JACKSON, Miss. (AP) — Low oil prices mean the driller that has been the most bullish on an oil region that straddles the Louisiana-Mississippi line is cutting back.
Goodrich Petroleum Corp., based in Houston, said Friday that it will spend $80 million to $100 million on exploration and drilling this year, down from $150 million to $200 million it had previously projected.
The company had projected that it would drill 16 to 21 wells in the Tuscaloosa Marine Shale region in southwest Mississippi and Louisiana's Florida Parishes. A spokesman didn't immediately respond to a request for comment, but the new budget will mean fewer wells drilled in 2015.
Part of the money will go to maintaining leases, which could position Goodrich to ramp up activity if oil prices rebound.
Only three rigs are now working in the region, said Liberty accountant Bernell McGehee, who closely tracks drilling activity. That's down from nine this summer, and could soon fall to two rigs, McGehee said.
Some other companies that had been drilling in the region have cut back or pulled out, in part because of drilling costs exceeding $10 million per well. The oil is deep underground, and long lateral wells must be drilled. It's also in part because companies have been drilling only one well at a site, instead of multiple wells, and have faced high contracting costs.
Goodrich has been watched closely because the relatively small company, heavily in debt, has devoted most of its efforts to the Tuscaloosa Marine Shale. Company leaders had contracted to sell some output this year at high prices before oil prices plunged below $50 a barrel. But even those hedges were apparently not enough to offset low prices. Some analysts have said that in general, the Tuscaloosa Marine Shale needs prices of about $80 a barrel to be attractive to drillers.
Comstock Resources has already suspended drilling in the Tuscaloosa Marine Shale, and Halcón Resources said in November that it would wind down operations. Sanchez Oil and Gas Corp has said it will drill three rigs in the shale this year, but isn't currently drilling.
The region is a relatively small investment for the much larger Encana Corp., which appears to be freezing drilling despite describing the shale as having "massive upside potential" in a December slide show for investors.