The prospect of a profitable oil and gas industry in El Paso County isn't looking good.
Ultra Petroleum, which holds the majority of approved permits in the county, stated in a year-end earnings call that the petroleum system under our feet is "immature, under-pressured and not commercial." That "disappointing" opinion was reinforced in the company's annual report to the Securities and Exchange Commission.
"Ultra assembled 139,000 low-cost acres and deployed it over the past two years and has no significant lease expirations until 2014," said Michael Watford, Ultra chairman, CEO and president, according to a transcript of the earnings call. "We'll continue to monitor industry activity in the region but have no immediate plans for additional exploration in the area."
A call to Ultra for comment was not returned.
"I am wondering if they are formally going to contact the city and say whether they are or are not interested in further exploring," says Colorado Springs City Councilor Val Snider. "If you take this at face value, they've at least tested in the county and it wasn't good enough to continue."
City Council is slated to hold a second reading of its oil and gas regulations Tuesday, March 12. However, if Ultra is no longer interested in the county, it does raise the question as to whether or not Council will need to move ahead, says Snider.
"If they were to call and say no way are they are going to do more work in the county," he says, "maybe we should just postpone the regulations."
Diana May, the county's local government designee — the go-between for the city and the state regulators who oversee oil and gas development — says she has been in contact with Ultra representatives.
"What Ultra has indicated to the county is that there is oil there, but that it is uneconomic to continue any oil operations," she says. "They have no plans to drill Banning Lewis at this point."
Kyle Campbell, Colorado Springs' LGD, has not spoken with the company, but says that he believes the Council should still move forward with a vote on its ordinance. Ultra's suspension of exploration, he notes, could only be temporary.
"It doesn't necessarily mean that economic conditions or other conditions couldn't change," he says. "I think that it is still worth adopting the regulations at this state and time."