Several independent exploration and production companies have started to disclose additional details on the development of the Niobrara Shale, an emerging unconventional resource basin located in areas of Wyoming and Colorado. This additional information will help investors understand which companies are best positioned here.

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What Is the Niobrara
The Niobrara Shale is a Cretaceous era formation deposited approximately 85 million years ago, in what is now the Rocky Mountain region of the Western United States. Much of the industry development of the Niobrara Shale has occurred in the Denver Julesburg Basin, with a secondary focus in the Powder River Basin.

The Players
Continental Resources (NYSE:CLR) has built up a position of 73,000 net acres in the play, with approximately 72% of this acreage in Wyoming. The company estimates that it has 228 locations assuming 320 acre spacing and potential net reserves of 53 million barrels of oil equivalent (BOE). Continental Resources is targeting the Niobrara B zone, which is one of three zones that operators are looking at. The Niobrara B zone is at a depth of approximately 6,000 to 9,000 feet and is 50 to 100 feet thick. The company plans to spud a Niobrara well in the fourth quarter of 2010.

Chesapeake Energy (NYSE:CHK) has 685,000 net acres prospective for several liquids heavy plays, including the Niobrara. The company is active in both the Denver Julesburg and Powder River Basin. Chesapeake Energy is operating four rigs and will move up to six in 2011 to explore and develop the Niobara and the Frontier and Codell plays, which are present on some of the same acreage. Some exploration and production companies have experienced problems in developing the Niobrara Shale. Rex Energy (Nasdaq:REXX) has properties that are prospective for the play, and recently drilled a well on its acreage in Wyoming. The company experienced problems during the completion of the well and said that it would take several weeks to ready the well site.

Other exploration and production companies are just starting up development here. Carrizo Oil & Gas (Nasdaq:CRZO) just finished drilling the vertical portion of the company's first Niobrara well, and has started the horizontal portion of the well. Carrizo Oil & Gas has 58,000 net acres in Colorado that are prospective for the play and plans to spud four wells starting this month. The company is modeling well costs of $3.5 million, and an estimated ultimate recovery (EUR) per well of between 200,000 and 500,000 BOE.

The Bottom Line
Exploration and production companies that are developing the Niobrara Shale are starting to disclose more information on the area, helping investors that want to invest in companies in the play. (To learn more, see our Oil & Gas Industry Primer.)

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