The Mancos Shale plays in the Piceance and San Juan basins in Colorado and New Mexico are a potential gold mine of low-cost natural gas supplies, according to an executive from Rapid City, SD-based Black Hills Corp., who spoke Wednesday to Wall Street analysts at the J.P. Morgan SMid Cap Conference.
CFO Tony Cleberg said Black Hills is retooling itself as a predominantly utility holding company that makes occasional killings in the oil/gas patch, and he said what it did earlier this year selling 85% of its interest in the Bakken Shale in North Dakota for $227 million is a model for later transactions (see Shale Daily, Aug. 27).
Noting that the North Dakota sale was “a very good transaction and something we are looking to repeat,” Cleberg told analysts Black Hills holds 74,000 acres of Mancos Shale in the Southwest in which he sees a lot of upside potential to develop, partner with, and sell parts of. Even with depressed wholesale gas prices, the Mancos supplies can be economic at $4/Mcf prices, he said.
“I know it is natural gas and prices have been low, but we see it with a lot of upside because it is probably the second lowest cost gas play in the United States,” Cleberg said. “Therefore, $4 gas is economical for us.”
With the Mancos, Black Hills estimates it could more than double its current 2.1 Tcf of gas reserves, seeing the potential for 2.2 Tcf even with more modest 160-acre spacing of wells. “We’re a small player in oil and gas, so we are going to watch the other [larger] guys and see how they develop the area with the right well spacing and lateral capability and how many frackings are required,” Cleberg said.
As the company has announced previously, Cleberg said Black Hills plans to drill some initial exploratory wells in the Piceance Mancos because there are the possibility of a lot more liquids there than in the San Juan, which is almost exclusively dry gas. “The possibilities are very significant and could be four times what we have estimated [2.2 Tcf].”
Cleberg said Black Hills intends to “learn from others” among the bigger, more experienced players in the Mancos. He said the company is looking at the possibility of drilling 460 new wells, and in pursuit of this goal the company will be looking for partners.
“We are looking primarily to be a utility company with a upside in the oil and gas business,” said Cleberg, noting Black Hills is still “learning” the area before deciding what options it takes with its acreage.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 2158-8023 |