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PXP plans southern Piceance gas drilling

By OGJ editors
HOUSTON, Apr. 19 -- Plains Exploration & Production Co., Houston, plans to drill 100 wells/year initially in Colorado's southern Piceance basin on properties being acquired from Laramie Energy LLC, a private Denver independent.

The $946 million transaction, to close May 30, involves 55,000 net acres, 100 wells producing and 100 awaiting completion, and more than 3,000 potential drilling locations in the Williams Fork member of Cretaceous Mesaverde mainly in eastern Mesa County. It also includes a 25% interest in the Collbran Valley Gas System, which began operating in late 2006.

With completion of the second 100 wells, production is expected to double by the end of 2007 from the present 36 MMcfd.

Five rigs are drilling at 18 days/well and averaging $1.7 million/well to 8,000 ft measured depth. The properties are mainly in the Brush Creek, Hell's Gulch, East Plateau, and Baldy Creek areas.

Permits are in hand for 1,500 of the other 3,000 locations, which would eventually narrow spacing to 10 acres from 160. The 200 wells drilled so far have proved the majority of the acreage, PXP said. Estimated ultimate recovery is nearly 1 bcf/well.

PXP consumes 45 MMcfd of gas in its California heavy oil operations and produces only 20-25 MMcfd elsewhere in the company. The acquisition will provide the company favorable economics with respect to Rocky Mountain gas price differentials and its own gas purchases in Southern California, PXP said.

The Piceance properties being acquired hold 386 bcf of proved reserves and 1.8 tcf of expected additional recovery.

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