Rig counts climb, but ‘boom’ elusive

Drilling-rig counts are climbing back in Weld County, but don’t expect the boom back in the Denver-Julesburg basin like it was before.

“You won’t see a dramatic increase in those rig counts like in 2013 and 2014,” said Richard Werner, president and CEO of Upstate Colorado Economic Development in Weld County. He made the comparison to railroads that cut employment during the recession, but when the ridership and freight returned, many of jobs did not, having been replaced by more automation and efficiency.

“What you saw was a dramatic decrease in spending in capital expenses, but they maintained production,” Werner said. Drilling rigs are the exploratory side of the oil and gas businesses, but production wells are seldom closed until dry.

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Production costs for oil-and-gas development in Weld County are known as being some of the most competitive in the nation, but even so, when oil prices slipped to below $29 a barrel, there isn’t a lot of incentive to drill new wells. Now with the price of oil edging over $50 a barrel, drilling is also edging upward, but most of the major oil companies were hardly sitting on their hands in the interim.

“We love this field because we understand the geology, and we have been operating in that field for some time,” said Robin Olsen, public affairs manager for Anadarko Petroleum Corp.’’s Rocky Mountain division in Denver. “In terms of infrastructure, we’ve made substantial investments in terms of water and oil-gathering pipelines. So instead of trucking oil and water across the fields, we can transport them in pipelines, increasing safety while streamlining our operations and increasing our efficiencies.”

Anadarko ended 2016 with five operating rigs and added another in January. Olsen said that the efficiencies gained in the D-J have brought the average price of drilling a new hole down 30 percent over the last several years, to an average cost of about $2.1 million.

“We’re able to drill a hole in about 6.2 days, because of the efficiencies we’ve gained,” she said. “We’re more efficient, faster, and we’re still gaining efficiency.

“We understand our core acreage here and understand where the resources are, so we see really good returns. It’s a great place for us to operate.”

Drilling rigs are also almost totally subcontracted by the oil companies and create about 100 jobs per rig. As of Feb. 3, there were 26 operating rigs in Colorado, with four of those on the Western Slope and the remainder operating in the Denver-Julesburg (D-J) basin.

While recently that rig count has been trending upward, it is still a long ways from the 64 operating rigs the state boasted during 2015. Meanwhile, oil and gas production tapered off only slightly in 2016, remaining near all-time-high numbers.

“Production of course begins to decline the moment the well is in production,” noted Brian Miller, chief communications officer for Noble Energy Inc. He said Noble currently has two rigs operation in the D-J, and was expecting to add another this summer.

“I don’t think it’s any secret that the D-J has some great advantages,” Miller said. While he said there was a limited amount of lease transfers over the last couple years — his company did a small exchange — most of the bigger companies stayed involved in the D-J field.

Miller also credited increased efficiency in the area as a big reason that rigs are returning here first. However West Texas was another returning area for Noble, as it is for Anadarko.

While Weld County isn’t returning to big boom times in the energy market, Werner noted that unemployment remains at an all-time low, which is comforting for an area that still primarily relies on commodity markets such as oil and gas and agriculture.

“Ag production is doing great, but the prices are not great,” he said. In the oil-and-gas market, “What we saw last year was a pretty dramatic slide, but they’ve continued to invest heavily over the last several years.

“At least over the next several years, I think you’ll see reinvestment into Weld County, but it will be a more steady pace.”