Oil production, exploration continue in Nebraska; boom unlikely

2013-03-24T04:00:00Z 2015-05-20T14:58:57Z Oil production, exploration continue in Nebraska; boom unlikelyBy MATT OLBERDING / Lincoln Journal Star JournalStar.com

Colorado produced 48 million barrels of oil last year, the most in 57 years and the second-highest annual total ever.

Most of that oil came out of the Niobrara, a shale and chalk formation that stretches into Wyoming and Nebraska, and a big portion came from wells in Weld County, which borders Kimball County in southwest Nebraska.

Wyoming, too, had a big year, producing nearly 58 million barrels of oil, its highest production number in more than a decade.

Nebraska's western neighbors' recent success, however, is not likely to portend an oil boom for this  state any time soon, says Nebraska's top oil official.

"I don't know if we'll ever have a resource play like those other places," said Bill Sydow, director of the Nebraska Oil and Gas Conservation Commission. "I think it has to do with something geological."

Sydow bases that on the fact that parts of northeastern Colorado and southeastern Wyoming have high conductivity, which indicates oil and gas in geologic formations. Go just a couple of miles across the border into Nebraska, it drops off.

Looking at geological survey logs, "Kimball County just doesn't look anything like Weld County (in Colorado) or Laramie County (in Wyoming)," Sydow said.

To illustrate his point, Sydow cites the case of a company called Fairways Exploration, which drilled two wells last year in Banner County right on the Kimball County line.

"They made a little oil out of it, but nothing like what they thought they would get," he said.

Among the most active oil drillers in northeast Colorado are Noble Energy and Anadarko Petroleum, both large, publicly traded energy companies. Between the two, they have estimated they have reserves of 3.6 billion barrels of oil just in the Niobrara formation.

Neither has expressed any interest in exploring in Nebraska.

A spokesman for Noble, which has leases on land in Colorado that goes right up to the Nebraska border, says the company has no plans to expand outside of the state any time soon.

That doesn't mean there's no interest in oil exploration in Nebraska.

Oil production did increase ever so slightly last year, up about 10,000 barrels from 2011 to just a little more than 2.5 million barrels, according to Sydow.

The failure to produce a boom in Nebraska similar to what's happening in North Dakota or what happened in 2012 in Colorado is not for lack of trying, Sydow said.

He said 1,335 wells produced oil in 2012 in Nebraska, a historically high number. Twelve discovery wells were drilled last year, which Sydow said also was a high number.

There's also been a lot of interest from companies in leasing land in Nebraska.

The state Bureau of Educational Lands and Funds netted more than $1.3 million at its October auction of oil leases on farmland and ranch land it holds in trust for public schools, which was the third-highest total ever, according to Richard Endacott, executive secretary and chief executive officer. On a per-acre basis, the amount was the second-best ever.

The bureau also has seen increased production on lands that already are leased, with more than 127,000 barrels being produced on those tractsin 2012, up from about 107,000 just two years ago.

Sydow said about 500,000 acres have been leased for oil exploration or development in the past two years, a big number for a state with an oil industry the size of Nebraska's.

Most companies leasing land in the state are looking at areas that previously produced oil but were abandoned because of low prices or for other reasons.

Those prospects have drawn interest from as far away as Australia. Black Star Petroleum in West Perth, 13 time zones away, has drilled a couple of wells in Banner County.

BlackStar officials did not respond to an email seeking comment, but in a news release earlier this month the company said it was "extremely pleased" with results from a well at the Harrisburg Oil Field, which has produced more than 6 million barrels of oil dating back to the 1950s.

The company also drilled in the Downer Field, and it said that if those wells are successful, it could drill 15 to 20 more in the same area. 

Despite Sydow's contention that geological differences make the Nebraska side of the Niobrara less likely to produce big-time oil, some companies are showing interest in Panhandle counties.

In addition to Black Star, 1st NRG Corp. out of Denver leased nearly 1,400 acres in Banner County in October.

A couple of companies have been drilling horizontal wells in the Panhandle, a method associated with hydraulic fracturing, or fracking as it is commonly called.

Fidelity Exploration has drilled a couple of horizontal wells in Sioux County, and a company named Chama Oil and Minerals has drilled horizontal wells in Banner and Cheyenne counties.

The area with the most activity and the biggest potential right now seems to be southwest Nebraska, specifically Dundy, Hitchcock and Red Willow counties, which contained nearly two-thirds of the top 25 producing wells in 2012.

Credo Petroleum drilled 18 new wells in the first half of 2012 before being acquired by the Forestar Group of Texas. One of those wells, in Dundy County, has consistently produced more than 1,000 barrels a month since becoming operational.

Jim DeCosmo, Forestar's president and CEO, said in an email the company does not talk about specific well production, and he also was willing to talk about Forestar's oil assets in Kansas and Nebraska only as a group.

He said the company was pleased with its results so far in the two states and planned more wells.

"We like our oil prospects in Kansas and Nebraska," DeCosmo said, noting the company had 62 producing oil wells in the two states at the end of 2012 and plans to drill 82 more this year.

"We foresee several more years of activity in both Kansas and Nebraska developing and expanding our oil prospects," he said.

Other companies with large acreage leased in the area include Synergy Resources of Colorado, with more than 118,000 acres in Dundy, Hitchcock, Chase and Hayes counties, and Apache Corp. of Texas, which last year acquired 580,000 acres in southwest Nebraska and northwestern Kansas.

Jon Kruljac, a spokesman for Synergy, said the company hadn't drilled any wells in Nebraska yet and was waiting to see what Forestar and Apache did. Apache officials did not respond to a request for comment.

Kruljac said Synergy might start doing some seismic surveys in the area in the next few months to gauge oil potential.

DeCosmo, the Forestar CEO, said the company had been very successful in using three-dimensional seismic testing in Nebraska and Kansas.

Sydow said the technology has made it possible to find more oil, raising the prospects that more companies will find success in drilling.

As for this year, Sydow said he was hopeful the trend of increasing production would continue, but, "I think if we just keep our production flat, that's positive."

Reach Matt Olberding at 402-473-2647 or molberding@journalstar.com.

Copyright 2015 JournalStar.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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