On May 24, independent producer EP Energy Corp. and refining giant Tesoro Corp. announced a joint venture (JV) that will be focused on oil and natural gas development in EP’s Altamont area in the Uinta Basin. The JV agreement is centered on a 60-well program where Tesoro will provide a capital carry in exchange for 50% of EP’s working interest in JV wells.

All oil production from JV wells will be purchased by Tesoro, as well as additional crude produced from EP outside of the JV, and will supply Tesoro’s Salt Lake City refinery. EP Energy’s position consists of approximately 181,000 net acres located in Duchesne and Uintah counties in Utah.

EP Energy has been pumping capital into its Wolfcamp operations in the lucrative Permian Basin allocating approximately 39% to 45% of its 2017 capital budget to the area. The company also owns a substantial position in the Eagle Ford Shale, so its portfolio consists of more attractive options when compared to active operators in the Uinta such as Crescent Point Energy Corp.

However, EP’s Altamont operations rival its economical expectations for the Eagle Ford as both areas have the ability to yield 500,000 to 505,000 barrels of oil equivalent (boe) EUR per well with breakeven prices hovering around $35 per barrel (bbl). Having more than 900 gross drilling locations with sub $40/bbl breakeven prices, EP Energy is expected to play a pivotal role in bringing Uinta production back.

Activity in the Uinta Basin took a nose dive after the supply glut of 2014 which caused oil prices to spiral downward below $30/bbl. Wellbores in the region have primarily been vertical or directional (“S” shaped) due to the multitude of thin producing formations and complex geology. However, further delineation has shed light on horizontal potential in the Castle Peak branch of the lower Green River group, which is being tested by Crescent Point Energy after the first horizontal well was drilled in late 2015.

Additionally, Crescent Point’s Uinta portfolio achieved a 2016 exit rate of approximately 19,000 boe/d and boasts original oil in place of more than 5.2 billion barrels. Of this reserve potential, only 0.7% has been recovered to date, leaving a significant upside in terms of development.

The company estimates that it has a risked inventory of roughly 200 wells assuming a spacing of four wells per section, though Crescent Point is currently testing eight wells per section in parts of their Uinta acreage. It also continues to optimize its completion practices; including lateral extensions exceeding 1 mile in length, introducing new fluid systems, and increased stage and proppant intensity.

The western Rockies region will continue to be a focal point for Crescent Point, as it emerges as one of the better performing assets within the company’s portfolio.

Although perpetually overshadowed by the Denver-Julesburg Basin as the top producing basin in the Rockies, the Uinta is far from being finished. Many companies can still see the hydrocarbon potential that exists in the Uinta, and the latest deal between EP and Tesoro will not be the last one we see. If Cres-cent Point’s operational activity in the play is any indication of what EP and Tesoro will be able to achieve with their recent JV agreement, the Uinta could gain some serious traction once oil prices rebound further.

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