Extraction Oil & Gas said Tuesday that it plans to stay busy in the Denver-Julesburg Basin next year, spending $770 million to $840 million to drill 170 to 175 wells.
The Denver-based producer plans to frack or complete another 185 to 190 wells, and spend another $120 million to $150 million to acquire land and on other nonproduction costs.
“We are looking forward to a robust 2018 as we expect to realize additional capital efficiencies driven by the development of our high-quality acreage in the city of Greeley along with drilling a higher mix of long laterals across our development program,” chairman and CEO Mark Erickson said in a statement.
Even though the capital spending program unveiled is slightly smaller than this year’s program, the added activity could boost output by about 83 percent, or an average of 45,500 barrels of oil a day.
Assuming domestic oil prices stay above $50 a barrel and natural gas prices can hold above $3 per thousand cubic feet, Erickson said the company expects to pay for the new wells out of cash generated from oil and gas sales.
The company expects to fund its land purchases from the sale of “non-strategic” assets. It will turn to outside financing for its drilling programs in north Broomfield and Greeley’s Hawkeye area. Those two areas weren’t included in the capital spending figures released Tuesday.
Extraction Oil has faced strong public opposition over its plans for an 84-well project in north Broomfield County, where voters in November passed a ballot question that provides local officials a greater say on regulating oil and gas activity. That measure is expected to face a legal challenge.
Extraction said it plans to focus its investments on the more populated southwestern part of the Wattenberg Field until additional gas gathering and processing capacity is added in the more rural northern part of the field, which should happen sometime after next summer.
In November, Anadarko Petroleum announced plans to invest $950 million next year in the D-J Basin, up from $840 million this year. PDC Energy, a much smaller Denver-based producer, is looking to spend $480 million next year to drill 131 wells in Colorado.
Land, drilling and completion costs are much lower in the D-J Basin than in the Permian Basin in Texas, currently the country’s most popular oil and gas play, said Taylor Cavey, an energy analyst with S&P Global Platts in Denver.
“The barriers to entry are much lower than competing basins like the Permian and you can generate pretty dang good returns in today’s price environment,” Cavey said.
Wells cost $3.6 million to bring into production in northeast Colorado, compared with $6.3 million to $6.8 million in the Permian’s Midland and Delaware plays in southwest Texas.
“While the Permian generates far better production rates, the lower costs in the DJ play are a huge advantage to producers in the area,” Cavey said.
https://www.denverpost.com/2017/12/19/extraction-oil-unveils-active-drilling-program-d-j-basin-could-boost-output-85-percent/
