Colorado SB 181: Where will DJ Players go?
With SB 181 being signed into law in Colorado, operators are looking to move from the Denver-Julesburg Basin (DJB) to the Powder River Basin (PRB) in Wyoming. PRB has given up some very impressive well results (>4k BOPD IP’s), but along with those results has come some frightening Authorizations for Expenditures or AFE’s.
This indicates one of the main differences between the two basins: COST.
A major reason for increased cost in the PRB is that rocks within the productive areas are significantly deeper than the DJB.The image below gives a relative comparison between the two basins. It simply shows how much rock the bit has to go through before it reaches the Niobrara Formation. Operators have to drill through significantly more rock in PRB than the DJB.
Along with the increased depth comes major well control issues that operators do not typically have to deal with in DJB which include significantly under/over-pressured zones, lost circulation, etc.
Some may say, “but the wells are much better in PRB than DJB, and costs are continually coming down.” That is true. However, PRB is in an early development phase and CAPEX (drilling and completion) costs are still typically 2-3x higher than DJB drilling and completion costs. Operators and investors need to be aware that even though the rocks were deposited in the same seaway and are very similar, the costs associated with getting to those rocks are vastly different.
Even though investors and operators may feel that a move to the PRB is better because of Colorado SB 181, staying in DJB may be the more economical choice.
If you’re interested in more information like this please contact us at
855-867-3876 or, info@LandGate.com
Written by Craig Kaiser, President of LandGate
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