Oil producer builds up investment in Utah oil drilling
The biggest oil producer in Utah intensifies oil production this year by allocating US$500 million for towards new oil investment for drilling and exploration ventures.
According to the Deseret News, Newfield Exploration Company has set aside over 30 percent of this year’s company budget to step up operations at the Uintah Basin, located in Eastern Utah.
The company’s VP for Rocky Mountain, Darylle Howard said “It’s a key year for us,” and added that “We have growth plans for the Uintah Basin, just domestic oil growth plans, that will be just north of 20 percent growth.”
Back in 2004, Newfield bought the Monument Butte field from Inland Resources for US$575 million. The Uintah Basin was part of the sale as this is covered by the vast Butte field property.
The property is referred to by Howard as the company’s “foundational asset”, which brings many years of good oil prospects.
He disclosed that while the company started with a fleet of five oil drilling rigs, it now owns and operates seven oil rigs within the Basin. He added that there are plans to invest in oil rigs again in the very near future, as it envisions a nine-rig fleet by next year.
Starting in 2009, and every year thereafter, Newfield’s oil production reached approximately 30% of the total volume of oil produced in Utah. This is based on data from Utah Division of Oil, Gas and Mining.
The company brings in substantial earnings for the State in the form of taxes and royalties. Sources reveal that an estimated US$50 million was paid to the State for the period 2005 up to 2010. This translates to about US$10 million yearly of ad valorem and production taxes remitted to Utah.
The Basin produces black wax crude oil, which is thicker compared with the more popular light, sweet crude oil. Also, crude oil prices for this type of oil are relatively lower than varieties such as West Texas Intermediate, the US Benchmark blend.
Prospects are getting brighter as substantial volumes of black wax crude were extracted from the basin, prompting the company to look for enough refinery capacity. By January, it was able to clinch supply deals with oil refining firms HollyFrontier Corporation and the Tesoro Corporation.
Beginning in 2013, Newfield is scheduled to deliver 18,000 bpd of black wax crude oil to Tesoro and another 20,000 bpd of said oil to HollyFrontier by 2014.