FARMINGTON — Encana Corp., the Canadian firm that has been at the forefront of exploring Mancos Shale oil production, plans to release one of its two rigs in the San Juan Basin to cut costs, a spokesman said.
"It's an Aztec (Well Servicing Co.) rig, and we'll be releasing it as of Aug. 1," said Encana's Doug Hock.
Encana Corp. has drilled at least 23 wells in the basin, and the company says results have been good. Encana will continue to lease one rig from Aztec Well to continue its drilling program in the basin, Hock said.
"This is really a reflection of the fact we're trying to maintain or stay within the capital budget we set for 2013," he said.
The company will continue to drill in the basin, Hock added. "We intend to allocate capital and continue on next year," he said.
Encana, a publicly traded company, is due to release its second-quarter financial results Wednesday.
In April, Encana said it expects to spend about $100 million in the basin in 2013. The company is exploring for oil in the Mancos Shale, a geologic layer in the basin.
The decision is a blow to Aztec Well, one of the basin's largest employers.
Jason Sandel, executive vice president of Aztec Well, said Encana's move is another sign of slow business in the basin.
"The difficult times are here to stay in the San Juan Basin for a little while," he said.
Sandel expressed optimism the industry could turn around next year, particularly if natural gas prices improve.
"We're starting to think we'll see an upturn in the San Juan Basin around mid-year 2014, but that's a hopeful guess right now," he said.
ConocoPhillips in March announced it would suspend its San Juan Basin drilling program until prices rebound. The company is continuing to operate its 10,000 existing wells in the basin.
Natural gas production in northwest New Mexico is on track to decline for the seventh consecutive year, according to the state Oil Conservation Division.