Independents set on developing Rocky Mountain region

Anadarko Petroleum Corp., Barrett Resources Corp., and Devon Energy Corp. are among a growing number of independents mounting major natural gas development projects in the Rocky Mountains. Rocky Mountain basins are at the forefront of US land sources for new natural gas supplies, industry analysts say.


Sam Fletcher
OGJ Online

Anadarko Petroleum Corp., Barrett Resources Corp., and Devon Energy Corp. are among a growing number of independents mounting major natural gas development projects in the Rocky Mountains. Rocky Mountain basins are at the forefront of US land sources for new natural gas supplies, industry analysts say.

The National Petroleum Council estimates ultimate recovery of total gas reserves in the Rockies at 388 tcf�compared to 637 tcf for the US mid-continent, 474 tcf for the Gulf of Mexico and 434 tcf for the Gulf Coast, primarily in Texas and Louisiana. But only 15% of those Rocky Mountain gas supplies have yet been produced, officials said, compared to 58% along the Gulf Coast, 54% in the mid-continent, and 30% in the Gulf of Mexico.

That gives the Rockies an estimated 329.8 tcf of remaining proven and potential gas reserves. That's a close second to the gulf offshore, where 331.8 tcf remain, and ahead of the mid-continent at 292 tcf and the Gulf Coast at 182.3 tcf.

Anadarko
Anardarko officials say a long strip of primarily Rocky Mountain properties acquired as part of the company's $4.4 billion merger with Union Pacific Resources Group Inc. is shaping up as its next prolific gas play, which in time could rival its core operation in the Bossier play of East Texas and Louisiana.

That new area consists of 7.55 million acres of land awarded to Union Pacific's former railroad parent in the last century as part of the push to build rail lines across the continent.

The broad swath of connected properties stretches from the Kansas border across northeast Colorado, through southern Wyoming, and into Utah. Along the way, it transects Colorado's large Denver Basin, encompasses the Hanna and Laramie Basins and cuts through the Green River Basin in Wyoming, and dips toward the Uinta Basin in Utah.

Anadarko officials report 199 wells have been drilled in that region this year, including 72 coalbed methane wells, with a cumulative unrisked potential of 235-385 bcf.

Anadarko pioneered development of the Bossier gas play in East Texas, its newest core area along with the Gulf of Mexico, Alaska, and Algeria. After drilling only one dry hole out of more than 130 wells, Anadarko went from zero production from that play in 1996 to 110 MMcfd at the end of 1999 and expects to average 150 MMcfd this year.

Its Bossier production already has surpassed Anadarko's share of output from the giant Hugoton gas field in Kansas, long one of the company's mainstays.

At an energy conference in Houston last week sponsored by Dain Rauscher Wessels Inc., Anadarko Pres. and COO John Seitz said the company's Rocky Mountain holdings might prove as good.

Devon Energy
Devon Energy, another of the new super-independents, is a major player in all four of the big US coalbed methane plays: the San Juan Basin of New Mexico; the Raton Basin, which straddles the Colorado-New Mexico border; and the Green River and Powder River Basins of Wyoming. "I think we're the only big independent who can say that," said H. Allen Turner, the company's director of corporate development, at that same energy conference.

Devon uses a base price of $2.50/Mcf to judge the profitability of its North American projects, which are still predominately gas-driven. However, Turner said, "You can run coalbed methane at (a base price of) $1.50/Mcf and still get strong numbers."

After its $2.6 billion acquisition of PennzEnergy Co. last year and its $787 million purchase of Canada's Northstar Energy Corp. in 1998, Devon was already one of the top 10 US independents. "We were 80 times bigger within 12 years than when we started. That's the kind of growth rate that you would expect from a dot-com company," Turner said. "High-impact transactions are common for us."

Devon's acquisition of Santa Fe Snyder Corp., completed in August, propelled it into the ranks of the top 5. Moreover, Turner said, "We emerged from that transaction pre-financed for our next takeover."

However, he noted that recent high commodity prices have "run up the bid-and-ask split" in buying new reserves. "You can still do mergers in this market," Turner said, "but you have to be highly selective to make it accretive."

Devon hasn't yet figured its 2001 budget. But with a strong portfolio of domestic and international projects in hand, Turner said, there's no reason for next year's budget to decline below the $900 million-$1 billion that it's spending on exploration and development this year.

Barrett Resources
Although relatively small compared to the new super-independents, Barrett Resources is a major force in the coalbed methane play of the Powder River Basin, on track to drilling 1,088 wells there this year at a budgeted cost of $52 million. More than 81% of the company's reserves are located in the Rockies, and 95% of it is gas.

The Denver-based independent plans to double its proven reserves within the next 3-5 years, up from 1.1 tcf equivalent of natural gas at the start of 2000.

Officials at the energy conference said Barrett's future will be much like its past, growing primarily through the drill bit with some niche acquisitions, and focusing on natural gas development in the Rocky Mountain basins.

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