Wyoming attractive as other basins face challenges
From the Casper Star Tribune
With not enough pipeline capacity to move the prolific mineral development in Texas’s Permian basin, large firms are thinking of distributing their resources elsewhere.
A number of companies are either considering other regions where they have a presence or reducing completions on wells in the Permian, according to a recent report from the Energy Information Administration that considered 45 large oil and gas firms’ financial reports earlier in the year.
Those companies represented about one-third of U.S. oil and other liquids production in the second quarter.
Brian Jeffries, of the Wyoming Pipeline Authority, said he doesn’t have firm evidence to tie troubles with pipelines down in the Permian to a direct advantage in Wyoming.
But it’s a reasonable assumption, he said.
“Given the troubles in the Permian — the Permian is the best example of trouble — that reallocations of capital to Wyoming at least in the short run would make sense,” he said. “Unless we had someone’s earnings report say that, I would have to stick with, it seems plausible.”
Some larger firms have begun to talk about Wyoming in a significant way, though not because of pipeline issues in other basins. The state’s Powder River Basin is simply growing in prominence for some firms.
Both Anadarko Petroleum and EOG Resources noted the state’s importance in recent earnings calls with investors.
“The Powder River Basin is now ready to become a meaningful contributor to EOG’s future growth,” Dave Trice, executive vice president for EOG’s exploration and production, said in August. “For 2019, we expect to increase our activity as we add infrastructure and prepare to bring the Powder into full development.”
Wyoming regulators have 18,000 applications for permit to drill in a queue awaiting approval. In order to deal with the record volumes, the state has instituted a first-to-drill schedule, so that producers who are ready to deploy rigs move to the top of the list for processing and approvals. The Wyoming Oil and Gas Conservation Commission is moving through up to 150 applications per month.
Many of those will not be approved, but the activity speaks to increased interest in either drilling in Wyoming or securing primacy over a drilling area by being the first to secure a permit.
With the price of crude hovering between $65 and $70 a barrel for West Texas Intermediate, interest is up in Wyoming and other areas of the country, with the majority of the country’s drilling rigs located in the Permian Basin.
For some time, the higher prices for leases in Texas has encouraged Wyoming industry as a potential driver of development in places like the Powder River Basin, a play that appears to be reaching a tipping point but still offers a bargain.
The largest portion of the drilling permits popping up in Wyoming comes from three players: Anadarko, EOG and a family firm from Casper, Wold Energy.
According to the Energy Information Administration, the pipeline constraints in the Permian will likely continue into next year.
The Permian’s class of “winners and losers and people in the middle”
Jeffries noted that the lack of takeaway capacity isn’t affecting all producers equally.
“Some people down there have access to firm pipeline and oil pipeline capacity that they signed up for long ago,” he said. “There is a clearly a class of winners and losers and people in the middle down there.”
One could presume that a large firm like Anadarko may want to shift money to a place where capacity is less of an issue. But it depends on that access to transportation, he said.
There are challenges that could redirect drilling to Wyoming. Colorado voters will consider a citizen-led initiative to increase the setback between dwellings and oil and gas operations. The extension would make it difficult to drill in the majority of the state, leaving the future of the industry for Wyoming’s neighbor uncertain.
What’s more pertinent in the short term for Wyoming is the jockeying going on as operators figure out how to approach the Powder River Basin and other formations.
“As soon as they’ve got that figured out they move from science mode into development mode,” Jeffries said. “(The permit interest in Wyoming) would suggest that those entities have started to cross that barrier.”
Wyoming’s 30 rigs: very small potatoes compared to Permian’s 488
Wyoming’s Powder remains small potatoes in comparison to the Permian, where there are currently 488 active rigs, according to the Baker Hughes rig count. The entire state of Wyoming has about 30 rigs.
