Powder River E&Ps Target New Zones as Oil Prices Threaten Growth

New investment in Wyoming’s Powder River Basin could suffer under a lower oil price environment, analysts say.

The Powder’s deep stacked pay potential is still relatively untapped and major oil producers, including Occidental Petroleum and Devon Energy, are looking to the emerging horizontal play for future output growth.

But the outlook for oil producers is unclear because wells drilled in the Powder’s Niobrara Shale—the basin’s top drilling target—and Mowry Shale still break even around $60/bbl, according to Ryan Hill, principal analyst at Enverus Intelligence Research.

“And oil is $60/bbl right now,” Hill said in an interview with Hart Energy. “Nobody really invests in a breakeven project.”

Operators are adjusting where they can to lower prices. Devon Energy, Continental Resources and Anschutz Exploration are drilling 3-mile Powder laterals, according to Enverus data.

“They’re not testing anything crazy. They’re doing whatever they can to drop costs,” Hill said.

While 3-mile wells deliver similar productivity per foot as 2-mile wells, they help reduce overall drilling costs for Powder operators. Continental and Devon are both pushing longer laterals in the Bakken to lower D&C costs.

Drilling longer 3- and 4-mile laterals in the Bakken has been shown to reduce breakeven costs by up to $10/bbl, Hill said.

“When you’re talking about $60 to $50, that’s a whole different ballgame,” he said. “It is very hard to find $50/bbl breakeven inventory these days.”

RELATED

Bakken Beast: Chord Plans Seven More 4-Mile Bakken Wells in ‘25

Stacked pay

E&Ps are seeing strong results from wells in the Powder’s Niobrara and Mowry shales and from a host of semiconventional targets: Turner, Parkman, Sussex, Shannon, Teapot and others.

Some of these semiconventional targets in the Powder can rival any of the Tier 1 plays in the Lower 48, Hill said.

Occidental is reporting strong results from the Turner formation, a sandstone bench underlying the Niobrara. The company plans to test other semiconventional zones and the deeper Mowry Shale soon, Occidental told Hart Energy.

RELATED

Terrific Turner: Oxy's 'Exceptional' Results from Powder River's Turner Sands

But the variability of the semiconventional targets across the expansive basin poses challenges to repeating and scaling a drilling program.

The Niobrara and Mowry are widespread across the basin. The Turners, Parkmans and Teapots vary in presence depending on where you’re drilling.

The basin’s core acreage is locked up by only a few large operators: Continental, Devon, Occidental, Anschutz and EOG Resources.

Wyoming well completion filings show that each E&P is testing out a unique drilling program based on its exposure to semiconventional targets.

Continental mostly completed wells in the Niobrara last year but also tested the Mowry and Parkman.

Anschutz’s 2024 program included completions across the Niobrara, Sussex, Mowry, Parkman and Turner zones.

Devon completed wells in the Niobrara, Teapot, Parkman and Turner last year.

Data show that the deeper Mowry Formation has become a significant focus of EOG’s Powder development strategy.

Unclear outlook

Despite reason for upside, Enverus remains cautious about the Powder River Basin emerging as a significant oil play in the near term.

Most of the big Powder E&Ps have prioritized investment in other areas of their portfolio. Devon spent $5 billion to acquire Bakken E&P Grayson Mill Energy last year.

Occidental acquired Midland Basin E&P CrownRock for $12 billion. It’s also allocating more capital to the Niobrara in the Denver-Julesburg (D-J) Basin, which is shallower and has among the best economics in the country, Hill said.

EOG is testing newer horizons in Ohio’s Utica oil play and the South Texas Dorado dry gas play.

Anschutz is the closest E&P to a Powder River pure play (the company also has holdings in Utah’s Uinta Basin). Last year, Oxy sold non-core assets in the northern Powder to Anschutz, part of a debt-reduction plan after closing the CrownRock deal.

Other Rockies basins, like the Uinta Basin, are attracting more M&A attention than the Powder.

With stronger returns elsewhere, Wyoming must keep proving it deserves a seat at the table.

“I am quite confident the market would not love if Devon said, ‘I’m going to take rigs away from the Permian and put them in the Powder,’” Hill said.

RELATED

Oxy CEO Sheds Light on Powder River Basin Sale to Anschutz