Colorado briefs

June 11, 2015

Whiting reports Niobrara Redtail output

Whiting Petroleum Corp. reported first-quarter Redtail field production of 13,000 boe/d net, up 28% over the fourth quarter of 2014, and executives expect growth will continue. Redtail is in the Denver Julesburg basin in Weld County, Colo.

During April, Whiting had two rigs running at Redtail. On Apr. 30, Whiting reported internal rates of return of 40% from Redtail Niobrara wells. Completed well cost in the Niobrara was $4.5 million in 2015, down from $6 million in 2014.

The Denver independent has assets in four zones: the Niobrara A, B, C, and D, which is a combination of the Codell and Fort Hays.

Mark Williams, Whiting vice-president, exploration and development, said he is focused for now primarily on continuing with development in Niobrara A and B, although he noted Whiting was completing two Codell wells in late April.

As of Dec. 31, 2014, the company had an estimated 6,700 future gross drilling locations in the Niobrara.

"We're on schedule to expand the inlet capacity at our gas processing plant from 20 MMcfd to 70 MMcfd in the second quarter," said James J. Volker, Whiting chairman, president, and chief executive officer, during a first-quarter earnings call.

Newfield Exploration closing Denver office

Newfield Exploration Co. plans to combine its onshore Gulf Coast and Rocky Mountain business units into one operating region to be based in The Woodlands, Tex., and will close its Denver and north Houston offices.

The reorganization of regional operating units aligns Newfield's workforce with near-term drilling and asset management plans, creating cost efficiencies, the independent said in an Apr. 29 news release.

Newfield will continue to manage its growing operations in the Mid-Continent from its regional office in Tulsa.

"We are aggressively pushing for cost efficiencies in our operations and working to improve our margins in today's lower oil price environment," said Lee K. Boothby, Newfield chairman, president, and chief executive officer. "Our near-term plans are focused on drilling in the Anadarko basin," he said.

Newfield expects one-time costs associated with this restructuring plan of $20 million, which will be recorded primarily in the second half.

Noble Energy settles pollution Charges

Noble Energy Inc. agreed to settle federal and state air pollution charges stemming from its Denver-Julesburg basin activities, the US Department of Justice, Environmental Protection Agency, and state of Colorado jointly said.

The proposed settlement resolved claims that the Houston independent failed to adequately design, size, operate, and maintain vapor control systems on its controlled condensate storage tanks, which government officials said contributed to emissions of volatile organic compounds (VOCs).

Noble agreed to spend $60 million on system upgrades, monitoring, and inspections to reduce emissions, in addition to spending $4.5 million for environmental mitigation projects and $4 million on supplemental environmental projects.

It also agreed to pay a $4.95 million fine, some of which was to go to Colorado.

"We're implementing a serious action plan through which we will evaluate tank batteries throughout our D-J basin operations, remove the tank batteries that should be removed, improve others, and implement enhanced environmental strategies," said Gary Willingham, Noble executive vice-president of operations.

The proposed consent decree, announced Apr. 22, was subject to a 30-day public comment period and final court review and approval, DOJ and EPA said.

Colorado task force suggests local input

Colorado Gov. John W. Hickenlooper's (D) oil and gas siting taskforce called for more consultation with local communities, and the task force forwarded 9 proposals to Hickenlooper.

The task force reviewed 36 proposals total as it decided which recommendations to make regarding ways to reduce land-use conflicts arising from oil and gas activity near homes, schools, businesses, and recreation areas.

The task force drew the attention of protesters. Food & Water Watch and other organizations immediately announced formation of Coloradans Against Fracking. They called on Hickenlooper to follow New York Gov. Andrew Cuomo's (D) example and ban hydraulic fracturing.

Another group, Protect Colorado, supports responsible fracturing and sought to counterbalance what it calls "extreme groups."

Erik Milito, upstream operations director with American Petroleum Institute, urged Colorado policymakers to carefully review the taskforce's recommendations.

"State policymakers must avoid creating unnecessary or unintentional roadblocks to the responsible energy production that is driving Colorado's economic growth," Milito said, adding that the oil and gas industry has a long history of working collaboratively with state and local officials in Colorado.

Fracing bill proposes landowner payment

Colorado state lawmakers introduced legislation proposing that mineral owners receive compensation from local governments that ban hydraulic fracturing in cases where property values were reduced by at least 60%.

Senate Bill 93 won Senate approval, but the House killed the measure.

"Whenever a local government adopts or implements an ordinance, resolution, rule, regulation, or other form of official policy concerning mineral extraction operations that has the effect of reducing the fair market value of the owner's mineral interest by at least 60%, the owner's interest is deemed to have been taken for a public use," the bill said.

"In such circumstances, the owner has the right to obtain compensation from the local government for the full diminution in the fair-market value of the owner's interest caused by the regulatory impairment," SB93 said.

Carrizo adjusts its Niobrara spacing

Carrizo Oil & Gas Inc. of Houston tested 40-acre spacing in the Niobrara B bench at five separate pilots, the company told analysts during a January conference call about Carrizo's 2015 operating plans.

Analysis of these well results combined with analysis of non-operated results prompted Carrizo to change its spacing. The company has adjusted its development in Area 1 and part of Area 2 to include 40-acre spacing vs. 60-acre spacing previously.

That adjustment added 75 net locations to Carrizo's Niobrara drilling inventory in the company's higher-return areas. Consequently, Carrizo increased its Niobrara type curve estimated ultimate recovery to 275 MBoe per well from 253 MBoe.

Carrizo's type curve EUR excludes wells that are uneconomic below $80/bbl.

API sets up Colorado Petroleum Council

The American Petroleum Institute has established a Colorado Petroleum Council with an office in Denver to focus on energy priorities in Colorado, including hydraulic fracturing and infrastructure.

API also hired Tracee Bentley, a former Colorado state official, to lead API's new office as executive director.

Bentley most recently worked as legislative director for Colorado Gov. John Hickenlooper. She also serves as a senior advisor on energy and agricultural issues. Previously, Bentley served in the Colorado Energy Office as deputy director of policy and legislative affairs. She also served as Director of National Affairs with the Colorado Farm Bureau.