Finding opportunities in the oilfield downturn – Greeley Tribune

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Troy Bonnell wasn’t much of a rancher.

Heck, with 12 acres and chickens that wouldn’t lay eggs and cows that kept jumping the fence, ideas of agriculture independence seemed to slip away for the oil and gas company manager.

“Ranching was more of a novelty,” Bonnell said with a chuckle. “We had a few heifers but we ended up naming them. Now, they’re just pets. We figured we’d stick with the oil field and forget the farm.”

Bonnell, a trucking-drilling manager for All Around Roustabout in Greeley, found another use for his small slice of the agriculture pie. He turned it into an oil and gas storage yard.

He’s among many in Weld who have converted some of their vacant, non-producing ranching and farming land into storage yards for the oil and gas industry. And it couldn’t have come at a better time with companies laying down drilling rigs, and needing a place to store them and the associated equipment until the market returns.

All Around Roustabout serves the oil industry with completions, maintenance, tank battery construction, drilling services and just about anything else related to the oil business. During the current downswing, however, the company has struggled.

“We’ve been struggling for a while with what to do with equipment that’s been laid down until the market picks up,” Bonnell said. So, he got a permit with Weld to use his personal ranch as a storage facility.

“It’s not a permanent storage yard, but temporary in a sense that companies can use this space until the market picks back up,” he said. It cost him, too. At this point, he’s more interested in recouping the money it took to build the yard up to county specifications. Beyond that, every little bit will help.

His ranch, located primarily in a flood zone which prevents it from being farmed, has tank battery equipment, piping equipment – about three rigs worth of equipment. His income was hit so hard, Bonnell said he had to take a pay cut and come up with this idea to help subsidize his income.

He rented ranch land six months ago to a drilling company that had no place to put its rigs when production slowed. The company would have had to move equipment out of state and then move it back when the demand returned, Bonnell said. His ranch saved them the hassle.

Bonnell gives thanks to his neighbors for being understanding during this downturn in the market. They tolerate his temporary storage area though it can prove an eyesore to some.

“Thank God we have good neighbors,” he said. “Everybody knows my family and what-not. We’re blessed with good neighbors. They’ve been real understanding.”

Although drilling permit applications are nearly half what they were a year ago, companies are forging ahead in Weld. Commissioner Sean Conway said downswings are an ideal time for oil companies to take a step back, assess their businesses and get ready for the next boom.

It helps the DJ Basin, primarily located in Weld, is a steady play that keeps companies in place, even during downturns. Operation costs in the basin are lower and many oil and gas rights are actually owned by the oil company, making its production costs lower, too.

“I think what’s going on is, the DJ Basin is one of the most valuable holdings you can have right now. It’s a proven field,” Conway said. “We understand the cyclic nature of this commodity. Everybody knows it’s cyclic, and they do what they gotta do to weather the storm in the short-term.”

Companies continue to seek out Weld as places to build oil and gas support systems, such as storage yards and infrastructure such as pipelines to ship the crude out of state.

“I think what they’re doing is looking at the long-term,” Conway said. “It’s a smart, forward-looking way in the industry because what they’re doing is investing.”

One of the focuses of businesses right now is getting pipeline in place, Conway said. Magellan Midstream Partners LP, based in Tulsa, Okla., is working on a 550-mile pipeline from Weld to Cushing, Okla. The 550-mile Saddlehorn pipeline is expected to be operational in late 2016.

“You see other pipeline projects that are really about not just getting the product from well heads to the market place, but also looking at reducing truck traffic – looking at reducing emissions,” Conway said. “It all plays in to making the industry more friendly.”

He reiterated that many oil-related businesses are in the planning process on projects.

“Another thing that’s reassuring to me as commissioner is we have 31 oil and gas companies operating in Weld, and we make it a point to meet with them annually or twice annually,” he said. “We like to have a dialog on where they’re going and where we’re going. What has amazed me, in the last 90 days we’ve had conversations with all these companies and they’re not curtailing their activities. The rig count is not as high as it once was, but 89 percent of the oil in Colorado gets produced in Weld County.”

Despite the downturn, Weld is expected to have record oil production for 2015. Oil production in 2014 was at 81.69 barrels, representing 85.5 percent of the state’s total output. Current production is closing in on 90 percent of the state’s output, according to state Oil and Gas Conservation Commission numbers.

If it weren’t for the rich oil production in the DJ Basin, downsizing would be much worse.

“I’ve had more oil and gas experts tell me that,” Conway said. “Meanwhile, what I think companies are doing is looking at this as an opportunity to look at pipelines – ways to take trucks off the roads. I think they’re looking in terms of making some investments for the long-term for when this pricing environment turns around. And it will.”

Weld is more fortunate than most in terms of withstanding the current bust.

“I’ve heard it from a number of people – energy experts, analysts, oil and gas leaders – the DJ Basin is one of the most valuable holdings you can have. And it’s only going to become more valuable,” Conway said.

“That’s what’s driving these applications for new pipelines and other infrastructure applications.”

He described Weld as a gift that keeps giving.

“We are just very fortunate to be positioned in a really good place,” Conway said. “Every day I come to work with the idea, let’s not screw this up.”

– Sharon Dunn contributed to this report.

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