Rig count stuck in the mud

Rig count stuck in the mud

Several areas of Wyoming are under flood-watch conditions, and even non-flood-plain areas are saturated in the midst of a very wet early summer, cutting drilling activity down to just six rigs this week and only two or three “rathole” rigs, according to state officials.

That total even includes the “fit-for-purpose” cookie-cutter rigs in the Pinedale Anticline and Jonah natural gas fields. There were approximately 46 active rigs in Wyoming just two months ago.

“Until we get through this wet spring and early summer, I think it will be fairly slow going,” said Wyoming Oil and Gas Conservation Commission supervisor Tom Doll.

State field inspectors are discouraging companies from conducting even prep work at some future drilling locations, particularly in Goshen, Platte and eastern Laramie counties where vehicles could cause significant damage to dirt roads and cultivated lands. Seasonal sage grouse and raptor restrictions also contribute to the current slowdown.

Last week the U.S. rig count was at its lowest since January 2010, dogged by the lingering low price of natural gas (just over $4 per thousand cubic feet at Wyoming’s two main trading hubs). However, with the price of oil steady at about $100 per barrel, there are now more rigs drilling for oil in the U.S. than for natural gas.

Baker Hughes will issue its updated rig count on Friday.

When the rain season passes and the ground does dry up, industry officials here expect an uptick in drilling in Converse County and southern Campbell County where operators are targeting the Niobrara, Turner and Sussex formations for oil. Douglas is enjoying much of the activity, with locations both north and south of town.

Doll said BP America anticipates adding a couple of rigs to its summer drilling operation in southwest Wyoming where the target is shale gas.

“I’m still a little bit concerned about whether we’re going to see a lot of activity early on in the Niobrara play,” said Doll.

Early production results haven’t matched the high hopes and high lease bids of a year ago. However, operators say they’re taking a long-term view of the Niobrara oil play, collecting seismic data to determine the best locations to sink steel at about $5 million per horizontal well.

“We hope by the end of year we will have 10 rigs operating in the play,” Chesapeake Energy spokesman John Dill told WyoFile.

The good news for Wyoming right now is that the state unemployment rate dropped to 6.0 percent in April, and there was a net jobs increase of 2,600 for the month. That jobs increase was unevenly applied; Jobs in retail were still down by 1,400 compared to April 2010, which means most of the gains were made in the extraction industries, according to Wyoming’s Economic Analysis Division.

A lot of Wyoming towns are pulling for a resurgence in drilling beginning this year, particularly Douglas, Gillette, Casper and Rock Springs where the mineral extraction service industry is well established.

Chesapeake, for example, hopes to gradually work up to 30 to 40 active rigs in the Niobrara in southeast Wyoming by 2014, if the play pans out.

Niobrara operators are telling local officials that each active rig supports about 50 jobs indirectly, plus just about as many “multiplier” jobs. But Chesapeake Energy’s John Dill admits that, initially, many of the jobs closely tied to drilling will be filled by out-of-state workers because each rig that comes back to the state brings with it its own crew. The same goes for some service companies such as those that provide hydraulic fracturing services.

“We want to offer as many opportunities as we can to Wyoming workers,” said Dill. “But because Wyoming has a relatively low unemployment rate, we don’t have a lot of people standing around waiting for jobs.”

Chesapeake is already working with the McMurry Training Center in Casper and the High Plains Economic Development District based in Wheatland to support workforce training in anticipation that the Niobrara play will eventually boom.

Dill said Chesapeake has taken job applications from folks who say they want to return to Wyoming. And of the four rigs recently drilling for Chesapeake, three were from Wyoming; two from Cyclone Drilling in Gillette and one from Unit Rig in Casper.

“The development of the Niobrara is still in the early stages of exploration, so the full benefit of jobs is yet to come,” said Dill.

— Contact Dustin Bleizeffer at 307-577-6069 or dustin@wyofile.com.

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