The DJ/Niobrara Basin| August 2020
Located mainly in the Northeast of Colorado, the Denver-Julesburg Basin consists of five main oil-producing formations: Niobrara sections A-C, Codell, and Greenhorn. These five plays produce over 90% of Colorado’s oil/gas.
State Drilling Statistics (End of August)
Active Drilling Rigs in Basin: 4
Total Rigs in Colorado: 5
Total Rigs in United States: 254
Total U.S. Rigs down -72% YTD
State Top Producers
Top Oil Producer- Kerr McGee Oil & Gas Onshore LP
Top Gas Producer- Kinder Morgan
Financial & Economic Updates
In a move that we have become all too familiar with, Colorado has adjusted its taxing on the oil and gas industry to address state budget deficits that are a result of the still depressed oil prices. Although oil prices have been increasing slowly, the month of August showed that WTI prices could climb ever so slowly and remained in the realm of $42. The Colorado Oil and Gas Conservation Commission raised the tax on production to compensate for a $3.4 million dollar hole in the organization’s budget with support from the industry and environmental groups. Industry support came from the fact that the increase was scaled back from what it potentially could have been thanks to the slightly increasing prices. Environmental groups are always pleased when oil and gas is taxed more, but Boulder County Commissioner, Matt Jones, urged the commission to go for the full increase in production tax in order to fulfill the agency’s new mandate to protect public health, safety, welfare, and the environment. Governor Polis expressed his approval for the increase by saying it is “viewed as a way to have the staff they need to process permitting quicker.”
Occidental Frantic for Free Cash
In mid August, Occidental announced that it had entered into a purchase and sale agreement to divest land assets in Wyoming, Colorado, and Utah. CEO Vicki Hollub said, “This transaction significantly advances the progress against our $2 billion plus divestiture target for 2020.” This deal is expected to free up approximately $1.33 billion for the aforementioned plan which was put into place as a preparatory goal for when debt matures and needs to be paid off. Occidental has been struggling to get rid of foreign Anadarko assets in a market where few people are acquiring assets, so this is a significant win for the company, but an almost negligible amount considering the several billions of dollars that will mature in the coming two years.
Wells Under Threat from Record Fires
The month of August was hot in more ways than one. The Pine Gulch fire was the second largest fire in the state of Colorado burning an area of just over 139,000 acres. Storms over Pine Gulch continued to blow embers to other sources of dry fuel, spreading the fire. The fire contained dozens of oil and gas wells which had been confirmed damaged. The fire department confirmed that they were working with operators in the area to protect the sites from damage and prevent increased damage from compromised gas lines.
Top Oil Producers (2020 cum)
|4||Extraction Oil and Gas||11,779,877|
Top Gas Producers (2020 cum)
|4||TEP Rocky Mtn.||124,483,674|
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