Anadarko announces 50 new wells within Fort Lupton city limits
Colorado’s Wattenberg Field has been a serious investment for oil and gas major Anadarko (ticker: APC), with the company more than doubling year-over-year production from its horizontal drilling program in 2013 and 2014, according to APC. Anadarko holds approximately 350,000 net acres in the Wattenberg and estimates it hold 1-1.5 billion BOE of recoverable resources on its acreage, with an additional 500 million barrels of potential reserves with optimized spacing.
Yesterday, Anadarko announced that it planned to drill up to 50 wells inside Fort Lupton city limits, where the company will continue to target the Wattenberg, according to Craig Walters, vice president of operations for Anadarko. “In 2015, we expect to drill over 300 wells, which will generate approximately $320,000 worth of tax revenue (per well),” Walters said at an event in Fort Lupton.
Walters said the drilling should begin in September or October. The drilling will be focused on acreage the company gained when it swapped roughly 100,000 acres in Weld County with Noble Energy (ticker: NBL) in 2013.
The news marks Anadarko’s first horizontal wells in Fort Lupton, which will complement their established vertical well program in the area, reports the Greeley Tribune. It was not hard for residents to get on board with the program, says Fort Lupton Mayor Tommy Holton. “[Operators] were west of U.S. 85 and east of U.S. 85, and they were just converging this way.”
Earlier this month, Fort Lupton City Council approved the company’s request to begin drilling 11 new wells, which should be running 24 hours a day over the next three to four months.
Holton said the economic impact of each producing well in taxes came to over $300,000, which will go a long way in paying for services in the city.
The fanfare that accompanied the event yesterday stood as an interesting juxtaposition to events just 15 miles away in Erie, Colorado, where new codes were passed for more stringent review processes on oil and gas companies looking to drill near the city. Erie’s new code creates two types of reviews, one that requires higher than state standards, but offers a streamlined permitting process, and a second that meets state requirements, but involves a more in-depth review process, including public hearings and approval from the town’s Planning Commission and Board of Trustees.
Anadarko has a long history of drilling and development in the Wattenberg field and Weld County. The company made a tax payment of $52 million to the county 2012.
Drilling without completions
In the company’s most recent operations update, Anadarko said that it plans to intentionally defer the completion of approximately 120 wells. The decision will keep APC’s production flat at about 232 MBOEPD inside the Wattenberg, but it also allows the company’s rig crews to continue working.
Anadarko has not announced any major layoffs of its workforce, despite the price of oil plummeting by more than 50% over the last year. The company has reported doubling the workload of its drilling rigs while it builds a backlog of uncompleted wells to produce from, once commodities prices become more attractive.
According to the company’s Q2 operations update, drilling efficiencies in the Wattenberg have improved to $97 per foot and 7.7 days from spud to rig release in the first half of 2015, down from $142 per foot and 10.5 days from spud to rig release in 2014.
According to EnerCom’s E&P Weekly Report, Anadarko’s trailing twelve month (TTM) change in production is 0%, suggesting the company’s production has remained stable throughout its operations. The company’s debt-to-market cap of 46% sits well below the group median of 97%, while its 3-year F&D cost of $16.12 per BOE also beats the group median of $19.71 per BOE. Anadarko does have a high asset intensity, at 505%, while the group median sits at 88%. Asset intensity is defined as trailing twelve month production times three year finding and development costs divided by trailing twelve month cash flow from operations.