Most of the excitement in Wyoming’s oil and gas plays has focused on the Powder River Basin, where the lion’s share of some 18,000 applications for permit to drill have been filed with state regulators. But next to the oil excitement in the Powder is growth in the gas fields, from large developments like Jonah Energy’s 3,500-well NPL project to increasing exploration of what horizontal drilling offers gas producers.
Ultra Petroleum, the state’s largest producer of natural gas, recently reported a net income of $18.6 million for the third quarter of the year.
The company, which recently relocated from Houston to Englewood, Colorado, emerged from bankruptcy early last year. Executives noted in a call with investors on Thursday that Ultra continues to work on a horizontal program in the Pinedale field, an approach that’s advancing slowly.
Developers in Wyoming’s western gas fields are increasingly interested in horizontal drilling. A protracted and bitter disagreement between Jonah Energy and Exaro Energy recently concluded before the Wyoming Oil and Gas Commission, regarding the two companies’ different plans for how to best approach horizontal in shared drilling units — north to south or east to west.
The horizontal wells that Ultra brought on in the third quarter had poor results, the company noted in the call with investors.
“The three wells brought online were impacted to different extents by reduced rock quality, lowered gas saturation,” said Jay Stratton, the company’s new chief operating officer. “... for one, well depletion did offset vertical wells where we drilled them to lateral alongside several existing vertical producers.”
The company noted that it is incorporating its horizontal results into its further attempts, broadening its understanding of what horizontal offers for the firm. For now, Ultra’s focus in Pinedale is on its vertical wells, which continue to perform well despite depressed prices. The company has cut its vertical well costs by 10 percent since early in 2018.
Those wells are very responsive to small price changes for gas.
“Our inventory is extremely sensitive to small positive moves in gas prices and for every $0.20 of improved gas price realization, our unhedged EBITDA increases by approximately $45 million on an annualized basis,” said Bradley Johnson, senior vice president of operations.
For the rest of the year, Ultra will focus on verticals, operating three rigs.
“We’re still absorbing those inefficiencies from the horizontal program, but the team is rapidly pivoting back to their previous efficiency in the vertical program.”
Back in the Powder River Basin, Devon Energy recently added its voice to a chorus on the Powder’s virtues.
The Powder is the best emerging growth opportunity in North America, said Tony Vaugh, president and chief executive officer of Devon, in a call with investors Wednesday.
Devon, which operates in oil-rich basins like the Eagle Ford in Texas and Oklahoma’s STACK, will double its rig count in the Powder to four rigs and drill 50 new wells next year. Devon, like many others, is focusing its upcoming Powder activity on the Turner formation, which is considered a low-risk, high-return play.