Rise in San Juan Basin drilling rigs sparks optimism

Four active drilling rigs are operating in the basin — the highest number since November 2015

Leigh Black Irvin
  • Two of the active rigs belong to BP America. One belongs to Encana and the other to WPX Energy.
  • WPX says it plans to invest up to $170 million this year to run a rig and drill about 40 new wells.
  • BP expects its 2017 activity in the San Juan Basin to be greater than last year, though that will depend on market conditions and permitting.
  • Dugan Production vice president says the problem with drilling in the San Juan Basin is how long it takes to get drilling permits approved.
An idle workover rig sits in Aztec Drilling's rig yard. A recent report states there are four active rigs in the San Juan Basin, the highest number since November 2015.

FARMINGTON — A recent increase in drilling rigs in the San Juan Basin has some wondering if the downturn in oil and gas production might be starting to turn around.

There are currently four active drilling rigs in the basin, according to a weekly rig report that tracks rigs and wells in the area. While that may not seem like a large number, when compared to reports of active rigs going back 16 months, it's significant.

The last time the report listed four or more active drilling rigs in the basin was November 2015. During subsequent months, that number gradually dwindled to just one rig, and at one point last November, there were no active rigs operating in the basin. The number of active rigs started increasing in December.

Wally Drangmeister, spokesman for the New Mexico Oil and Gas Association, said in an email that oil and gas companies in northwest New Mexico have demonstrated "incredible resilience and innovation in dealing with challenges of increased regulations and low commodity prices."

"We are very pleased to see that there are now four drilling rigs operating in the San Juan Basin," he said. "The 50 to 75 full-time jobs created by each operating drilling rig are badly needed in the region, and we hope this positive trend continues."

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Two of the current active rigs belong to BP America. One belongs to Encana Corp. and the other to WPX Energy.

"We're planning to invest up to $170 million locally this year to run a rig, drill about 40 wells and build new infrastructure," said WPX spokesman Kelly Swan in an emailed statement. "The uptick in activity supports a lot of local jobs."

Swan said the company's primary vendors employ roughly 800 people and approximately 40 percent are Native American.

"Overall, our activity has generated more than $200 million in taxes for the state, more than $200 million in royalties for the federal government and more than $150 million for private landowners over the past decade," Swan said. "Navajo allotees have received close to $100 million in leasing and royalties from WPX over the past three years since our new oil discovery."

BP spokesman Brett Clanton confirmed his company has two rigs running in the San Juan Basin.

Randall Parker shows his weekly rig report on Sept. 16, 2015, at the San Juan College School of Energy in Farmington.

"We are drawing from our deep and long-term understanding of the area's reservoirs," said Clanton in a written statement. "Through this process, we are seeking to link innovative well-design capabilities with our subsurface expertise to enhance capital efficiency and potentially increase the number of future development opportunities across San Juan Basin."

Clanton added BP expects its 2017 activity in the basin to be greater than last year. But he said projects will depend on market conditions and the company's ability to secure timely permitting and regulatory approvals.

"In December 2015, we significantly expanded our operations in the Basin by acquiring all of Devon Energy's assets in the region," Clanton said. "We anticipate that our capital investment in the Basin in 2017 will bring much-needed revenue and positive economic benefits for the region. In 2015, BP's capital and operating spending in the Basin — both in New Mexico and Colorado — exceeded $400 million, which directly supported over 300 BP jobs and indirectly supported over 2,400 industry jobs in the Basin."

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John Alexander is vice president and chief operating officer for Dugan Productions. He said much of the earlier decrease in drilling was the direct result of large oil and gas companies reorganizing their priorities and choosing to drill in more lucrative areas.

"The problem is that in the San Juan Basin, it takes a large amount of time to get drilling permits approved," Alexander said. "But we've heard that Encana, which has been very active in the Permian (Basin), plans to drill six wells in the San Juan Basin this year. It all depends on funding and is strictly a matter of economics."

Efforts to reach Encana representatives were unsuccessful.

Alexander said any increase in drilling is good news, for obvious reasons.

"We definitely are glad to see it," he said. "It's good for the basin, it's good for the county and good for the state."

Leigh Black Irvin is the business editor for The Daily Times. She can be reached at 505-436-0853.