New drilling rig strikes natural gas
August 23, 2008
Craig — With $300,000 at stake, Ken Currey said Friday that he was fairly pleased a drilling rig leased by his company hit a producing pocket of natural gas.
After a week of Currey waiting in a mobile trailer, staring at computer screens spitting out various arcane numbers and charts, Montana-based Beartooth Oil & Gas Co. found what it was looking for.
A hidden pocket of natural gas 3,000 feet below a Moffat County wheat field.
“Yes, sir, we did,” said Currey, vice president of field operations for the comparatively small energy company. “We’re going to be working on getting hooked up in about three months or so.”
Beartooth officials project their newest well – they have about five existing ones in the same area some 10 miles north of Craig – to pump about 500,000 cubic feet of gas a day, Currey said.
That equates to roughly 15 million cubic feet each month.
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Natural gas currently sells for about $6 per 1,000 cubic feet. At those prices, Beartooth’s new well would generate about $90,000 each month.
Moffat County owns the rights to the gas underneath the new well, and officials have a signed contract to collect 18.75 percent of its production income. At current prices, that amounts to $16,875 each month – or $202,500 each year – in production royalties for local institutions.
Those royalties are split, with about 53 percent going to Moffat County School District, 40 percent to the county, 6 percent to Colorado Northwestern Community College and half a percent to the Colorado River District.
Problem is, however, prices do not hold in the natural gas market, which Currey has called one of the most volatile commodities markets around.
Jeff Comstock, county Natural Resources Department director, said he couldn’t guess how much the well would be worth to the county for that reason.
Also muddying the financial picture, the well will not produce that much gas forever, or even for very long, necessarily, Currey said.
“Gas is a finite resource,” he said. “That’s why Williams and Encana and those guys have all those drilling rigs: They have to keep up with production. Encana and Williams probably have to drill 15 to 20 wells in a month just to keep up with production from the month before.”
The Beartooth well is not among the county’s top producers. Wells owned by Wexpro Co. in the Hiawatha region have produced as much as 90 million cubic of feet of gas in a month.
Moffat County remains an exploratory area for companies to try their luck finding a new profitable play, however. For now, it is far from a proven gas reserve, Comstock said.
Beartooth, for instance, spent $600,000 in 2007 drilling two holes and got nothing but mud and water.
Currey said he doesn’t expect his company to get too involved in Moffat County in the coming years. Maybe another two wells.
Still, he said, the ground’s not empty.
“Oh yeah,” Currey said. “There’s enough gas around here that people will be up here for a while. Us, too, probably.”