EOG Resources (NYSE:EOG) highlighted the potential of the Niobrara Shale, an unconventional resource play in the western United States that produces primarily oil and natural gas liquids.

IN PICTURES: 10 Ways To Prepare For Nature's Worst

The Niobrara is an Upper Cretaceous formation composed of chalk limestone and shale at various depths depending on where the Niobrara is encountered. The play is sometimes referred to as the Codell/Niobrara because the Codell Sandstone is nearby and production from the two formations is sometimes commingled. There is also a shallower part of the Niobrara formation, which produces mostly natural gas.

Early Mover
EOG Resources has built up a position of 400,000 net acres here, and was so early in the play that the company's average cost is only $35 per acre.

EOG has drilled five wells so far in the Niobrara Shale, of which three are complete. The Jake 2-01H, the company's first well, produced 50 Mbo in the first 90 days. The maximum production rate on the three wells completed ranged from 730 to 1,558 barrels of oil per day. The company said that the play was in too early a stage of development to estimate the recoverable resource potential or the economics of drilling.

Other Players
Another company with acreage in the Niobrara is MDU Resources (NYSE:MDU), which has 27,000 net acres in the play. The company hasn't publicly disclosed any development plans yet here.

Petroleum Development Corporation (Nasdaq:PETD) also has acreage in what it calls the Codell/Niobrara formation in the Wattenberg field in Colorado. The company has 72,000 gross acres and is drilling new wells as well as refracturing older wells.

Petroleum Development Corporation also has 127,000 gross acres in the NECO area in Colorado and Kansas. The company is targeting natural gas reserves here at shallower depths of between 1,500 and 3,000 feet.

This is not the first time the industry has tried horizontal drilling into the area, although it's not clear if they were targeting the same oil and liquids rich interval or the shallower natural gas formation in the Niobrara.

Twenty years ago, Union Pacific Resources Group drilled and completed several horizontal wells here. One was the No. 1 McGahan 21-5 in the Silo Field, an area that EOG Resources mentioned at its analyst meeting as a promising area. Anadarko Petroleum (NYSE:APC) purchased Union Pacific Resources Group in 2000.

The Bottom Line
Investors should expect to hear more about the Niobrara Shale over the next few years, as the exploration and production industry continues to find oil and gas in the United States, an area written off by some as mature and unproductive. (To learn more, check out our Oil And Gas Industry Primer.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  4. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  5. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  6. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  7. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  8. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  9. Stock Analysis

    Analyzing Porter's Five Forces on Under Armour (UA)

    Learn about Under Armour and how it differentiates itself in the competitive athletic apparel industry in light of the Porter's Five Forces Model.
  10. Stock Analysis

    The Biggest Risks of Investing in Qualcomm Stock (QCOM, BRCM)

    Understand the long-term fundamental risks related to investing in Qualcomm stock, and how financial ratios also play into the investment consideration.
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
Trading Center