Boom again?

Matt Adelman (
2017 could be the year of the big turn-around in oil and gas development in Converse, Campbell and eastern Natrona counties as producers have a slew of new and old drilling permits in hand and are cautiously making plans to bring in new rigs and increase production this summer and next fall.
Of course, after a rocky two years of depressed prices and falling production and the crushing impact on our local economy, any turn around is welcomed news, but some in the industry suggest this may be the start of a boom the likes of which we haven’t seen before. It all depends, they say, on the price of oil and natural gas – mostly oil.
Oil, after plummeting from its $100+ per barrel highs a few years ago to below $30, has rebounded in recent months – topping $50 for more than two months and it was still above $52 last week for West Texas Intermediate crude – and that’s enough to get producers ready to increase production from wells already drilled and to plan (again, cautiously) to bring in new rigs.
All of that, though, hinges on the price staying above $50, which some experts nationally say is a gamble. While OPEC has agreed to cut its production, the U.S. rig count has been creeping up for months, and the resulting production increases from that could offset some of the OPEC cuts.
“WTI and Brent sank more than 2.5 percent in intra-day trading on (Jan. 9), after a report at the end of (the previous) week showed another solid build in the U.S. rig count, the 10th consecutive week that the oil industry added rigs back into the field. Aside from a single week in October, the U.S. oil industry has deployed more rigs in every week dating back to June, a remarkable run that has resulted in more than 200 fresh rigs drilling for oil. The gains in the rig count come even as oil prices have held steady in the mid- to low-$50s per barrel,” energy and environment report Nick Cunningham wrote for last week.
“At the start of 2017, there are two major dynamics at play occurring at the same time, each pushing in opposite directions on the market. The OPEC deal is slated to take oil off the market, while U.S. drilling is expected to add new supply. The pace and magnitude of each trend will ultimately drive oil prices one way or the other.”
Nailing down how many rigs are headed back to Converse/Campbell counties is a little tough until they are actually on site, but officials with knowledge of the industry said Chesapeake Energy alone is expected to have three or more rigs here by summer and the other major players – Anadarko, Wold Energy Partners, Anchutz Oil Co., EOG and Wave Petroleum – will be drilling as well in 2017. The caution, they repeated, is the price for a barrel of oil has to stay above $50.
Some new numbers indicate those producers believe it will. The Wyoming Oil and Gas Conservation Commission approved 24 new oil/gas drilling permits in Converse County in just the first two weeks of 2017, with another 20 permits in Campbell County (primarily along the Converse/Campbell line near Wright). Another 11 permits were approved in Natrona County, though the most (39) were approved for Laramie County.
Of the 24 drilling permits approved so far in 2017 for Converse, Wold Energy had 13, Anchutz and Anadarko two each and Wave five. 
The commission lists a total of 169 permits to drill received for Converse County, while it has another 31 on file total for Campbell.
Those numbers speak volumes about the growing optimism for drilling in Converse and southern Campbell counties this year and into 2018.
“We’re seeing some good trends,” said, John Robitaille, vice president of the Petroleum Association of Wyoming. Noting prices above $50 a barrel is crucial, he added that stability in prices will be critical for long-term planning. “It gives (producers) a little more comfort” to invest in upping production and drilling new wells.
“We’re cautiously optimistic that we’re going to see some production come out of those areas (Converse, Campbell and Natrona) in the near future,” he said, noting that he doesn’t expect much new drilling until mid- or late-2017 because of the time it takes to ramp back up.
Prior to that, though, will be signs of better times as companies increase production from existing wells. 
“Some service companies are hiring back, which is a positive sign that producers plan to have work soon” and are in the process of upping production. Robitaille said the rig count in Wyoming has been slowly increasing since November with new activity being reported, but it will be slow going into the new year.
“Anything that happens won’t be immediate,” he warned.
While others in the industry agreed with his assessment, some also offered this: that with the number of permits already approved, leases pending both on private and public lands, the amount of work involved and the need for more rigs, we could be on the verge of another boom in Converse County. None would say it on the record, but they pointed out the same factors mentioned above, then they added the standard caveat: all  of it is predicated on oil staying above $50 a barrel.
As an example of what could be ahead, here, Anadarko reportedly sold its assets in the Eagle Ford shale play for $2.3 billion, according to’s Irina Slay. “The divestment, according to Anadarko chief Executive Al Walker, is part of the company’s shift towards higher-return operations elsewhere,” including the Niobrara-DJ Basin in Wyoming. The Niobrara runs from northeaster Colorado through Converse County to Campbell County.
While new rigs in the area will certainly drive employment, production increases coupled with higher prices will make the difference for state, county and city revenues long term – although any increase in production and price in 2017 won’t make it to the tax base until summer 2018 at the earliest.
The same would be true for any property taxes from new pipelines, gathering systems or infrastructure this year. What would make the difference sooner would be excise (sales and use) taxes on the supplies. Excise taxes can show up in government coffers as quickly as a month or as long as six months, but any increase in their revenues would be welcome news.
In Converse County, excise tax collections have taken a bath in the last three years. In January and February of 2015, sales taxes here topped $10 million each month, record numbers coming on the heels of record numbers. With the exception of October, every month in 2016 saw sales tax revenues far below any year since 2013. As of November, year to date collections were down 58.6 percent in the county, according to data provided by Community Builders, Inc.’s Joe Coyne.
He also provided data on Converse County’s mineral tax valuations, a major factor in determining revenues for the county and municipalities. While non-mineral valuations and property tax valuations have remained fairly steady between 2015 and 2016 (after having surged between 2014 and 2015), mineral tax valuations here fell back to 2014 levels of slightly above $1 billion. In 2015, mineral tax valuations came in at just under $1.4 billion, driven primarily by the huge jump in oil production between 2012 and 2105.
By comparison, mineral tax valuations in 2012 in Converse County were roughly $600 million.
“Nine (Wyoming) counties enjoyed growth of their tax base from 2011 to 2016, while 14 counties experienced a decline in valuations,” Coyne wrote. “Converse County led all counties’ growth rates (78.8 percent), mostly driven by huge increases in oil valuation. . . The most significant increases in total actual valuation during the last five years came from Converse County ($671 million), followed by Laramie County ($440 million), where growth in the local tax base appears to be driven by nearly all sectors.”
Converse County Assessor Dixie Huxtable said the 2016 total valuation here was $1.52 billion, down $300 million from the record $1.8 billion in 2015. By comparison, the county valuation in the late 1990s was around $200 million.
Given where Converse County’s tax valuations sit already, any significant growth in production of oil and gas or coal could fuel new record total assessed valuation, but even that couldn’t happen before 2018-2019 because of the way mineral valuation and taxes works.
Huxtable explained that any oil and gas production in mid or late-2017 shows up in 2018 production  reports, which doesn’t show up in tax revenues until 2019.
She noted tax the number of working rigs also impacts the valuation. In 2014, she estimated, the county has 20+ active rigs, but that fell quickly to three in 2015. If the number of rigs increases to 7-10 this year, that will help but not fully replace what has been lost.


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