Colorado oil and gas drilling — hammered by high costs and falling market prices — has dropped to its lowest level in a year, according to industry data.
Friday, there were 98 rigs operating in the state — a 21 percent drop in six weeks, according to the weekly survey by energy-service company Baker Hughes Inc.
“Rigs are down about 15 percent across the nation, but they are down more in the Rocky Mountains,” said Ward Polzin, managing director with energy investment bank Tudor, Pickering, Holt & Co.
The last time there were fewer than 100 rigs operating in Colorado was last January.
While the price of natural gas dropped to a low of $5.29 per thousand cubic feet Dec. 22 from a July high of $13.57 on the New York Mercantile Exchange, Colorado operators struggled with even lower prices.
“Rocky Mountain producers were so successful this year, they really boosted supplies and as a result ended up with low prices,” said Pete Stark, a vice president with energy consultant IHS.
As a result of supply and limited pipeline capacity, Rocky Mountain gas was selling $2 lower than the market, Stark said.
“That put a real pinch on new drilling,” Stark said.
Even with the low prices, the cost of rigs and drilling services did not fall in the last quarter of the year, Stark said.
“This will work itself out, and costs will drop, but until then there will be fewer rigs,” he said.
Since the beginning of November, operating rigs in New Mexico dropped almost 30 percent to 92, and Utah activity was down 40 percent to 48 rigs, according to Baker Hughes.
Rocky Mountain gas — because of the costs of production and limited transport out of the region — is more sensitive to economic changes, Polzin said.
New gas from shale formations in Texas, Oklahoma and Alabama was also placing pressure on Rocky Mountain supplies, Polzin said.
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
