The Piceance Basin of Colorado has long been a natural gas producer, but recent results in the Niobrara Shale indicate that the best days may be ahead, Bentek Energy LLC said in a new report.

Evergreen, CO-based Bentek analysts were intrigued by the gas output in some recent Niobrara wells and found that horizontal drilling in the Piceance has “the potential to dramatically change the gas market in the Rockies, returning the region to the constrained conditions that have been present throughout most of its history.”

Bentek’s Market Alert, “Niobrara Gas Breathes Life into Piceance,” was published on Wednesday. Analysts detailed results from wells drilled by an Encana Corp. subsidiary in the winter of 2009-2010. The wells “tested at initial production rates that were comparable to horizontal wells drilled in the Haynesville Shale,” the analysts said.

What’s made the difference are the gains in drilling technology and hydraulic fracturing techniques. The Piceance Basin, which has been explored for close to a century, most often has been developed using directional drilling — and often with positive results. However, a horizontal well drilled by Encana in the Grand Valley Field of the basin in January 2010 indicates that all good things come to those who wait.

“In its initial 30 days of production (February 2010), the well produced 7.2 MMcf/d,” the Bentek report said. “From its peak 30-day IP [initial production] in February 2010, production decreased to around 2 MMcf/d in September 2010 and has held steady at that rate through January 2011. Over the last year, the well produced just less than 1.4 Bcf of gas and 401 bbl of oil.”

By comparison, 30-day IP rates from horizontal wells drilled in the Haynesville Shale typically produce 9 MMcf/d and “around 1.0 Bcf during the first year of production,” the analysts said.

“The wells drilled by Encana in the Piceance already rival Haynesville wells, providing early indications that further development of the Niobrara may dramatically change the economics for gas production in the Piceance.”

In late April an arm of information analyst IHS also issued a special report about the Niobrara’s oil potential. “The IHS Herold 2011 Regional Play Assessment” analyzed well performance of the “few modern horizontal oil wells present in the play” and compared IP rates of the early wells against IP rates for median-producing oil wells in the core of the Bakken/Three Forks shale play.

“The median Bakken horizontal well completed since 2009 in the core of the play averaged about 230 b/d in its sixth month online,” according to the IHS report. “Two modern Niobrara horizontal wells matched or exceeded that oil production level, with the remaining 10 wells producing between 10 b/d and 190 b/d.

“In their sixth month, five of these wells produced 70 b/d or less; three produced between 100 b/d and 125 b/d, and the remaining two wells produced approximately 185 b/d.”

The “enthusiasm” for the Niobrara oil potential is “likely tied to the success of the Bakken/Three Forks play,” said IHS study author Sven Del Pozzo. Results still are preliminary because of limited data.

“We stress that definitive conclusions can’t be made at this early stage, since fewer than 20 modern horizontal Niobrara wells (in the Denver-Julesburg and North Park basins) have 365 days of IHS production history, and just 10 of those have a meaningful oil cut,” said Del Pozzo. “The Niobrara is situated at various depths and has diverse rock properties as it spans multiple basins, making it very risky to generalize about its prospectivity at this early stage.”