Oil & Gas Service Companies Say Business is Slow in Colorado

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Lower crude oil prices and increased regulatory risks appear to have diminished the attractiveness of drilling for oil and gas in Colorado's Denver-Julesburg Basin, according to interviews with about a dozen exhibitors at Hart Energy's (Houston, Texas) DUG Bakken and Rockies conference and exhibition in Denver on February 19.

Speakers at the event, which drew about 620 attendees, expressed more enthusiasm for drilling in other nearby formations, including the Williston and Powder River basins. No speaker or exhibitor outright slammed the D-J Basin. Rather, elliptical concerns were expressed about "the regulatory environment," particularly the state's ongoing process of rewriting the rules of drilling in the Centennial State.

Those revisions, still underway, followed the November 2018 "blue wave" election, where Democrats won the governor's race and captured majorities in the state House and Senate. For more on that, see April 9, 2019, article - Colorado Oil & Gas Industry Faces a New and Different Regulatory Future. Soon after, the state changed the mandate of the agency responsible for regulating oil and gas drilling to prioritize environmental protection and human health and safety over extraction, reversing decades of previous practice.

Several exhibitors at the DUG conference said they were busy helping Colorado's oil and gas companies compete in a low-price environment by offering products or services that lowered their costs, shortened their cycle times and increased their efficiencies.

RigER (Houston, Texas) is helping operators in Colorado and elsewhere digitize their business processes. "The industry is still heavily reliant on whiteboards, spreadsheets and pen and paper to capture their data," said a representative from that company. "The way companies capture, access and process information has become a limiting factor." He cited the experience of one customer who shortened the process to collect data from the field, confirm it and invoice for it from 21 days to one day, freeing staff to perform higher-value tasks.

That company has only a few clients in Colorado. Like several other exhibitors and attendees, the Permian Basin is RigER's No. 1 market. RigER also provides customers with daily updates to encrypted databases, software as a service (SaaS) and other applications customized for the Oil & Gas Industry.

Several exhibitors at the DUG event were marketing frac plugs. Representatives from one company, Kureha Energy Solutions LLC (Houston, Texas), extolled the company's biodegradable frac plug, which eliminates the risk of a costly process to remove a plug once the operator is finished fracking a particular lateral. That company is just starting out in Colorado, a representative said, but it is doing brisk business in the Eagle Ford and Haynesville shales.

Another frac plug supplier, Royal Frac Plugs (Houston, Texas), claimed its small size gave it an advantage over larger firms. "We have lower overheads than bigger firms, which means our prices are better, and our product is more reliable," said Tony Ruffo, president of operations, who used to work for one of the industry's larger equipment manufacturers.

Royal Frac Plugs, an 18-month-old company, is particularly active in Oklahoma's SCOOP and STACK formations and in the Eagle Ford shale.

Another company looking to gain clients in Colorado is Cotton Logistics (Katy, Texas), which provides man camps, catering and emergency cleanup services to various industries, including oil and gas. "We served about 2.5 million meals last year," said one booth representative. The company is particularly busy in West Texas and South Texas, though it also operates in the Haynesville Shale. "We're just getting started in Colorado," the booth representative said. "Business tends to flow with the price of oil."

A representative of financial services company Crestmark (Troy, Michigan) said business in Colorado was "a little slow." The lender offers loans of between $1 million and $10 million, mainly to private and family-owned companies. The company representative at the DUG event said its lending to trucking companies was hot right now.

The Schlumberger (Houston, Texas) booth was staffed by two employees eager to discuss the firm's new "play evaluation" services, particularly for the Power River Basin. "We offer a turnkey solution that streamlines the information-gathering process for new operators in that basin," a representative said in an interview. The company cited a Forbes finding that owners and operators spend 79% of project time collecting, cleaning and organizing data sets. Schlumberger's service draws on publicly available data, machine learning and the company's deep expertise in the Oil & Gas Industry to create a pre-built basin model that can accelerate owners' and operators' decision-making process.

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