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May 13, 2021

Oil and gas production from the DJ Basin play expected to witness a slow recovery

GlobalData’s latest report, ‘DJ Basin in the US, 2021 – Oil and Gas Shale Market Analysis and Outlook to 2025’ provides a comprehensive review of hydrocarbon appraisal and development in the Denver Julesburg (DJ) Basin shale play against the backdrop of COVID-19 pandemic.

By GlobalData

GlobalData’s latest report, ‘DJ Basin in the US, 2021 – Oil and Gas Shale Market Analysis and Outlook to 2025’ provides a comprehensive review of hydrocarbon appraisal and development in the Denver Julesburg (DJ) Basin shale play against the backdrop of COVID-19 pandemic. The report also provides an outlook for oil and gas production in this Basin along with competitive positioning and investment plans of major operators.

The DJ Basin, located in Colorado and Wyoming, accounted for 7.02% of oil and 6.65% of natural gas production in the United States Lower 48 in 2020. The play peaked in production in November 2019, with 801.5 thousand barrels of oil per day (mbd) and 5.8 billion cubic feet per day (bcfd) of natural gas. Since then, it has experienced a constant decline even before the effect of Covid-19.

COVID-19 outbreak and subsequent restrictions on economic activities further affected the oil and gas production in DJ Basin. The DJ Basin averaged 53 drilling rigs in 2019 and then decreased to an average of 17 rigs, a 68% drop, in 2020. While other basins throughout the US have increased their rig count with commodity prices rising to pre-pandemic levels, the DJ Basin has lagged with their rig count. Overall production is still declining in this region, while plays like the Permian Basin, Bakken and Appalachia Basin have all seen an increase in production level in the second half of 2020 and first quarter of 2021. With West Texas Intermediate (WTI) future prices averaging $62.85 per bbl for the remainder of 2021, GlobalData expects a slight uptick in the rig count and production but not the level that was seen in 2019.

In addition, a rise in production would depend on the capital allocation from major operators in this region. The top two producers in the DJ Basin are Occidental Petroleum and Chevron. These two players have large positions in the Permian Basin where returns on investment are higher than the DJ Basin. Hence, this play may see relatively lesser investment and production growth may largely be supported by drilled but uncompleted wells (DUCs).

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