Drillers in Colorado dodge $10B threat to yearly output levels

JIM POLSON, JENNIFER OLDHAM AND DAVID WETHE

NEW YORK Oil and natural gas explorers from Anadarko Petroleum Corp. to Synergy Resources Corp. have escaped a vote in Colorado that would have limited drilling and threatened to halt about US$10 billion worth of oil and natural gas production a year.

A proposal known as Initiative No. 78, which would have restricted drilling near homes, fell about 21,000 valid signatures short of the total needed to qualify for a ballot vote, based on a projection in a statement from Colorado Secretary of State Wayne Williams. A measure allowing local governments to ban fracking also failed to attract enough valid signatures. Synergy, a Colorado oil and gas explorer, rose the most in more than seven months on the failed ballot initiatives.

The measures had threatened to wipe out oil and gas drilling in Colorado, the sixth-largest gas producer among U.S. states, according to a Bloomberg Intelligence analysis. Initiative No. 78 alone could have barred drilling across 90 per cent of the state, where explorers extracted about US$10 billion worth of oil and gas last year, the report showed.

Energy explorers would have left Colorado “in droves if voters ever approved ballot initiative 78,” Bloomberg Intelligence analysts Rob Barnett, Bernard Chen and Vincent Piazza said in the analysis Monday.

Drillers Anadarko, EnCana Corp., Noble Energy Inc., PDC Energy Inc. and Whiting Petroleum Corp. account for about 70 per cent of the state’s output, they said.

Synergy, based in Denver, gained 4.8 per cent to US$6.98 at 2:36 p.m. in New York, after climbing as much as 12 per cent, the most since Jan. 14. Anadarko, Encana and PDC Energy were also up. Synergy was the most exposed of all explorers to the measures, John Freeman, an analyst at Raymond James, wrote in an email.

“This announcement today is a positive in that it removes a potential overhang in operations throughout the state,” analysts at Wunderlich Securities wrote Monday in a note to investors. “While these have been considered long shots, the fact is that they still were potentially crippling issues.”