Well the news on Monday was that Exxon bought out XTO for a balance sheet stock deal.  That’s curious since Exxon had a pretty good cash position.  No wonder their share holders are ticked.  If memory serves me, that was about what these guys paid for Mobil – I’ll check that.

Well, last I checked XTO had something like 50,000 acres here, but they were not that successful getting completions. Wonder what Exxon will do?  Tie all that acreage in with theirs – that would make something close to 400,000 acres in the Piceance.  You know – we were hearing rumors of an Exxon take over from over two years ago – things keep moving along, don’t they.

Anyway,  Bob retired well – estimates of his share in this deal are reported to be $180 mil just to make the deal and his stock is now valued something like $350 million.  Nice retirement deal Bob – I heard of a private boat down in Florida that will be shortly coming on the market – needs a new owner – that golfer is also retiring.

 

Heard that the Republican Josh Penry just dropped out of the race.  Too bad, even if he was way too young, something like the coach of the Broncos, he would of at least given us a choice of somebody else that’s running except Hogan & Hartson of Washington, DC.

Who’s this you ask?  Well, its the law firm (the firm) that both McInnis and Ritter work for.  Remember Ritter had to make sure the firm gets their stimulus money (fees) first – just in case.

FromDenver Post article.

Ritter hired his former law firm, the Washington-based Hogan & Hartson, in a no-bid contract to review stimulus spending, The Denver Post reported Friday. It said the firm was paid $40,000 in stimulus money through June.

Aides to the governor insisted the contract was properly awarded. The state attorney general’s office deemed the contract necessary to allow the state to have speedy legal advice about stimulus money. The contract is too small to require competitive bidding.

Ritter worked for the Denver office of Hogan & Hartson in 2005, leaving the following year when he ran for governor. The law firm has about 1,300 lawyers across the country and specializes in public finance, real estate, white-collar litigation and environmental and governmental regulation.

Note: Ritter was making sure the “firm” is handled and also note how he supplied the firm with all the additional “environmental” work in these last few years.  Although it has cost the people of the western slope dearly in jobs and livilhood (75% of the industry laid down in a quarter), the firm did OK with all of Ritter’s new work in the evironment and governmental regulation.

So now we are suppose to get excited the next candidate the firm offering up for show, this Scott McInnis.  I think somebody told me once his office was across the hallway from Ritter – like they shared the same view.  The firm must think the Colorado folks are into the way stupid and these lawyers are interchangable parts to them.  But hey, maybe the  Denver/Boulder folks are so smoked out, its all they can handle and can’t see anything else.



 

What going on in the Patch – 2009:

By mid 2007, the credit squeeze was on. It was apparent that the large banks and other normal energy lending institutions were tightening up. In the days prior from 2002 to 2006, it was a wild and wooly ride at the various oil/gas stock presentations for analysts. In those days it was not uncommon to see deals being stuck out in the lobby of the meeting rooms. By the summer of 2008, however, there was very little of this activity going on. The banks were quietly urging their friends to move away from any kind of debt structure and work only equity deals. Only the larger companies with huge inventories of (no-fault) shale plays were being debt funded or lines of credit being extend. There was a distinct fear in the air by that summer. The burning question was, how far down do you think it will fall, referring to oil and gas pricing. The ride down during the months of September, October and December were breath taking and numbing all at the same time. In summer of 2009 at these vary same shows, none of the banks and other normal lending institutions bothered even to show up.

The following is a newspaper article from the Grand Junction Sentinel, a paper from the largest town on the Western Slope of Colorado.

Rig count in Piceance Basin takes plunge

By GARY HARMON/The Grand Junction Daily Sentinel

Thursday, March 19, 2009

The rig count in the Piceance Basin has dropped more steeply than the entire state of Wyoming and more than in the neighboring Uinta Basin. Last October, 102 rigs were drilling into the rock of northwest Colorado in search of natural gas. The number has fallen steeply, to 30 rigs, or by 71 percent, according a compilation by Carter Mathies, a partner in Arista Midstream Services. Rig counts in other regions also have dropped steeply in the past six months, but none as steeply as that of the Piceance Basin.

Industry officials said that all other things being equal, the reason for the steep drop in Piceance Basin drilling was the pending adoption of new rules governing drilling in Colorado. State officials, who have maintained that the new rules pose no threat to the drilling industry, said the drop is attributable to the expense of capturing Piceance Basin gas, which is known for being difficult to harvest.

In Wyoming, the rig count is down 54 percent, including 10 rigs that stopped drilling last week, from 78 rigs to 36. The Uinta Basin, where 55 rigs once drilled, is now down to 21, or a drop of 62 percent. In the Rockies region overall, the rig count is down 57 percent, a drop of 447 active rigs to the current 191, according to the Arista compilation. The Piceance Basin “was a hotbed until this perfect storm of circumstances,” said Nate Strauch of the Colorado Oil and Gas Association. Drilling drops overall are attributable to the falling price of natural gas and the credit freeze of the economic downturn. An additional factor in Colorado is the rulemaking being carried out by Gov. Bill Ritter’s administration through the Colorado Oil and Gas Conservation Commission, Strauch said.

New rules go into effect April 1, “but what is on paper is of grave concern to the industry,” he said. Natural gas from Colorado at the distribution hub in Opal, Wyo., was getting $2.40 per 1,000 cubic feet, or mcf, said Theo Stein, spokesman for the Colorado Department of Natural Resources, the umbrella agency that includes the commission writing the new rules. Figures supplied by the state geologist suggest that the price fetched by Piceance gas is less than a third of what drilling companies need to make a 10 percent profit. EnCana, one of the most active drilling companies, needs a price of about $7 per mcf to clear a profit. IHS, an energy analysis company with offices in Englewood, estimates that a drilling company needs $6.03 per mcf, Stein said. Based on those numbers, “One could surmise that the Piceance is no longer economical to drill,” Stein said.

The effect of the government interference with the new crazy permitting rules, now extended over every inch of Colorado soil has dropped the rig count some 71% at the height of the panic. Most of the companies left the region never to return, EnCana is one of them. Only those large companies with extensive land holdings remain. The real unemployment rate is massive and is just showing signs of coming around, as the people leave this are to find other employment.  So much for Colorado.

Overall across the US, the rig count (based on a Jun 08 to Jun09) yearly rates are still down over 52.9% for the land rigs and 29.9% for the offshore. The emphasis for drilling in the US has focused on the regions where shale plays can be profitable, meaning they can get a stable price (which usually means they can hedge thru Henry Hub), drill without federal government interference and the cost to drill/complete are lower. Hence the great push down into the Barnett, Fayetteville and now the Haynesville shales. These shales drill for about a 100% completion rate, i.e., no dry holes and can be economic down into the $3.00/mcf range.

Beside the frac technology, the shale plays are driving a technology upgrade to the way we drill the land based wells. Helmerick & Payne has a licensed technology for their FlexRigs which are driving the costs to drill these wells down. Some operators are experiencing cost savings that exceed 40% by utilizing this style of drilling rig. This technology will eventually expand to the conventional drilling as well. This puts the current drillers with conventional drilling in a bind. They will have to modernize the drilling fleet in order to compete with these H&P rigs. Currently there are literally many “For Sale” signs hung on stack conventional rigs both here in Colorado, Utah and even in Texas.  There is very little conventional exploration being conducted onshore.


To Be Continued:

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