WPX Energy Inc. plans to deploy two more drilling rigs to the five now running in Western Colorado’s Piceance Basin, which should add an incremental 1.9 Bcfe in natural gas-weighted output through the rest of this year, the Tulsa operator said last week.

Previously, WPX had said it planned to use five rigs through this year, but the operator is setting the stage for bigger growth in 2014. The exit rate from Piceance operations was revised upward to 730 MMcfe/d from 701 MMcfe/d, which WPX said was in line with overall company guidance of 1,261-1,265 MMcfe/d.

“Now’s the right time for us to accelerate our natural gas production and the Piceance is the right place to start,” CEO Ralph Hill. “Natural gas prices are stronger, and this helps lay the groundwork for our 2014 development.

“WPX has a unique position in the Piceance. We have everything in place there to be among the first and fastest to increase our production. We have the permits, favorable processing contracts, take-away transportation capacity and large-scale, low-cost, efficiency-driven operations to yield attractive returns.”

The management team reported earlier this year that a gas gusher in the Piceance, which it said had exceeded 1 Bcf of production in a little more than 100 days of operation (see NGI, May 6). At that rate the discovery well promised to produce in its first four months what a normal Williams Fork formation well takes a 25- to 30-year life cycle to produce, the company had said.

Last week WPX said in its first 150 days, the Niobrara discovery well has produced “1.25 Bcf of natural gas and now is producing 5.5 MMcf/d at flowing tubing pressure of about 3,000 pounds per square inch.”

In January, WPX foreshadowed the unusual Piceance output when it reported that its first horizontal test well had the potential to more than doubling its proved, probable and possible reserves, which were about 18 Tcf at the end of 2012 (see NGI, Jan. 28). The benefit of expanding drilling plans in the Piceance this year “will be more fully realized in 2014 given the timing of drilling and well completions. Next year, the additional wells could add up to 15 Bcfe in additional cumulative production,” Hill said.

Reserves in the Williams Fork formation are going to be targeted with the new drilling. WPX has developed more than 4,100 tight sands wells already in the Piceance. The company earlier set a a record drilling time for a Williams Fork well in the Piceance Valley of 3.7 days.

The new rigs are going to add about $60 million in capital outlays, but the increase “is in line” with an overall spending estimate of $1-1.2 billion his year. Four horizontals are planned for the Piceance leasehold this year to help delineate the acreage.

In response to the WPX announcement, analysts at Wells Fargo Securities LLC said “maybe $4.00 is the answer to the official question of 2012: ‘what price would make you return to gas plays?'”

Analysts David Tameron and Gordon Douthat said they had heard or asked that question of operators at least 20 times in 2012. “The answers to the question seemed to be as predictable as the asking of the question itself. The three standard responses” last year were: “It really depends on the price of oil and natural gas liquids, and what our returns are in the liquids plays; It would probably take $5.00 or higher; or No gas price would make us return.”

However, “as front month gas prices have been able to hold the $4.00 mark pretty well since early April, we have seen some signs that maybe there is a magic number and perhaps it is closer to $4.00,” said the duo. “WPX has had some impressive gas wells in the Niobrara with one producing well over 1 Bcf of gas in the first few months. But still, and fully realizing that the capital budget is company-specific based on portfolio of choices, the Piceance would not seem to us to be the marginal basin at $4.00.”

WPX, they noted, “is just one anecdote, but perhaps the proof will show up in the rig count and production data. According to Baker Hughes, the gas rig count has been flat at 354 rigs since the beginning of May after dropping 85 rigs since the first week of January. We still have not seen that number creep higher yet, but would not be surprised to see it level out at current gas prices. Lower 48 production is down slightly from a November 2012 peak, but only by about 1 Bcf/d through March. Prices really rallied through March and April, so it should be interesting to watch microeconomics at work as the next couple of months of data are released.”

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