Global Recession Fears and Geologic Uncertainty Slow Southern Niobrara Leasing Activity

A wild week of stock market fluctuations that have seen the commodities complex including oil, experience the largest drops since 2008, have both operators and land companies slowing or halting their efforts to obtain oil leases in Douglas and Elbert counties of Colorado. The futures price for West Texas Intermediate Crude fell below $80/bbl on Friday.

According to reports from multiple mineral owners in the area, we have seen both Maxim Mineral Investors and Great Western Oil and Gas both suddenly pull out of negotiations close to completion in Douglas County. Only the weeks before these operators had burst onto the scene with a lot of enthusiasm. When one mineral owner asked why the negotiations were being terminated he was given a response from one company that  “All their money was to be directed to Weld county and South Dakota until further notice.”

Also in play are 29,000 net mineral acres that Meridian Minerals has leased in this area. These minerals have only recently been put up for sale. Click here to see the listing.

This information combined with the rather lethargic leasing activity in the southern Niobrara of larger players like Chesapeake Energy and Anadarko Petroleum point to a significant slowdown of industry leasing activity in the area for the immediate future.

A local landman told me that “The buzz in the industry is that everyone is waiting to see the results of Anadarko’s wells to be drilled in Arapahoe County somewhere by the bombing range”

Map Showing Old Lowry Bombing Range

A location permit for 10 acres on or near the old Lowry Bombing Range acreage was granted to Anadarko on June, 16th 2011 by the COGCC located at NENE quarter of Section 24 Township 5S Range 65W  Since this will be a tight hole, no information will be available on the results of the drilling on this acreage even if a well is completed before the end of 2011 The drilling permit for this acreage is currently in process at the COGCC.

To summarize, it would appear that a combination of global recession fears affecting the price of oil, and industry players waiting on the sidelines to see if the Niobrara will be economical to develop in the southern DJ basin, will have industry activity in the area at minimal levels for the winter months.

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