Little near-term growth seen in Colorado’s energy sector

LOVELAND — Northern Colorado’s energy sector has taken hard hits from declining energy prices, and only modest improvements are expected in prices in the next couple of years.

That was the message on Wednesday from Brian Lewandowski, associate director of the Business Research Division at the University of Colorado Boulder Leeds School of Business, and John Harpole, president of Mercator Energy LLC, a Littleton-based energy services company. The two presented an “Economic Report Card” for the energy sector during the opening session of BizWest’s Northern Colorado Energy Summit, being held at the Ranch Events Complex in Loveland. The event was attended by about 150 people.

Lewandowski said that as oil prices have declined from $106 a barrel two years ago — dipping as low as $26 a barrel before recently climbing back to about $45 — the region has suffered, with hundreds of layoffs, company closings, mergers and acquisitions. Colorado has shed about 25 percent of its energy-sector jobs, he said.

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“We’re seeing that negative effect,” Lewandowski said. He noted that severance taxes over a 12-month period, as calculated in early 2015, totaled $330 million, whereas they now stand at less than $100 million over the past 12 months.

Lewandowski noted that rig counts and production have been declining, even as job losses have mounted. He said that state officials are expected to revise downward Weld County’s employment numbers, showing a decline year over year.

But he said the state has weathered the energy storm, thanks to population growth and a diverse mix of industries.

“I don’t think we’re headed into a recession because of the downturn in the industry,” Lewandowski said. “I do think that we’ll see slower growth.”

Much of the impact of the energy downturn has been felt in Weld County, which accounts for about 90 percent of the state’s oil production and about 33 percent of the state’s natural-gas production. Energy overall accounts for 15 percent of the Weld economy.

Harpole said oil prices are unlikely to record any significant increase in the near term, remaining at $45 to $60 per barrel for the next five years.

“The world is awash in energy,” Harpole said.  “When you have a weak GDP worldwide, you’re going to have a weak price for energy.”

But he said natural-gas prices likely will increase modestly in the next couple of years. Fewer oil-drilling rigs mean less associated natural gas is being produced, he said. That should lead to higher prices, describing it as “a breath of hope.”

Afternoon sessions at the Energy Summit included:

• “Emerging Mergers (& Acquisitions),” examining trends with companies seeking to merge with other business, or to sell their companies or assets.

• “On Track — Trends in Transloading,” looking at new transloading facilities that have opened in the region.

• “Energy and Public Policy,” an examination of state and local legal and land-use issues.

Sponsors of the Energy Summit included Fort Collins Dodge Chrysler Jeep, Dellenbach Motors, Bill Barrett Corp., OmniTrax, ARB Midstream LLC, DaVinci Sign Systems Inc., GrafXGroup and SurveyGizmo.