Wyoming Oil Saving the Day

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Wyoming oil is saving the day, something that hasn’t been said for more than two years. State revenue forecasts are improving. The oilfield service industry is climbing. And the general mood has gone from “cautiously optimistic” to just plain “optimistic.”

Proponents point to high producing wells in the Powder River Basin, a flush of new applications to drill and most of all the rising price of crude as evidence of a turnaround.

The national benchmark price, West Texas Intermediate, eclipsed $65 a barrel last week, the highest it has been since before the bottom dropped out two years ago. Perhaps more importantly, the price has held steady within a favorable band for about six months, encouraging operators and Wall Street alike. The International Monetary Fund recently released projections that global economic growth will be higher than expected, while the national stockpile of oil has fallen for eleven consecutive weeks.

In Wyoming, a state depleted of once robust fossil fuel revenues, the recovery has spurred hope. Oil is just one of the three commodities that tanked in recent years, but its comeback has brought unexpected revenue right before a legislative budget session. The state is facing an $850 million shortfall, depending on how it’s calculated, due to the downturn in coal, oil and gas. That money that goes to schools, the Department of Health and basic government services from Cheyenne to Meeteetse.

The recent oil recovery has been strong in Wyoming and across the country, and for many it’s been surprising. But the resilience of the price rise that made this recovery possible is harder to define. The questions now are ‘How much staying power does the oil sector have?’ and ‘How well positioned is Wyoming’s eastern oil patch to take its place in the global uptick?’ The answers depend on who you ask.

The good, the bad,

the ugly

The outlook in Wyoming’s oil patch changed dramatically from the middle of 2014 to the beginning of the following year. The price of crude fell by half and it hadn’t held a sustainable price over $55 until this winter.

Phil Flynn, an analyst at Price Futures Group in Chicago said he’s not surprised. He’s been bucking the trend of pessimism for a year.

The best booms follow a time when the market was glutted, he said.

“It’s always the same at the bottom of every cycle,” Flynn said. “People get so bearish and make statements like ‘oil prices will never rise again.’ But they don’t look at what happens when oil prices crash.”

When the prices fell two years ago, billions of dollars in oil investment disappeared, he said. That adds up to expected production that won’t be there, on top of new projections of global demand, he said.

“If the economy continues to go the way it’s been going, we are going to need every drop of shale oil we can get to replace all the oil production investment that we didn’t see,” he said.

But Wyoming has reason to be cautious of the good news, because the price of oil is no less tenuous than it was, some say.

“The fundamental risks are all still there,” said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming. “People are paying less attention to those than they did before, and it’s not clear whether they should be.”

Chief among these concerns is that U.S. production is higher than it’s ever been and will only rise, he said.

This boom to bust to recovery is typical of others, Godby said.

The financial market overshoots in one direction, then the other. A year ago, the sector was entrenched in pessimism, now it’s hopeful again.

“What’s going to cause that pessimism to reappear in the market is the question,” he said.

And Wyoming, currently relieved by a stream of oil dollars into dry coffers, is still suffering from the two years of downturn, he said.

“People move from cautious to taking for granted sometimes pretty quickly,” he warned. “The fundamental risks are all still there.”

Spending money

to make money

One thing is certain; the last six months have heartened Wyoming operators, small to large.


Bill Thompson, vice president of the Jonah Bank in Casper, said his oil and gas customers are in a better financial position now than they’ve been in since the downturn.

Those who were looking for more time to pay back loans are taking money out to expand operations, add trucks and employees. For the banker, the turnaround has been recent, over the last 90 days.

“There is this optimism around town that we are starting to feel,” he said. “It’s got a buzz.”

Jonah finances the smaller projects, existing wells that are no longer economical for major players but that a small company can make a profit from. Their loan amounts go up to about $5 million or $7 million. For Wyoming’s larger projects, it’s either major players like Anadarko and Chesapeake making moves, or it’s mid-sized companies following suit and using private equity money from high-risk, high-return investors. That kind of funding is flowing into Wyoming right now, said Peter Wold, of Wold Oil in Casper.

And it’s necessary for some firms to be able to take advantage of this uptick, he said.

Wold said the renewed optimism is coming from a mix of good news, from the economic growth picture to the business-friendly attitude in Washington.

He expects the price to hold, though it will go through ups and downs in 2018.

Wold is also confident because of the success of drilling in recent months. Wells are producing at astonishing rates, as operators continue to figure out how to tap the complex layers of the Powder River Basin.

“When you start hearing and seeing that type of thing,” he said, “That really lifts your spirits.”

Wyoming’s place in line

Wyoming is not first choice for the increase in oil and gas investment compared to Texas or Oklahoma, but it’s not last either.

“We have oil that’s, relatively speaking, higher demand,” said Godby, the economist, of Wyoming’s sweet crude.

“As oil prices go up, it’s only going to increase the chances that people are going to want to invest in oil,” he said. “And we are one of the places they could do it.”

Once thought of as the next big play, Wyoming lost its shine during the downturn, and operators turned to more profitable opportunities elsewhere. But interest in the state’s many layers of rock has risen.

Operators argue that’s for good reason.

For one thing, the biggest play in the country, West Texas’s Permian Basin, got too expensive even during the low price environment, said Bruce Hinchey, president of the Petroleum Association of Wyoming.

Operators started looking at Wyoming as a deal, and that competition pushed up the cost of buying leases in Wyoming’s Powder River Basin.

“We haven’t seen that in a long, long, long time,” Hinchey said of the $15,000 per acre leases sold in 2017. Companies were dropping millions simply to stake out a claim, he said.

“When you buy a lease like that, you want to make it productive, because you’re spending a lot of money,” he said.

Large companies like EOG Resources, Anadarko, Chesapeake and Devon have all made investments in eastern Wyoming.

Coinciding with the current uptick in price are new strides in the drilling plans that these companies have set up in earlier years.

The Bureau of Land Management released a draft environmental impact statement Friday for a joint oil and gas project between five major players north of Douglas. The 5,000-well project is planned over a 10-year period, and according to BLM’s estimates could generate 8,000 jobs.

Major players like EOG and mid-sized operators like Wold Oil are figuring out the puzzle of Wyoming’s rock. They are drilling horizontally, keeping within a band of oil saturated sediment for up to 2 miles.

“Clearly Wyoming is benefiting a lot from this,” said Godby, the economist, of the oil recovery. “How strong is this? That’s hard to say.”

Powder River Basin Mega-Project

5,000-Well Project Edges Forward in Wyoming

in Closing Bell Story / Energy News   by— Oil & Gas 360

January 30, 2018

Anadarko, Chesapeake, EOG, SM and Devon are partners in PRB mega-project

From the Casper Star-Tribune

The Bureau of Land Management released an environmental study on Friday for a 5,000-well oil and gas project in Converse County.

Five major players in Wyoming industry proposed the joint project, which would cover 1.5 million acres, just north of Interstate 25 between Glenrock and Douglas, and take place over a period of 10 years. Each well proposed is expected to last about 30 years, according to the environmental study.

It’s a hefty undertaking in a region of Wyoming that’s already expecting another oil and gas boom if prices hold.

Anadarko Resources, Chesapeake Energy, EOG Resources, SM Energy and Devon Energy are the partners on the proposal, first made in 2014, before the oil sector busted. The Bureau of Land Management anticipates the joint approach to drilling in the southern Powder River Basin will generate more than 8,000 jobs and between $18 billion and $28 billion in revenue.

“(The environmental study) has been an ongoing effort for several years,” said Jennifer Brice, a spokeswoman for Anadarko. The project, and the federal study, will allow a collaborative approach to development in the region, she said.

Federal, state and private interests are all impacted by the proposed project in the county. About 90 percent of the land is private or state owned. Only about 6 percent of the project’s 1,500 well pads will be built on Bureau of Land Management Land. The remainder is on the U.S Forest Service-managed Thunder Basin National Grasslands.

The Bureau of Land Management owns more than 60 percent of the minerals to be tapped.

The environmental study notes that the proposal calls for year-round development and exemptions to operate in sage grouse and raptor habitat. Of the 53,000 acres directly disturbed for pipelines, roads and pads, about 21,000 acres may be disturbed for the full life of the project.

Converse County is no stranger to oil and gas development. Douglas was in the heart of the 2014 boom, when oil prices eclipsed $100 a barrel. Recently, local officials have signaled that increased industry activity is on the way in 2018.

Companies like Anadarko have already applied for thousands of permits to drill in Converse County, stoking expectation by locals of a boom to rival 2014.

Interest in Converse County has excited some of the Wyoming-based operators who are gleaning information on how to approach the multilayered Powder River Basin from other major players.

Tapping the Powder River Basin north of Douglas has been front and center for the Wold Oil company since last year. The company completed a horizontal well in December north of Glenrock on a pad that can hold more than a dozen more wells, and Wold has moved on rapidly to other drilling in the region.

So far, activity has had some impressive results, said Peter Wold, of Wold Oil Properties. But there are still mysteries in the Powder than can only be solved by more activity, he said in a recent interview with the Star-Tribune.

“I still think we have some work to do to unlatch the key to the ultimate success of the PRB,” Wold said. “We are going to need more wells out there.”

Others are looking at this development with concern.

“I don’t think we’ve seen this scale of drilling,” said Jill Morrison of the Powder River Basin Resource Council, a landowners advocacy group based in Sheridan. “It’s going to be a new, big scale on the landscape. If they don’t do it with a lot of care, it’s going to have some very long-term impacts.”

Morrison’s concerns include water resources to feed this level of drilling activity, and the proper disposal of waste water, as well as air quality impacts and wildlife habitat fragmentation.

One of the issues raised in the environmental study is how the project will impact sage grouse, an imperiled bird that is protected by state and federal provisions. A key habitat for the grouse is located within the project boundary.

Public comment is open until March 12. The Bureau of Land Management will hold three public meetings on the project in Douglas, Casper and Glenrock.


5,000-Well Project Edges Forward in Wyoming

Western Energy Alliance Member Jarred Kubat Explains Leasing and Development Obstacles to Congress


Wildcatter Weekly

January 23, 2018

President's Message

Introducing Our Feature on Small Independents

Last week, the House Natural Resources Committee held a hearing on actions the Interior Department is taking to eliminate onshore energy burdens. We’re proud that two Western Energy Alliance members were outstanding witnesses who effectively explained the obstacles to responsible leasing and development to Congress.

Alliance board member Shane Schulz, QEP Resources, discussed how nonfederal lands in places like Texas, where the regulatory regime provides less risk and more certainty, are able to attract more capital than public lands. Jarred Kubat, Wold Energy Partners, discussed how delays, such as the 415-day average delay between parcel nomination and lease sale, are a deterrent to development, especially for small businesses like Wold.

Thank you to Shane and Jarred for spending the time and effort to educate Congress on these public lands issues! The hearing was a first step for the Committee as it crafts legislation to address those leasing obstacles. The resulting bill will likely be a companion to the permitting bill, the SECURE American Energy Act, which the Alliance has also been actively engaged in.

Highlighting the Small Independents

As you may know, Western Energy Alliance was founded in 1974 as the Independent Petroleum Association of Mountain States, designed to be a voice in Washington on federal issues that affect independents. While we lost “independent” from our name in 2010, we didn’t change our mission. Our advocacy is still focused on small independents. To that end, I’d like to kick off a new periodic feature of those independents that form the backbone of our membership.

Since Jarred was just testifying on Capitol Hill, now is a good time to highlight Wold Oil. The company has been a member for many years, and we’ve enjoyed working with Jack, Peter, Court and others in this family owned and operated business founded in 1950. Jack currently serves on the Alliance’s Board of Advisors and PAC (Political Action Committee) Steering Committee. John Wold, patriarch of the Wold family, served on the very committee Jarred testified before as Wyoming’s Congressman in the late 1960s and early 70s. Congressman Wold also has the distinction of being the first geologist to serve in Congress.

Wold Energy Partners (WEP) is a four-year-old entity of Wold Oil, with 37 full-time employees, focused entirely in the Powder River Basin of Wyoming. WEP operates 119 wells, is a partner in 82 additional wells, and has acreage totaling 143,000 net mineral acres (264,000 gross acres) with greater than one billion barrels of recoverable reserves. WEP is truly an entrepreneurial endeavor as the product of 192 acquisitions and trades, with 394 individual federal leases representing 71% of its PRB acreage position.

I very much appreciate that the company was willing to share its experiences with federal leases before Congress. Thank you Wold Oil for your leadership on behalf of the small independent producer, and your membership in Western Energy Alliance. And thank you for kicking off our new feature!

If you’d like your company to be featured, please let me know.  

Kathleen Sgamma