Results ‘mixed’ for Encana Corp. drilling

By Chuck Slothower

Updated:   11/08/2012 12:24:21 PM MST

FARMINGTON — Encana Corp. has drilled five wells in the San Juan Basin and hopes to complete a planned eight wells by the end of the year, the company said in an investor release last week.

The oil and gas firm is still trying to figure out the potential for oil production in the Gallup formation, a geologic layer in the basin.

“Our results are mixed at this point, but that’s not unexpected,” said Doug Hock, a Denver-based Encana spokesman. “That’s the purpose of an exploration play: to see what you’ve got.”

Encana, based in Calgary, Canada, is the most active player in the early exploration for oil in the south San Juan Basin. The company has partnered with Farmington’s Dugan Production Corp. and Robert L. Bayless Producer, LLC, to exploit their lease positions in the basin.

“It is going very well,” said Jeff Wojahn, Encana’s executive vice president, in a conference call with investors Wednesday. “We’re still learning every day.”

Encana continues to “appraise the land” in the basin, he said.

Also, Bill Barrett Corp. has announced plans to drill two Mancos Shale wells in partnership with Merrion Oil & Gas Co by the end of the year. The Denver-based producer will release its third quarter results Wednesday.

The major producers are searching for oil in what has traditionally been a natural gas-producing basin. With natural gas prices remaining depressed, many drillers are scrambling to find more valuable oil.

“There’s a lot of competition,” Hock said. “We’re not the only company trying to shift to oil and liquids.”

Encana will be able to make the transition to focusing on oil, he said. “We feel pretty confident that we can turn that corner.”

In June, Encana disclosed its first Mancos Shale well, Lybrook H36, yielded a 30-day initial production rate of about 440 barrels of oil per day.

Encana’s San Juan Basin wells are horizontal wells requiring hydraulic fracturing. The wells are costing $4.3 million each. The U.S. Environmental Protection Agency is studying the effects of fracking, as the technique is also known.

Hock said additional federal regulation isn’t necessary.

“Regulation is best left to the state level,” he said. “They’re in a much better position to regulate than the federal government.”

On the Good Times leasing unit, Encana’s wells are within sight of several older wells. Dugan Production shut some of its older vertical wells nearby to protect them from sand believed to be coming in from Encana fracturing operations.

“There’s a lot of vertical control in that area and because of that, we have a relatively lower risk profile maybe than in some of the other plays in our portfolio,” Wojahn said.

Encana Corp. has gotten office space in Farmington on east Main Street.

Drilling in existing basins like the San Juan carries certain advantages, Hock said. Among them: existing infrastructure and an oil and gas industry workforce.

“This is a community that’s familiar with oil and gas,” Hock said.

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