Horace Greeley’s advice to “go west, young man,” has never beenmore true than for independent North American oil and gascompanies, which are claiming stakes in the Rocky Mountains andreaping huge returns from the untapped natural gas reserves thatlie beneath the deep, thick sands in the mountainous, multi-stateregion.

In an area where residents could once count goats to boostpopulation figures, they now can count oil and gas companies, whichhave moved to the region in increasing numbers, prompted by lowproduction costs and near certain success in the area’s play. Atthe Dain Rauscher Wessels Energy Conference in Houston last week,three independents explained why the region is drawing moreattention from producers – and why they’ve decided to concentratetheir work there.

The natural gas potential in the Rockies, which, for productionpurposes basically includes parts of New Mexico, Colorado, Utah andWyoming is amazing, considering that North America has drawn lessattention than other places across the globe because of its agingresources. In the Rockies, however, about 85% of its remainingproven 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, “theRockies will play a significant role in the North American gassupply,” said Barrett Resources Corp.’s Bob Howard, vice presidentof investor relations.

By growing through the drillbit, Denver-based Barrett hasincreased its stature in the region with niche acquisitions and aconservative fiscal posture – about 90% of its budget is gearedtoward low risk development. Its 2000 capital budget earmarked $227million for its 1,224 wells – 96% in the Rockies. The Powder RiverBasin in Wyoming holds the most, 1,088 wells, while Colorado’sPiceance area holds 87, Wind River has five wells and the Uintaleases have 16 wells. Barrett also earmarked $36 million this yearto obtain more leases in the Piceance.

“We are realizing unexplored potential there, and have an activeexploration effort planned for 2001,” said Howard of the company’sRockies development.

Tom Brown Inc.’s Dan Blanchard, CFO, said his company has pinneda lot of its hopes on the Rocky Mountain states as well, and in thelast few years has become a “significant” Wind River player. Alsofocused on natural gas production, Tom Brown had 137 MMcf/d fromits Rocky Mountain holdings in the second quarter, or about 82% ofits production. Its Rocky Mountain reserves at the end of 1999totaled 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 mostsignificant net acreage positions” there. But he knows othercompanies are moving in.

“We are really seeing a reemphasis on exploration in the pastsix months.” A lot of the movement has come, he said, because thearea has a low annual acreage maintenance cost and an “excellentdevelopment success rate.” In the company’s Wind River Basinleases, there has been little competition up to now, and there arestill many “significant high impact exploration prospects.” TomBrown has 13 exploration prospects in its current Wind Riverinventory, with an individual prospect size of between 50 Bcfe and250 Bcfe. Three more exploration wells are set to be drilled thisyear.

Focusing on what it calls the “forgotten corner” of the GreenRiver Basin in Wyoming, Ultra Petroleum, headquartered inEnglewood, CO, is tapping into huge reserves there, now controllingmore than 275,000 gross (200,000 net) acres in the play. CEOMichael D. Watford said the company, which is listed on the TorontoStock Exchange, has the opportunity “to be every bit as big as TomBrown and Barrett” given the resources it has to deal with.

And that’s coming from a near dead last position – in 1999 ithad practically zero cash flow. Today, it expects to have $12million in cash, and “be double that” next year. “I think in fiveyears we will grow 10 fold,” Watford said. “We’re now deliveringabout 20 MMcf/d, and I think by the end of the year, the way theprospects 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 ofattention to this area.”

Carolyn Davis, Houston

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