Barrett Corp. drilling plans pushed back

By Chuck Slothower

Updated:   11/01/2012 10:28:37 PM MDT

FARMINGTON — Bill Barrett Corp.’s plans to drill two wells in the San Juan Basin may be pushed to early 2013.The Denver company plans to drill the wells “in the coming months,” said Chief Operating Officer Scot Woodall in an investor conference call Thursday.

A Barrett spokeswoman said the date for initial drilling of the wells may be closer to the end of 2012 or early 2013. Barrett is partnering with Merrion Oil & Gas Co. to explore for oil in the basin. Merrion has leasing rights in the area.

Drilling may not occur until early next year because of delays in obtaining drilling permits. Surveys for threatened and endangered species and cultural sites took longer than Barrett expected, said Steve Dunn, Merrion’s drilling and production manager.

Barrett has completed a three-dimensional seismic survey and intends to target the Tocito-Gallup-Niobrara formation, a geologic layer approximately 6,500 feet underground. The company has approximately 36,800 net acres in the prospect.

One well is slated for Jicarilla Apache land. The other will be near Dzilth-Na-O-Dith-Hle, a small Navajo village along U.S. Highway 550. The drilling rig will be visible from the highway, Dunn said.

Like many oil and gas producers, Barrett is trying to shift from natural gas to oil because of a wide gap in the commodities’ prices. Barrett’s oil production was up 80 percent during the third quarter compared to a year earlier, the company said in an investor release Wednesday.

Barrett posted a loss of $52.6 million during the quarter, due in part to low natural gas prices and two unsuccessful exploration wells in the Paradox Basin of Utah and Colorado. The company earned $20.6 million during the same period a year earlier.

Barrett is following Encana Corp.’s lead into the San Juan Basin oil play. Encana, based in Canada, has completed five wells, and plans to have eight done by the end of the year. An Encana spokesman recently described the preliminary results as “mixed.”

It is unclear who will drill Barrett’s wells in the basin. The Barrett spokeswoman, Jennifer Martin, said she did not know who the drilling contractor would be.

Aztec Well Servicing is drilling the Encana wells, and is the only local drilling contractor with top-drive rigs. But Aztec and Barrett do not have a deal in place for the two wells, said Jason Sandel, Aztec’s executive vice president.

Barrett could potentially bring in a driller from outside the basin, an expensive proposition.

Local business and civic officials hope a boom in San Juan Basin oil could bring jobs to the area and improve the economy. However, the search for oil in the Mancos Shale and related formations remains in an early phase.

“I’m cautiously optimistic at this point,” said Dunn. “I’ve seen encouraging results, but nothing that would be a slam-dunk at this time.”

Across the nation, about two-thirds of drilling rigs are searching for oil. That has reversed within the past three years, when most rigs were drilling for natural gas, Dunn said.

“The economics are best in oil, and that’s where everybody’s going,” Dunn said.

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