El Paso Corporation (NYSE:EP) is developing a relatively unknown field in the Uinta Basin to help meet its goal of increasing production of oil and other liquids over the next few years.
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Utah Oil and Gas
Although Utah doesn't get as much publicity as other areas of the United States, the state is an active area for oil and gas exploration and development. There were 29 rigs active in Utah in May 2011, and the state produced 24.6 million barrels of oil and 437 billion cubic feet of natural gas in 2010. Major basins in the state include the Uinta and Paradox basins and the thrust belt near the border with Wyoming.
The Altamont Field started up in 1970 when Royal Dutch Shell (NYSE:RDS.A) reported a successful well into the Wasatch formation.
El Paso has 190,000 net acres under lease at the Altamont field in the Uinta Basin in Utah. The company has been active in the field for several years and has increased production here at a 19% compound annual growth rate since 2005, and is currently producing 9,000 barrels of oil equivalent per day.
El Paso is producing both oil and natural gas from this field but is currently focused on oil development here and estimates that the company has more than 800 drilling locations and total risked resource potential of 125 million barrels of oil equivalent (BOE).
El Paso plans to operate between two and three rigs in the Altamont Field in 2011, and is targeting the Wasatch and Green River formations. The company is focusing its efforts on infill drilling on its properties and increased drilling efficiencies with a goal of reducing costs by 20% per well. El Paso estimates that wells here will cost between $4 million and $7 million and have estimated ultimate recovery of between 300,000 and 400,000 BOE per well. The company believes that it can earn an internal rate of return between 25% and 35% on wells here assuming a price of $80 a barrel for oil.
The Uinta Basin is attracting major interest from other exploration and production companies looking for onshore opportunities. Bill Barrett Corp (NYSE:BBG) recently purchased approximately 20,000 net acres of leasehold in the basin for $120 million, adding to the company's already substantial position in the Uinta Basin.
Newfield Exploration Company (NYSE:NFX) also purchased acreage in the Uinta Basin, paying $215 million to Harvest Natural Resources (NYSE:HNR). Newfield Exploration made a second purchase in the Uinta Basin from a private oil and gas company adding a total of 70,000 net acres to its position here.
El Paso is planning to develop the Altamont oil field in the Uinta Basin in Utah as the company looks to develop its oil assets due to the price strength of this commodity relative to natural gas. (For related reading, also take a look at El Paso Follows Industry's Spinoff Trend.)
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