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Denver-based Whiting Petroleum sold its Texas holdings for $816 million in July and said it would use the cash to "accelerate" development of Colorado's Niobrara shale.
"The one thing we don't have to worry about in the Niobrara is oil in place," James Brown, the company COO, told analysts in November. "There is a tremendous amount of oil in place."
Whiting is just one of the companies pumping money into Colorado to tap the equivalent of at least 3.8 billion barrels of oil beneath the plains.
The discovery of an easy-to-drill and oil-rich stratum fueled nearly $4 billion in spending in 2013 by the top operators — who have plans to spend and drill even more in 2014.
More than $1 billion is being spent on plants, pipelines and rail terminals to process and ship the oil.
"We are still finding out how big this is going to be," said Dan Kelly, vice president at Noble Energy, the basin's largest operator. " The opportunity is there."
The rush of investment and activity is reverberating across the Front Range. In oil country, it is buoying the economy.
"These huge investments are benefiting everyone: fire districts, school districts, homeowners," Upstate Colorado Economic Development president Eric Berglund said.
"Our hotels and restaurants are filled," Berglund said, and Greeley's 1.3 percent apartment vacancy rate is the lowest it has been in almost 20 years.
"The Greeley-Evans School District has some of the oldest school buses in the state, and Noble Energy donated $1 million in new buses," Berglund said.
As the pace of drilling increases and pushes industrial activity closer to suburbs, it has also led to a political pushback as some communities pass ordinances, moratoriums and bans to control or blunt drilling.
" People feel this big wave hitting them," said Matt Sura, an attorney representing community groups in Greeley and on the Western Slope on oil and gas issues.
Still, interviews with company executives and financial analysts and a review of corporate filings paint a picture of a resource so promising and profitable that it will continue to lure big investments.
In November, 50 rigs were running in the Denver-Julesburg Basin, which stretches from eastern Colorado just north of Denver into southeast Wyoming, western Nebraska and western Kansas. It sits atop the Niobrara.
That is a 50 percent increase in 22 months, according to the North American rig count conducted by Baker Hughes, an oil-field-services company.
Nearly 1,000 drilling permits were issued in the basin by the state in 2013, with another 250 permits pending.
The keys to the boom have been horizontal drilling — some wells extend 2 miles horizontally underground — and sequential hydrofracturing, or "fracking," which cracks the shale to release oil and gas.
The four largest companies operating in the basin based on production — Noble, Anadarko Petroleum, Encana and PDC Energy — say they have identified nearly 15,000 potential drilling locations.
Most of those sites are in the basin's Wattenberg Field, which is centered in Weld County.
Smaller operators have identified at least 5,000 more locations, according to company filings.
While the field covers parts of Boulder, Broomfield, Adams and Larimer counties, 95 percent of the permits issued in 2013 were in Weld County, according to Colorado Oil and Gas Conservation Commission data.
Driving this Front Range activity are the Niobrara shale and Codell sands, which have turned out to be relatively easy and cheap to drill and more productive than initially expected.
"We were surprised at how prolific those wells were," said Brad Holly, Anadarko vice president for operations. "There was a lot more oil in place than we are getting out."
Easy to drill
While the country's biggest shale-oil play has been North Dakota's Bakken formation, the cost of drilling a well there averages $8 million to $10 million. A Denver-Julesburg Basin well is about $4 million, according to operators.
And the formation has been relatively easy to drill.
"The DJ has been a great play for us. It has been very forgiving," said Darrin Henke, interim president for USA Operations for Encana. "We've only had to sidetrack a couple of wells. From Day One, it has been economically attractive."
Anadarko has been able to cut the time it takes to drill a well — one of the big cost factors — from 20 days to as few as six, Holly said.
Since 2010, the drilling push has led to record-setting oil production in Colorado, reaching an estimated 48 million barrels in 2012.
Before the fall's massive floods closed down some wells, 2013 production was running 44 percent ahead of 2012's record, according to the state oil and gas commission.
The Niobrara is one of several shale plays in the U.S. that have boosted domestic output to surpass oil imports for the first time since 1995.
Houston-based Noble Energy has operations around the world, but it committed $1.7 billion — 45 percent of its 2013 capital budget — to Colorado.
Noble plans to spend $10 billion in the Denver-Julesburg Basin over the next five years, Kelly said.
With 640,000 acres leased in the basin and a reserve estimated at the equivalent of up to 2.1 billion barrels, Noble is projecting decades of activity.
Anadarko, based in The Woodlands, Texas, is the second-largest operator in the basin, with 350,000 acres to develop, reserves estimated at up to the equivalent of 1.5 billion barrels and 4,000 potential drilling locations.
Anadarko drilled 300 wells in 2013 and plans to drill 400 in 2014, Holly said.
"The Wattenberg is the largest single field in the company," Holly said. "This has been a hub the company has really built itself on."
Rising stocks
The success in the basin is paying off in the stock market, industry analysts said.
Denver-based PDC Energy, the fourth-largest operator with 98,000 acres in the Wattenberg, is set to move from the equivalent of 2½ to four drilling rigs and invest $469 million in 2014 — a 67 percent increase over this year.
Since the start of 2013, PDC's stock has climbed 58 percent to $52.55 a share.
"The biggest impetus in moving the stock has been the Niobrara," said David Tameron, a Denver-based oil and gas industry analyst for Wells Fargo.
Whiting, which sold its Texas assets to focus on the Niobrara, has seen its shares rise 34 percent in 2013 to $57.94 a share.
"Whiting came late to the Niobrara but managed to have success," said Pete Stark, a vice president with consulting firm IHS.
What has spurred optimism has been growth of potential reserves, Tameron said. Initially, operators were searching the Niobrara, which is a layer of chalk and shale.
Operators have, however, found three distinct Niobrara zones, or "benches" A, B and C, and beneath them is a fourth oil-bearing zone, the Codell.
"The Codell definitely adds value and opportunity," Michael Edwards, a spokesman for PDC, said in an e-mail.
And that's the way the market has seen it.
"The play grew so fast," Tameron said. "A year ago, people weren't talking about three different benches."
Encana is the third-largest producer in the Denver-Julesburg Basin, with a 49,000-acre position in the basin.
When Doug Suttles, Encana's new CEO, reorganized the company in November to concentrate on five areas, the Denver-Julesburg was one of them with a projected basin budget of up to $280 million.
"It is one of our top plays," Henke said. "We've got five rigs operating."
The company is set to add a sixth.
Unique challenges
While the Denver-Julesburg Basin has been easier and less expensive to drill than some shale plays, it does come with unique challenges, operators say.
The basin has been drilled for a century, and there are already about 20,000 vertical wells, some decades old, some abandoned.
"The biggest challenge here is logistics," said Anadarko's Holly. "We are drilling horizontal wells in some sections in the midst of 32 vertical wells. And so the technology, the precision and accuracy we have to have in steering our wells is critical.
"We are coming very close to existing vertical wells," Holly said. "Applying the right technology and putting the horizontal in the right spot to avoid the existing wells is key."
Those old wells' proximity to the new wells poses a risk, said Bruce Baizel, director of the Durango-based Oil and Gas Accountability Project.
"Those old wells are perfect pathways for pollutants," Baizel said.
In June, the state adopted a policy that operators check sites for vertical wells before horizontal drilling for well integrity and to make sure abandoned wells are plugged and take remedial steps if needed.
"It is a policy, and we've been getting good cooperation," said Matt Lepore, director of the state oil and gas commission. "But if we have to make it a regulation, we'll make it a regulation."
The other challenge is operating in an urban area with "a million people living right there in our backyard," Holly said.
Of course, residents feel that it is the drillers who are in their backyards.
"We have to have a thriving oil and gas industry in Colorado, but we need some balance," Sura said. "You can't just drill near neighborhoods and schools."
The oil companies say they are taking steps to limit their impact.
Anadarko has laid miles of water and gathering pipelines to replace trucks — cutting the equivalent 93,000 truck trips.
Noble is trying to locate more of its drilling activity in complexes where it can drill, gather petroleum products and control wastes and emissions more efficiently.
The cost of these central processing facilities, which can handle 700 wells, is $35 million to $50 million, Noble CEO Charles Davidson told analysts.
"We are trying to limit our footprint," Kelly said. "We are trying to be a good steward and neighbor."
While acknowledging such steps help, Sura said, "If they continue to drill near people, there will be conflicts."
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
Updated Dec. 16 at 2:11 p.m. The following corrected information has been added to this article: Because of misreported information, the percentage of permits issued to Weld County was incorrect. 95 percent of all permits issued were in Weld County.
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