Energy Summit: Higher crude prices needed for renewed drilling

LOVELAND — Domestic oil production can remain stable with oil at $50 a barrel, but prices will need to return to at least $65 in order to see a revived U.S. energy market, said Sarp Ozkan, senior energy market analyst at Ponderosa Advisors LLC, an advisory firm for the energy, agriculture and water sectors.

Ozkan spoke at the Northern Colorado Energy Summit on Thursday in Loveland. The Energy Summit took place at the First National Bank Exhibition Hall at the Ranch event complex and was presented by BizWest Media LLC, Coloradans for Responsible Energy Development and Noble Energy.

Ozkan and others spoke on a panel titled, “What’s Coming for the Energy Sector if Prices Remain Low?” Panelists included Ozkan; Geoff Houlton, director of market fundamentals at Anadarko Petroleum Corp.; Lindsay Link, chief operating officer of Calfrac; and Mark Pearson, president of Liberty Resources II LLC. The panel was moderated by Chris Guith, senior vice president for policy at the U.S. Chamber of Commerce.

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Panelists said that increased efficiencies have helped producers in the Wattenberg field maintain production levels.

“At $50, we can still maintain the level of production that we have today,” Ozkan said, adding that, at $65, producers can drill new wells, bring rigs back and increase production.

“Prices don’t ever have to be $100 again, and they probably won’t be,” Ozkan said, noting that cost reductions have included faster drilling times, employee levels, salaries and other measures.

Ozkan said that improvements such as faster drilling times “never go away, even if prices go back up.”

Anadarko’s Houlton said the company will finish 2015 with eight rigs in the Wattenberg field, drilling almost 300 wells. That compares with 12 rigs and 350 wells drilled in 2014.

He said that although the company has slowed its activity, it has implemented no massive cuts. “We still saw production grow from the Wattenberg asset,” he said.

Calfrac’s Link noted that some suppliers have gone under, with equipment being auctioned. He said suppliers are challenged to cut costs, including salaries, employment levels, activity, discretionary spending and other factors while trying to retain key employees for when prices increase.

“This is a cycle that we have been through a number of times, but this is a very tough cycle,” he said.

Liberty’s Pearson said that as a private-equity-funded energy company, his investors expect a certain return, mandating an oil price of $60 to $65 per barrel for new wells. “Most of these plays are needing $60 to make that hurdle and go out and drill the well,” he said.

Panelists said that prices possibly will bottom out in October but are likely to remain low for some time.