COGCC: Temporary abandoned wells spike, but shut-ins down

DENVER — A review of the status of oil wells by the Colorado Oil and Gas Conservation Commission shows a mixed bag where producers are releasing more shut-in wells but temporarily abandoning more since the start of the year.

A whitepaper released Monday morning by the COGCC shows oil producers have released 238 shut-in wells, while 315 wells have been temporarily abandoned. There were 51,953 active wells in March, down from 53,294 from last year and down 115 from the start of the year. 

A shut-in constricts the amount of oil produced out of a specific well, which is often used to regulate the amount of pressure in a well along with reducing output. A temporarily abandoned well is plugged and its equipment is removed to completely shut off its ability to produce crude oil.

But while the number of wells that are being temporarily abandoned are rising, the number of plugging operation notices to the state declined from 292 in January to 152 in April.

In a Monday morning hearing with COGCC commissioners, interim field operations manager Mike Leonard said there may not be as many people available to do the work. He said he knew of at least one operator that had to stop plugging operations for at least two weeks because it had to quarantine staff.

“A couple of crews had tested positive for COVID-19, so that’s why you’re seeing the downturn,” he said. 

COGCC staff created the whitepaper in response to the questions posed after the dual hits of the economic crisis caused by the COVID-19 pandemic and an earlier oil price war abroad have devastated the U.S. oil industry’s prospects this year. In response, several oil producers in the Denver-Julesburg Basin have cut staff, reduced production and reduced capital project budgets.

Notably, state regulators said the number of active drilling rigs in the state dropped from 22 at the end of 2019 to just four at the beginning of May.

West Texas Intermediate, the benchmark for American crude oil prices, has traded between $19 to $25 barrel since the start of the month after a stunning sell-off forced prices to a negative $37.63 per barrel on April 20. The vast majority of major producers developed their 2020 outlook assuming prices of around $60 per barrel.

The COGCC as a last resort can shut-in the wells itself and deactivate equipment to prevent adverse environmental or health impacts.

In a later call with reporters, COGCC Director Jeff Robbins said the agency has the staffing capabilities to continue inspections and prevent safety issues due to abandoned wells if a producer goes insolvent.

He declined to say if state regulators expect to see higher amounts of shut-ins or abandoned wells when April data is reported. In April oil prices traded below $20 a barrel for most of the month amid a global supply glut.

“There’s the potential for that, but I don’t want to speculate on that yet,” he said.

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