The Rocky Mountain oil-and-gas industry — facing plunging commodity prices and a tightening credit market — is looking to cut back capital expenditures next year, according to industry executives.
The picture painted by speakers at the Colorado Oil and Gas Association’s annual meeting was of an industry buffeted by market forces.
“I’ve never tried bungee jumping, but I’m pretty sure I know what it feels like,” said Keith Rattie, chief executive of Questar Corp.
The Salt Lake City-based natural-gas producer’s share price plunged from $73.38 in July to $22.11 in October.
Rattie said Questar was cutting its 2009 capital budget to $1.6 billion from $2.6 billion, with the aim of operating on cash flow.
Falling natural-gas prices — which dropped about 45 percent between July and October on the New York Mercantile Exchange — and the credit market are squeezing companies, industry executives said.
“The capital-market meltdown is a game changer,” said Don McClure, vice president of finance for EnCana Oil & Gas (USA).
Companies are preparing to cut back on investment and operations as a result of the lack of capital, said McClure, who is the incoming chairman of the state association.
McClure said areas such as the Western Slope’s Piceance Basin, where operating costs are higher because of tough terrain, may be hit hardest by cutbacks.
The industry — which is on pace to surpass last year’s record for drilling permits of 6,368 — is also facing increased regulation, said Jay Still, executive vice president at Pioneer Natural Resources USA and the association’s outgoing chairman.
There are comprehensive new drilling regulations by the state Oil and Gas Conservation Commission aimed at protecting wildlife and drinking water and reducing odor and noise.
The industry tried to work with Gov. Bill Ritter’s administration and the oil-and-gas commission to find “creative solutions” to industry concerns about the new rules, Still said.
“It wasn’t pretty,” he said. “We made a lot of sausage this year.”
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
