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Weld oil production soars in 2014

Weld County’s 2014 oil production up 33 percent from the previous year and expanding to 85 percent of the state’s oil output, according to the Colorado Oil and Gas Conservation Commission.

GREELEY (AP) – Crude oil production in Colorado’s top producing county has gone off the charts since 2011, and three years later, it’s still not disappointing.

While production numbers are always a few months behind, solid counts through much of last year show Weld County’s 2014 oil production up 33 percent from the previous year, and expanding to 85 percent of the state’s oil output, according to the Colorado Oil and Gas Conservation Commission’s tracking system.

Weld’s production also is 8 percent higher than the entire state’s production last year.

Some analysts predict the state’s largest producer, and largest oil field employer, will continue to put up the big numbers through much of 2015 – even amid a slowdown precipitated by plummeting global prices.

Weld County production numbers as of Friday show a total output of 70.5 million barrels of oil for 2014. In 2013, total output had hit a record 52.9 million, a 33 percent increase with final numbers not in. Production numbers, however, change daily, as they are continually updated.

The numbers are encouraging as the world faces its first massive oil slowdown since 2009, one that has seen crude prices at six-year lows.

Prices hover around $50 per barrel, about half what they were last summer, prompting companies to shutter rigs, slow down drilling and concentrate mostly on its moneymakers.

While drilling will slow as supply and demand come into balance, production in Weld County likely will keep churning out big numbers.

The oil fields are about patterns, and Weld’s pattern may just follow those of the Bakken in North Dakota and the Eagle Ford in Texas, said Pete Stark, an oil and gas researcher and analyst with IHS in Englewood. The agency recently put out a report suggesting that U.S. oilfield production could trail off considerably starting in the second half of the year.

The new report, based on an IHS study of 39,000 wells, points to the possibility of month-to-month U.S. oil production growth coming to a halt in the latter half of 2015, assuming that West Texas Intermediate prices remain below $60, according to a news release from IHS.

Monthly average U.S. production by the end of the year is projected to be about half a million barrels per day above the January 2015 average, but nearly all of that growth will come in the first half of the year. By December, U.S. oil production growth will have been flat for several months, the report stated.

“In the Niobrara, the drilling activity may reduce by 50 percent, but we don’t anticipate that the production growth will start to flatten until mid-year or even after, maybe into the third quarter,” Stark said. “That’s because about 80 percent of the production from the Niobrara is coming from about 20 percent of the wells – the wells that are in the ‘sweet spot,’” and where break-even costs are $40 per barrel, Stark said.

“Don’t be dismayed if you see continued production growth through middle of the year, even though drilling is slowing down,” Stark said.

The sweet spots – one in the heart of the Wattenberg Field, essentially in and around Greeley, and the other in northern Weld County called the Redtail area – will continue to produce, Stark said.

Stark said the main reason is the decline curve of the wells makes it necessary for operators to keep drilling to find any profit in what they do.

“So you need to keep a fairly robust drilling activity to even sustain the levels of production to offset the declines,” Stark said.

Weld County Government has been able to boost capital projects by millions of dollars in the good oilfield years. Officials predict a 20 percent to 23 percent growth in property-tax revenue from the industry from 2014, while the county socks away cash to prepare for the bust cycle that always accompanies these booms.

Don Warden, Weld County’s director of finance and administration, has seen these ups and downs come and go, most recently in the decline of 2010, when the county had to bear the load of a $30 million loss in industry property-tax revenue caused by volatile pricing swings in 2008. Oil went from $100 to $34 per barrel. Oil companies are taxed on their production.

In the last few years, while oil and gas production has increased, Weld has managed to put $40 million in the bank to keep Weld’s government services operating smoothly.

The good thing is Warden has time to prepare. Weld receives property taxes two years in arrears, so when down times hit, like now, the county has time to batten the hatches, so to speak. The hit from 2015 production won’t be put on the books until 2017.

One way the county has avoided the pitfalls of relying too much on the good times in oil and gas, is by allocating the tax revenues as one-time monies that can be used for those rainy day projects. Oil and gas tax revenues are not part of the everyday budget, by which every department gets to fund an extra person, or pay for daily expenses.

“Way back to 2010, I wrote a document called Investing in the Future of Weld, which basically laid out we shouldn’t expand Weld government with oil and gas revenues, but recognize they’re volatile and use them for one-time items,” Warden said. “We’ve poured a lot of money into public works for one-time projects. If in fact the property-tax amount drops, we could basically slow down public works transportation projects.”



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