Low Prices Hammer CBM Industry

By Dustin Bleizeffer/Casper Star-Tribune

Coal-bed methane drilling has dropped off so dramatically in the Powder River Basin that officials are not even bothering to count rigs this summer. Instead, officials counted one well drilled in May. No wells were drilled in June, and so far one well has been drilled in July, according to Wyoming Oil and Gas Conservation Commission supervisor Tom Doll.

It’s a dramatic shift from an average of 300 new wells per month in 2008.

“It’s been pretty dismal over the past four or five months,” Doll said. “I’m not sure if there will be a tremendous increase in activity.” The sudden paralysis is a combination of poor pricing and the fact that the industry has drilled out most available private and state leases. Producers must now abide by stringent wildlife stipulations on federal leases. Several permits issued by the Bureau of Land Management were remanded back to the BLM’s Buffalo field office to consider more stringent stipulations regarding sage grouse.

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State Soda Ash Producers Fight Recession, Chinese Rivals

GREEN RIVER, Wyo. — Beneath the arid sagebrush flats of southwest Wyoming, miners work around the clock to grind out millions of tons of trona rock that’s hoisted to the surface and processed into a key ingredient for everything from baking soda and detergent, to glass and paper.

 Four of the United States’ five soda ash producers are located above the Wyoming’s vast trona reserves, which were formed by an evaporating lake 50 million years ago. Soda ash, or sodium carbonate, has been an anchor of the region since the 1940s, but these days, the industry is facing a confluence of difficult challenges.

The economic recession, including weak demand for glass in the auto and construction sectors, contributed to a 24 percent drop in U.S. soda ash production between the last three months of 2008 and the first quarter of this year, according to the U.S. Geological Survey.

On top of that, American producers say their competitors in China have flooded the international market with help from a Chinese government export incentive. Chinese soda ash exports grew 40 percent in the first three months of 2009 versus the same period last year, according to industry figures.

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Hedge Contracts Help EnCana Profits Fall Less Than Expected

EnCana Corp., Canada’s largest natural-gas producer, and major operator in Wyoming’s CBM industry reported second-quarter profit fell less than analysts estimated on contracts used to lock in commodity prices.

The key for EnCana was locking in higher gas prices before they declined in recent months. Menno Hulshof, an analyst with Dundee Securities Corp. told Bloomberg that, “The hedges were a massive boost. They had stronger cash flow than I anticipated on oil production and processing,” he said.

Net income for the company fell 80 percent to $239 million, or 32 cents a share, from $1.22 billion, or $1.63, a year earlier, EnCana said in a statement. Excluding gains and losses from the contracts, profit was $1.22 a share, 28 cents above the average of 15 analyst estimates compiled by Bloomberg.

EnCana said it has sold about 2.6 billion cubic feet a day of gas under contracts that run through October at an average price of $9.13 per thousand cubic feet. Natural gas averaged $3.81 per million British thermal units in the second quarter on the New York Mercantile Exchange. A million Btu is roughly equivalent to a thousand cubic feet.

The company has sold roughly 2 billion cubic feet a day at $6.09 per thousand cubic feet under contracts that run from November to October of next year.

Gas production output for EnCana fell 1.4 percent to 3.79 billion cubic feet a day. The company produces the fuel from fields in Western Canada, Texas, Wyoming and Colorado. Oil and natural-gas liquids production rose to 136,000 barrels a day from 128,000, boosted by output increases at the Foster Creek and Christina Lake projects in Alberta.

Total production was the equivalent of 4.6 billion cubic feet of gas a day, little changed from a year earlier. Revenue declined 49 percent to $3.76 billion.

Oil and Gas Job Loses Highlight State Unemployment Rise

Wyoming’s seasonally adjusted unemployment rate continued to climb in June, reaching the highest level in more than 15 years. According to the Wyoming Department of Employment’s Research and Planning Section, unemployment last month was 5.9 percent.

David Bullard, senior economist for the department, told the Casper Star Tribune that, “Different factors drive Wyoming’s economy than drive the national economy. One of the biggest factors is energy prices, in particular natural gas, at this point.”

A possible turnaround in the economy could happen if natural gas prices increase substantially in coming months, something experts say is not likely to happen.

The largest reductions occurred in natural resources and mining, including oil and gas, and in construction. Each sector lost 3,500 jobs