Denver audit: Some airport oil wells are losing money

 

Denver International Airport has owned oil wells since it opened in 1995, generating millions of dollars in revenue, but a new city audit found that in 2017 a third of the 71 wells were losing money.

The audit also found while DIA has a contract with an operator, PetroPro Engineering, to manage the wells the airport paid even more to third party contractors.

“The airport needs to take a closer look at whether it’s a good idea to continue operating wells that could be costing — instead of making — money on the airport’s land,” Denver City Auditor Tim O’Brien said in a statement. “If we are going to be in the oil and gas business, we need to make sure it’s worth it.”

The airport administration has already hired the University of Wyoming’s Enhance Oil Recovery Institute to identify which wells are economically viable and which need to be plugged.

“We have carefully reviewed the auditor’s recommendations and are in agreement. We are working to implement changes identified in his report and are confident we will be able to do that by May,” John Leavitt, a DIA spokesman, said in a statement.

“Profitability is greatly affected by the fluctuating price of oil,” Leavitt said.  “Whatever the fluctuations, no tax dollars are used to assist in airport operations of any sort.” In 2017, the wells generated $2.3 million in revenue.

The audit looked at revenue and expenses from January to September of 2017. During that period DIA wells had an operating profit of $617,530.

But 20 operating wells and six shut wells cost $226,667 more to service during the nine-month period than they produce in income.

Under a five-year contract to manage the wells that runs through October 2021 PetroPro could earn up to $3.6 million.

During that nine-month audit period the total amount paid for services was $1,040,179. PetroPro received $437,437 and $602,742 went to third-party vendors for services for services such as trucking, tool rentals, water hauling and workover rig work.

O’Brien recommended the airport analyze the total costs of operating the oil and gas wells to see if the current practice of paying both PetroPro and other companies makes the best business sense.

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