While it has never enjoyed the massive production numbers which generated top slot oil and gas notoriety for Texas, Colorado is and has been an important part of the oil industry in the U.S. for more than 100 years.

The EIA ranks Colorado as sixth highest U.S. state for natural gas production and seventh for oil production. Texas ranks in the number one slot for both hydrocarbons.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EIA

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EIA

Century of drilling and production

According to the Colorado Oil & Gas Conservation Commission (COGCC), the oldest oil and gas well in the state was drilled in 1898, marking the industry at 119 years old in Colorado.

Over that time, drilling activity in the state has gone through several phases. As different plays became the most popular, the leasing activity and the companies operating in the state moved in parallel. Drilling in Colorado was small before 1950, but has continued steadily and it has grown significantly in the past seven decades.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Wildcatting dominated in 1960s

COGCC reports that there are a total of 113,542 oil and gas wells in the state.

Many of these early wells were wildcats, as drillers searched for new productive fields. This trend reached its maximum in the 1960’s, when over half of all wells drilled in the state were wildcats. The rise of unconventional fields like the Niobrara have concentrated activity, and wildcat wells have declined in importance in the past 20 years. In the 2010s, under 5% of all wells drilled in Colorado have been wildcat wells.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

3,532 operators have drilled wells

A total of 3,532 different operators have drilled wells in Colorado, ranging from massive international companies with thousands of wells to single wells operated by individuals, such as Craig A. Coulter, who drilled a dry hole in northern Colorado in 1901.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

2000s brought drilling boom to Colorado

As in many other portions of the country, drilling activity increased in Colorado in the 2000s, driven by improving technology and rising oil prices. Two fields quickly became the most important in the state in this period, the Niobrara and the Piceance.

Activity in each of these basins skyrocketed in the 2000s. The number of wells spudded in the Niobrara doubled in the decade, rising from an average of 550 wells/year in the 1990s to 1107 wells/year in the 2000s. Drilling activity in the Piceance increased twentyfold, jumping from about 45 wells/year in the 1990s to nearly 970 wells/year in the 2000s.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Weld County is the Niobrara these days

Activity in the Niobrara is dominated by Weld County, which accounts for nearly half of all wells in the basin. The decrease in commodity prices drove companies to focus on core areas, meaning Weld County plays an even larger role today. Nearly 96% of wells drilled in the past three years have focused on the county.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Noble, Anadarko, PDC foremost in Niobrara

Historically, operations in Weld County have been dominated by three companies. Noble Energy (ticker: NBL) drilled about one quarter of all wells in the county, 9,586 in total. Second place in the county is Kerr McGee, an energy company that was highly active in oil and gas production in 2006, Anadarko (ticker: APC) bought Kerr McGee in a massive $16.5 billion all-cash transaction. Anadarko has kept Kerr McGee as a subsidiary, and continues to drill wells in the Niobrara under that name to this day. In total, “Kerr McGee” has drilled 8,133 wells in the county. Denver-based PDC Energy ranks third, with 3,940 wells to its name. These three companies account for 57% of all Weld County wells, while the rest are split between 917 different operators.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

West of the Rockies-another basin looked to be king

The Piceance basin has many similarities with the Niobrara, and once seemed on a similar trajectory. As noted above, drilling in the Piceance skyrocketed from 1998 to 2008, as drillers explored the potential of Western Colorado. As in the Niobrara, activity is concentrated on one county, in this case Garfield County.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

Private operators dominate Piceance

There is little overlap in companies active in the Niobrara and Piceance, though, as the Piceance is dominated by private operators. TEP Rocky Mountain, a subsidiary of privately-held Terra Energy Partners, has drilled over one third of all the wells in Garfield County. Private Caerus Energy accounts for another 18%. The largest public driller in the Piceance is Encana (ticker: ECA), which had extensive operations in the field during its boom period.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

The boom period in the Piceance is, however, mostly over. While activity in both the Niobrara and Piceance fell during the global financial crisis of 2008, the fields diverged after that. Activity in the Niobrara quickly recovered, while the Piceance never entirely did. While drilling in the Piceance in 2017 exceeds activity in the past two years, it is a far cry from the peak in 2008. The Piceance is primarily a gas play, with little oil output. High gas prices made this very attractive in the mid-2000s, but competition from shale plays like the Marcellus means the Piceance is far less economic currently.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics

While activity in Colorado has fallen below historic levels, as “lower for longer” oil prices squeeze operations, the Centennial state is not done yet. According to the EIA, the Niobrara is expected to add 75 MBOPD of production in the second half of 2017. COGCC reports there are 2,208 applications for drilling permits currently in progress, almost enough for two years of drilling, so operators continue to plan on expanding activity.

Regardless of Booms and Busts, Colorado Stays in the Top 10

Source: EnerCom Analytics


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