Thar she blows! Oil gushes from monster well

WELD COUNTY – There’s a potential oil-and-gas rush going on in Weld County, and that’s great news for the region in a still-not-so-great economy.

Most of the attention so far has been on a monster well called “Jake” near Grover in northeast Weld County, which has astonished observers with its output, reportedly hitting an average of 1,750 barrels a day in October.

That dropped to about 700 barrels a day in November, according to state records, but is still far above the 100 to 150 barrels a day a new well typically produces.

Jake was drilled by Houston-based EOG Resources Inc., which has indicated it plans to drill several more wells in the area this spring. Earlier this month, oil giant Anadarko Petroleum Corp. – also based in Houston – said it planned to operate up to eight rigs and drill 450 wells in the Wattenberg Field of the Denver-Julesburg Basin, one of the most productive oil-and-gas basins in North America.

Also jumping into the incipient oil rush is a local drilling company, Synergy Resources Corp. based in Platteville. Ed Holloway, Synergy’s chairman, said his company has had a couple of very good strikes recently in the portion of the Wattenberg that lies mostly within Weld County. One well came in at 226 barrels of oil a day with 726,000 cubic feet of natural gas and a second came in pumping 152 barrels a day with 640,000 cubic feet of natural gas.

As a result, Holloway said Synergy and other companies are picking up the pace of land leasing in an area that’s been a hotbed of drilling activity since its discovery about 40 years ago.

“We’re actively pursuing leases in Weld County,” he said. “It’s very competitive right now. It’s as busy as I’ve seen it in 30 years from the leasing standpoint.”

Holloway said Synergy is finding strong investment interest in its drilling plans and quickly raised about $12 million in a targeted $15 million campaign.

“We’ve been very well received in the investment community,” he said. “I think the future looks bright. Our assessment is energy prices will settle out in a very strong range.”

Technology opens new areas

Holloway said much of the recent upturn in oil-and-gas production has come from relatively new technology – including horizontal drilling and rock fracturing techniques – that’s opening up new areas that couldn’t be tapped before.

“These new discovery wells are showing what’s really happening in the oil business, to spend money on the technology needed to extract it,” he said.

Holloway said an oil rush would be most welcome in Weld County, which relies heavily on oil-and-gas revenue and where the industry has languished since 2008, the last boom year.

“You’re going to start having a healthy industry again,” he said. “New (drilling) regulations and the collapse of energy prices resulted in a lot of layoffs of people with good-paying jobs. I think you’re going to see a snap-back in employing people. It really bodes well for Northern Colorado.”

Drilling activity in Weld County did drop dramatically last year from 2008 – the highest year on record – when 2,340 annual permits were issued. Last year that dipped to 1,448 permits, still the third-highest year on record for the county.

Through mid-February this year, 242 permits have been issued in Weld County, setting a pace that could result in another record year.

Holloway said the irony of high permit numbers and big oil strikes amid ongoing complaints from the industry about new state drilling regulations isn’t lost on him. But he added that the regulations – meant to make the industry more environmentally sensitive- are still a hurdle that the industry shouldn’t have to jump over in tight economic times.

“It’s a very competitive world, and when you put more hurdles out there to negotiate, it’s going to create problems down the line,” he said. “If I’m a company spending $500 million a year on drilling, I’d probably go to where there’s fewer obstacles.”

Still, Synergy and other companies aren’t letting the regulations slow them down in the unfolding oil rush. And when Holloway hears all the talk in recent years about going “green” with solar and wind energy, he has a quick response.

“There’s nothing greener than natural gas,’ he said. “The answer is right under our feet.”

Steve Porter covers agribusiness for the Northern Colorado Business Report. He can be reached at 970-221-5400, ext. 225, or at sporter@ncbr.com.

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