FARMINGTON — The worst may be over for natural gas prices that plummeted in recent years, while oil prices and production are increasing. New Mexico Secretary of Energy David Martin said market prices for natural gas have plateaued.
"The decline has pretty much stabilized," he told members of the New Mexico legislature during a July hearing in Farmington.
The hearing was part of a New Mexico Legislative Finance Committee meeting held at San Juan College July 9 through the 11.
Martin also speculated that natural gas revenues should remain stable in the future.
He noted that oil production for the state is following the upward national trend, mainly because of a boom in southeast New Mexico
"Oil production is increasing dramatically," he said, adding that oil prices are expect to trend upward too.
"This is going to continue to increase over the next several years, assuming there is not going to be any catastrophic event (causing a) decrease of oil prices," he said.
To give the legislative body a clearer picture, representatives from two local companies also spoke to the committee.
T. Gregg Merrion, president of Merrion Oil and Gas, and Jason Sandel, vice president of Aztec Well Companies, presented their companies' outlooks for oil and gas exploration and production in the San Juan Basin.
They were part of an overall presentation titled, "Overview of Oil and Gas Industry in the San Juan Basin."
Merrion delivered a detailed PowerPoint presentation that showed the growth of Mancos Shale oil production since 2011 when Encana drilled the first horizontal oil well in the San Juan Basin.
Northwest New Mexico was producing a little more than 200,000 barrels of oil per month at first. Now the area has 64 producing horizontal wells, 73 in drilling stages, and 74 more that are permitted. Oil production has increased to more than 450,000 barrels of oil a month, according to Merrion's data.
He said the increase is largely due to technological advances in horizontal drilling and fracking.
"It changed everything. It turned our industry upside down," he told the legislators.
Sandel's presentation focused on the economic impact the oil and gas industry has on local communities.
Sandel — who also used a PowerPoint presentation — said the city of Aztec's gross receipts tax revenue fell from $5.6 million in 2009 to $4.1 million in 2011. Farmington's tax revenue dropped from $54 million to $43 million during the same time span.
"It's attributed directly to drilling activity," he said.
According to his data, about 35 natural gas drilling rigs were in operation in September of 2008. When natural gas prices fell, the drilling rig count dropped to about five rigs in April 2010.
Tim Smith, Encana reservoir engineer for the San Juan Basin, told the committee his company has plans to invest $350 million for oil exploration and production this year and they expect to drill 60 wells before the year is up.
"We have very consistent well performance," he said.
He also added that getting permits from the Bureau of Land Management for oil drilling is still a challenge for his company.
State Rep. James Strickler, R-Farmington, said the permitting process needed to be expedited to bring more revenue.
"(More permits) would bring in a billion dollars in extra revenues," he said.Erny Zah is The Daily Times business editor. He can be reached at 505-564-4638.and firstname.lastname@example.org. Follow him @ernyzah on Twitter.