Independents Gain Foothold In Rocky Mountains
Horace Greeley's advice to "go west, young man," has never been
more true than for independent North American oil and gas
companies, which are claiming stakes in the Rocky Mountains and
reaping huge returns from the untapped natural gas reserves that
lie beneath the deep, thick sands in the mountainous, multi-state
In an area where residents could once count goats to boost
population figures, they now can count oil and gas companies, which
have moved to the region in increasing numbers, prompted by low
production costs and near certain success in the area's play. At
the Dain Rauscher Wessels Energy Conference in Houston last week,
three independents explained why the region is drawing more
attention from producers - and why they've decided to concentrate
their work there.
The natural gas potential in the Rockies, which, for production
purposes basically includes parts of New Mexico, Colorado, Utah and
Wyoming is amazing, considering that North America has drawn less
attention than other places across the globe because of its aging
resources. In the Rockies, however, about 85% of its remaining
proven and potential reserves remain - only 15% has been produced -
totaling 388 Tcf in probable reserves.
It's no wonder then that for the foreseeable future, "the
Rockies will play a significant role in the North American gas
supply," said Barrett Resources Corp.'s Bob Howard, vice president
of investor relations.
By growing through the drillbit, Denver-based Barrett has
increased its stature in the region with niche acquisitions and a
conservative fiscal posture - about 90% of its budget is geared
toward low risk development. Its 2000 capital budget earmarked $227
million for its 1,224 wells - 96% in the Rockies. The Powder River
Basin in Wyoming holds the most, 1,088 wells, while Colorado's
Piceance area holds 87, Wind River has five wells and the Uinta
leases have 16 wells. Barrett also earmarked $36 million this year
to obtain more leases in the Piceance.
"We are realizing unexplored potential there, and have an active
exploration effort planned for 2001," said Howard of the company's
Tom Brown Inc.'s Dan Blanchard, CFO, said his company has pinned
a lot of its hopes on the Rocky Mountain states as well, and in the
last few years has become a "significant" Wind River player. Also
focused on natural gas production, Tom Brown had 137 MMcf/d from
its Rocky Mountain holdings in the second quarter, or about 82% of
its production. Its Rocky Mountain reserves at the end of 1999
totaled 407 Bcfe. Texas holdings, mostly in the Permian basin,
added 16%, or 83 Bcfe, and other areas added 6%, or 34 Bcfe.
With nearly 2 million net areas in the Western Rockies,
Blanchard said that the company believes it has "one of the most
significant net acreage positions" there. But he knows other
companies are moving in.
"We are really seeing a reemphasis on exploration in the past
six months." A lot of the movement has come, he said, because the
area has a low annual acreage maintenance cost and an "excellent
development success rate." In the company's Wind River Basin
leases, there has been little competition up to now, and there are
still many "significant high impact exploration prospects." Tom
Brown has 13 exploration prospects in its current Wind River
inventory, with an individual prospect size of between 50 Bcfe and
250 Bcfe. Three more exploration wells are set to be drilled this
Focusing on what it calls the "forgotten corner" of the Green
River Basin in Wyoming, Ultra Petroleum, headquartered in
Englewood, CO, is tapping into huge reserves there, now controlling
more than 275,000 gross (200,000 net) acres in the play. CEO
Michael D. Watford said the company, which is listed on the Toronto
Stock Exchange, has the opportunity "to be every bit as big as Tom
Brown and Barrett" given the resources it has to deal with.
And that's coming from a near dead last position - in 1999 it
had practically zero cash flow. Today, it expects to have $12
million in cash, and "be double that" next year. "I think in five
years we will grow 10 fold," Watford said. "We're now delivering
about 20 MMcf/d, and I think by the end of the year, the way the
prospects are going, we'll be at 30 MMcf/d."
With big successes by the little guys in the Rocky Mountains,
Watford said that this is one story that's bringing "a lot of
attention to this area."
Carolyn Davis, Houston