9 to 10 rigs planned, down from 20 in Piceance Basin

By Gary Harmon and Dennis Webb

The Williams Companies Inc., the most active drilling company in  the Piceance Basin, will “dial down” drilling in 2009 even more than it had previously anticipated, the company said Thursday.

Williams expects to maintain nine or 10 rigs in the Piceance Basin, down from the 25 rigs it ran through most of last year.
Company officials had planned to run about 20 rigs this year,
but halved that number for reasons including economic upheaval and the advent of  new drilling rules in Colorado.

The tight credit market forced Williams to stop borrowing to maintain its drilling program and put it on a cash-flow basis, Williams spokeswoman Susan Alvillar said.

New drilling rules scheduled to go into effect in April “were a
big consideration for us,” Alvillar said.

“The rules are not even in play yet, and they’re already costing the companies quite a bit of money” because compliance jobs now are being filled to meet the demands of the new regulations, she said.

As it stands, she said, “It’s more expensive to drill in
Colorado than it is in Wyoming.”

Dave Neslin, acting director of the Colorado Oil and Gas
Conservation Commission, didn’t return calls for comment
Thursday.

The state isn’t alone in making it more expensive to drill,
Alvillar said. Rio Blanco County last year levied new fees that
increase costs, she said.

The Williams announcement put an exclamation point on the trend in recent months of drilling reductions that began with the announcement of major drilling cutbacks by EnCana, the second-largest player in the Piceance Basin. EnCana said it plans
to run five rigs in the region next year, down from a dozen in 2008.

“Welcome to the new economy,” said Garfield County Commissioner
John Martin, a Republican. “There’s no fun and games anymore.
It’s going to be tighten your belt and hold on.”

Martin said he doubted that rule-making by the Colorado Oil and
Gas Conservation Commission is at the heart of the pullback in
drilling, noting it “happened to be at a bad time. There’s a
need for new rules and regulations.”

His major concerns, Martin said, are for subcontractors,
sales-tax revenue and residents’ disposable income.

Martin said he hasn’t heard much complaining from companies
about the new rules, and that they seem willing to adapt to
them.

But they’re also considering factors such as low natural gas
prices, the high cost of living in western Colorado and sweeter
production fields elsewhere.

Williams anticipates drilling its 3,000th well in the Piceance
Basin this year, and it could be that the company will need to
hire people to maintain the production grid of wellhead
equipment, pipe and other materials the company already has
installed, Alvillar said.

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source: Grand Junction Sentinel