it is running three rigs, down from four last month. It plans to let go of another rig and run two throughout next year. It is sticking with plans to open an office in Parachute.
ConocoPhillips, which operated five rigs early this year north of Parachute, is down to one but
is expecting another to be delivered. Spokesman Derek Wagner said the company hasn’t settled on its budget for next year.

The same goes for OXY, which is running nine rigs in the area and has 68 local workers and about 800 contractors. Operations manager Doug Weaver said low natural gas prices are a consideration as the company’s budget process continues, but no local drilling plans have been finalized.

EnCana Oil & Gas (USA) has yet to announce its local plans for next year but is operating 10 rigs, down a couple from its recent average.

The area’s biggest natural gas producer, Williams Production RMT, already has said it will be cutting back to about 20 rigs next year, from 26 this year.

Bill Barrett Corp., Delta Petroleum and Berry Petroleum are among some other companies planning local cutbacks. Barrett has been spending about $250 million for its drilling south of
Silt this year but expects that amount to be cut at least in half for next year.

Meanwhile, Chevron has called off plans to boost its investment in its De Beque-area drilling program by 50 percent and double its rig count there from two to four. Instead, it intends to keep its local budget the same for the next three years.

Leis said if new Colorado Oil and Gas Conservation Commission rules let the Division of Wildlife restrict drilling on private land, that would have a “tremendous impact” on Laramie.

Commission Director Dave Neslin said new rules for operating in sensitive wildlife habitats are “intended to be a cooperative effort to come up with site-specific mitigation.”

He said the wide-ranging rules the commission is close to adopting probably are affecting the drilling plans of some companies, but the national economic slowdown and falling natural gas
prices appear to be bigger factors.

He told attendees at Thursday’s forum the new rule-making is a balanced approach that will allow the industry to continue to operate in a robust fashion while protecting the public, wildlife and the environment.

The drilling slowdown has yet to reveal itself in state drilling permits, which totaled 7,200 so far this year through the end of November.

That’s already well above last year’s record 6,368-permit total, and the final 2008 figure could reach 7,600 to 7,800, Neslin said.


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