Berry Petroleum expanded its presence in the Piceance Basin through a new farm-in agreement with EnCana Oil & Gas (USA) Inc. in which both companies will develop a portion of EnCana's North Parachute Ranch property in western Colorado. Berry will fund the drilling of 90 natural gas wells on EnCana's valley lands and will acquire 4,300 gross acres elsewhere in the North Parachute Ranch property with a working interest of 95% and a net revenue interest of 79%.
Dan Anderson, Berry's vice president of Rocky Mountain production, said that in addition to funding the 90 wells, Berry "will invest $24 million in 2006 to drill and complete wells on the company's acquired acreage. We have two rigs available to start drilling in July and anticipate having a total of six rigs in 2006 as part of a continuous drilling program in the basin. We expect the productivity of the North Parachute Ranch wells to be comparable to wells in our adjacent Grand Valley project. Initial natural gas production from these wells ranges from 1.3 MMcf/d to 2 MMcf/d."
Berry CEO Robert F. Heinemann said the company now has more than 400 drilling locations in the Piceance and plans to spend more than $750 million to develop its assets there over the next several years. "The company estimates it now has proved and probable reserves of almost 850 Bcfe of natural gas in this basin when combined with the Grand Valley field acquisition completed earlier this year," said Heinemann. "This project has the size and scale to materially grow Berry's natural gas production in the Rockies."
EnCana holds about 700,000 net undeveloped acres in the Piceance and is largely responsible for spurring development of greater pipeline takeaway capacity from the Piceance through the Entrega Gas Pipeline project, which is now part of the Rockies Express system. EnCana expects about 310 MMcf/d of gas production out of the Piceance this year. It holds about 1,600 Bcf of proved reserves in the basin and sees an unbooked resource potential there totaling 4,700 Bcf of gas.
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