Completion totals and federal onshore permitting and leasing data reflect the strong drilling recovery under way in the US.
The country’s drilling activity climbed 9% year-to-year in the first quarter, the American Petroleum Institute said in its latest quarterly well completion report.
Producers drilled an estimated 11,527 oil wells, gas wells, and dry holes in the US during 2006’s first 3 months, compared with 10,534 in the comparable 2005 period.
Gas well completions increased 8% year-to-year to 6,957, oil well completions grew 10% to 3,358, and dry holes climbed 16% to 1,212.
API Chief Economist John C. Felmy noted “anecdotal evidence” that fewer deepwater wells were drilled in the first quarter but that more were successful.
Total US exploratory completions rose 12% year-to-year in the first quarter, while development completions grew 9% during the same period, according to API. It estimated that US oil and gas exploration footage reached 63,386,000 ft, 12% more than in 2005’s first quarter.
“I take this as a sign of good, continued growth. It demonstrates that the industry continues to look for oil and gas domestically, despite what some of our critics say,” Felmy said.
He noted that total US oil and gas well activity, for 2005, was slightly lower than in 2004 and much lower than in 2003, when the US industry still was recovering from a severe slump.
“We continue to see anecdotal evidence of rig and labor shortages as activity ramps up. But we don’t get it in the context of this report,” Felmy said.
Drilling permit demand
Demand for drilling permits on public land continues to grow, according to the US Bureau of Land Management. The Department of the Interior agency reports that applications for permits have increased dramatically over the last several years, which has led to a record number of approvals.
Approval totals, according to a spokesman, grew from 3,961 in fiscal 2003 to 6,452 in 2004 and 7,018 in 2005.
The spokesman said that halfway through fiscal 2006 (which ends Sept. 30), BLM is on a record pace in terms of drilling permit applications received, processed, and approved. “Based on current energy demands and market conditions, the BLM anticipates continued strong industry interest in oil and gas drilling permits on federal lands,” he said.
Andrew Bremner, government affairs director for the Independent Petroleum Association of Mountain States, Denver, said high oil and gas prices have stimulated Rocky Mountain drilling activity. But most drilling is planned farther in advance, he added.
“Production out of the Rockies has been increasing the past 2 decades. Much of it is based on the amount of natural gas here. It’s the largest onshore gas resource in the Lower 48 states,” he told OGJ Apr. 14. “The federal government controls the largest amounts of natural gas, both onshore and offshore. So it’s not surprising there’s so much interest in federal land.”
Bremner expects the number of permits to increase once the BLM fully implements a pilot program to increase seven district offices’ processing capacities.
The market for rigs remains tight in the Rockies. “But it’s responding,” Bremner said. “Between December 2002 and December 2005, the number of rigs here increased about 135%. It’s still a tight market, but they’re showing up. It’s a different rig environment than it was 4 years ago.”
Leasing stays strong
Inquiries to three BLM district offices show that oil and gas leasing increased year-to-year in two of them and declined in the third only because the agency’s 2006 lease sale in late March was smaller than the sale a year earlier.
New Mexico’s BLM office, which also handles activity in Texas, Kansas, and Oklahoma, attracted more than $12.2 million in bonus bids on 68 parcels totaling 31,695 acres at its last lease sale on Jan. 28. Daniel E. Gonzales of Santa Fe, NM, submitted the single largest bid, $1,646,400 for 587.65 acres.
A Jan. 19, 2005, lease sale drew nearly $8.1 million in bonus bids on 64 parcels totaling 33,234.23 acres. Most of the leasing involved New Mexico tracts in both years.
In its competitive lease sale on Apr. 4, Wyoming’s BLM office, which also handles activity in Nebraska, sold 160 parcels totaling 176,807.5 acres for nearly $9,356,215 in bonus bids. Receipts from four more parcels subject to presale offers pushed the total to $9,642,291.50. The highest bid was $760,800 from Hanson & Strahn LLC of Cheyenne for 2,535.24 acres.
In an Apr. 5, 2005, Wyoming sale, 199 parcels totaling 167,504.55 acres attracted $9,672,864 in bonus bids. The highest bid, $1,518,380 for 5,790 acres, came from Kirk D. Martinez of Rhame, ND.
In its latest competitive lease sale on Mar. 28, the BLM office for Montana, which includes North Dakota and South Dakota, received more than $3.1 million in bonus bids and advanced rentals, down from $4.7 million from a bigger sale a year earlier.
Fifteen producers successfully bid on 39 parcels totaling 24,603 acres in the three states in the most recent sale, compared with 77 parcels in Montana and North Dakota totaling 73,802 acres on Mar. 29, 2005.
The highest bid in the latest BLM Montana District sale was $312,000 from Calgary-based Summit Resources Ltd. for a 320-acre US Forest Service parcel in Billings County, ND. In the sale a year earlier, Gillette, Wyo.-based Pacer Energy LLC’s $689,000 bid for leasing rights on a 931-acre Forest Service parcel in McKenzie County, ND, was the biggest single bid. ✦