Williams contracts for 10 new drilling rigs to speed Piceance basin development

The Associated Press

Natural gas pipeline operator Williams Cos. said March 23 that it signed a contract with Helmerich & Payne Inc. for the operation of 10 new FlexRig4 drilling rigs, in order to speed the development of its natural gas reserves in the Piceance Basin of western Colorado. Williams said it continues to expect it will drill about 300 wells in the Piceance Basin this year. Starting in 2006, the company plans to drill up to 450 wells there, up from a prior forecast for about 325 wells.

In 2007, Williams now plans to drill up to 500 wells in the Piceance, up from prior estimates of 350 wells. The company also said it will boost planned capital spending in exploration and production by about $430 million from 2005 through 2007, with $400 million of the increase divided equally between 2006 and 2007.

Williams said it plans to fund the accelerated drilling program with currently available excess cash balances and future free cash flows. The company also hiked guidance for projected segment profit from its exploration and production business by $30 million in 2006 and $50 million in 2007.

At year-end 2004, Williams’ ownership in the Piceance Basin accounted for 61 percent of the company’s 3 trillion cubic feet equivalent of total proved domestic reserves and more than half of its estimated 7 tcfe of proved, probable and possible reserves.

Separately, contract drilling firm Helmerich & Payne said total revenue from the new Williams rig contract is expected to exceed $200 million. Construction of the first rig is scheduled to be completed in November 2005, and the remaining nine rigs are scheduled to be completed at the rate of one every 30 days thereafter.

Helmerich & Payne said this is the largest new construction and rig services project for a single customer in its 85 year history.