Looking to the West | SteamboatToday.com

Looking to the West

New York firm pumps $100M into Comet Ridge for oil exploration

Houston based EOG Resources is undertaking exploratory drilling for oil in Jackson County, where Mt. Ethel and other peaks in the Mount Zirkel Wilderness Area loom in the background.

— The Australian oil exploration company hoping to find 200 million barrels of oil in underground shale beds between Steamboat Springs and Hayden has hit a gusher of cash.

Comet Ridge Managing Director Andy Lydyard announced June 19 that Pine Brook Road Partners, LLC, a New York private equity firm, will infuse Comet’s operations in the American West with up to $100 million to further exploration and development. Comet’s operations include drilling already under way in the Tow Creek anticline just west of Milner.

“The initial focus will be on the Florence (Colo.) and Grays Harbor (Wash.) projects,” Lydyard said, but “another well is planned for Tow Creek. Further drilling at Florence and Tow Creek is likely later in the year, once we digest the results of the initial drilling.”

The news comes against the backdrop of record prices for crude oil further encouraging energy exploration companies to push into wildcat – remote and essentially unproven – basins like West Routt County. The price of crude increased to $142 a barrel Friday.

The new capital for Comet Ridge is indicative of heightening interest in the pool of oil beneath the surface in West Routt.

Routt County Assessor Mike Kerrigan said June 20 that his office plays host to more than one “land man” daily. Land men typically are independent agents working on behalf of energy companies to tie up leases on subsurface mineral rights.

Recommended Stories For You

The Steamboat Pilot & Today reported June 23 that a San Antonio limited liability company, NRC Group, had paid $30.5 million for mineral rights beneath 12 parcels of land south of Milner – about 10 miles west of Steamboat Springs – and south of U.S. Highway 40.

Strong signs

Energy exploration companies often lease mineral rights, and often the lease is with government entities. But NRC Group bought the rights in Routt County outright.

NRC Group has not indicated it is looking for oil. But the mineral deed conveys title and interest in all minerals on the parcels involved. That includes oil, gas, coal, gravel and even sand. There is one notable exception, which involves two coal seams leased in late 2006 by Twentymile Coal Company, a division of Peabody Energy.

Excepted from the deed is all coal and coal-bed methane located in the Upper and Lower Wolf Creek Seams. Twentymile retains the rights to access the seams to reach, process and transport coal.

The deed also shows that all of the rights acquired by NRC Group are privately held and not under government-owned land. They are not contiguous and scattered from Colorado Highway 131 in the southeast to Fish Creek Canyon – a different Fish Creek from the stream northeast of Steamboat – on the west.

A strong sign that oil wells in Routt County could yield handsome returns can be found in the Forest Oil well on Wolf Mountain Ranch, which consistently has produced between 5,000 and 7,000 barrels of oil a month since May 2005.

One veteran land man said that’s enough production to spark broader interest in West Routt.

“That is a significant production amount for an un-established production area like this,” Bill Roberts said.

Roberts worked as a land man based on Colorado’s Front Range throughout the 1970s and ’80s.

Growing interest

Routt County isn’t alone among its neighbors in terms of seeing growing interest in its oil reserves. Just 22 miles east as the eagle flies and 39 miles by car, Houston-based EOG Resources is drilling exploratory wells in Jackson County.

A number of the drilling sites are visible from Colorado Highway 14 south of the crossroads of Hebron.

Asked if the wells were seeking natural gas or coal bed methane, an energy worker entering the Buffalo Ditch site on Jackson County Road 34 responded “nope.”

Asked if the wells were meant to find oil, he answered, “We hope.”

Jackson County Administrator Kent Crowder said EOG has been active in the area drilling field development and monitoring wells to determine what they may have.

“Anything they drill, they want to take care that it will produce well,” he said.

EOG Chairman and CEO Mark Papa wrote in his company’s 2007 annual report that the company has gained a competitive advantage with its increasing knowledge of when to apply horizontal drilling techniques.

“In Northwest Colorado, we have assembled 100,000 net acres in the North Park Basin, another promising horizontal crude oil play. EOG has tested one horizontal well and plans to drill an additional seven in 2008,” he said.

EOG, which has an office in Denver, has international operations and most of its efforts are directed at natural gas production.

Tow Creek setback

The decision by Pine Brook Road Partners to invest $100 million in operations in the American West by Comet Ridge could help oil drilling get back on track along the Tow Creek Anticline in West Routt.

Comet Ridge reported in September 2007 that the second attempt to establish production on the southeastern part of the anticline was frustrated by repeated problems with the drilling rig. There was a period of time during which the drill-string was left hanging in the open hole while repairs were undertaken, but it eventually became irretrievably stuck and Comet Ridge released the string and left the site.

Pine Brook’s infusion of capital will allow Comet Ridge to spread out the risk of further drilling, the company said.

Lydyard said Pine Brook Road’s involvement will actually create a new company, Comet Ridge Resources, to hold the American operations. Pine Brook Road will own a majority 56.25 percent share in CRR and could increase its stake to 80 percent by investing an additional $19 million.

– To reach Tom Ross, call 871-4205 or e-mail tross@steamboatpilot.com