The exploration and production industry has big plans for development of the Niobrara Shale in 2011, as capital flows to formations that produce a high proportion of oil and other liquid hydrocarbons.

IN PICTURES: 5 Tips To Reading The Balance Sheet

The Niobrara Shale is located in parts of Colorado and Wyoming, with current development centered in the Denver Julesburg basin. The formation made headlines in 2010 when EOG Resources (NYSE:EOG) reported a well here with production of 1,558 barrel of oil per day. The company has 320,000 net acres under lease across the play.

Noble Energy (NYSE:NBL) was also an early player in the Niobrara Shale and has assembled hundreds of thousands of acres across Colorado and Wyoming. The company's 2010 capital planned called for 30 wells into the play.

New Entrants
PDC Energy (Nasdaq:PETD) just reported a successful horizontal well into the Niobrara Shale on its acreage at the Krieger Prospect. The well came in with a twenty-four hour peak production rate of 625 barrels of oil equivalent (BOE) per day, and an average of 310 BOE per day during the first thirty days. (L1) The company has a total of 70,500 net acres in the Niobrara in Colorado and plans to drill 14 wells here in 2011. It has budgeted between $205 million and $240 million to develop the Niobrara and another play in Texas.

Another relatively new entrant into the Niobrara Shale is Carrizo Oil and Gas (Nasdaq:CRZO). The company reported its first horizontal completion into the Niobrara in early January 2011. The well was producing at a stable gross rate of 530 barrels of oil per day.

Carrizo Oil and Gas has 61,000 net acres prospective for the Niobrara, and has four wells either drilling or being completed. The company hasn't released its capital budget yet for 2011, but has adopted a strategy to increase development of formations that produce oil and liquids. The company spent $60 million in 2010 to acquire leasehold in the Niobrara and another oily play in Texas, and these two areas will no doubt receive substantial capital in 2011.

SM Energy (NYSE:SM) has acreage in the Silo Field in Wyoming that has exposure to the Niobrara Shale. The company drilled and completed one well on its properties and reported production of 350 barrels of oil per day. SM sees better opportunities in other oil plays in its portfolio of assets and has only allocated $25 million in capital in 2011 to develop the Niobrara. These other areas include the Bakken and Eagle Ford Shale.

The Bottom Line
Operators in the exploration and production industry love oil and natural gas liquids and the Niobrara Shale is one of the areas that will see a large amount of capital in 2011. (The drillers are just one aspect of the oil & gas industry, and by knowing some details of their role, you'll be better suited to make investment decisions. See Understanding Oil Industry Terminology.)

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

Related Articles
  1. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  2. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  3. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  4. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  5. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  6. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  9. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!