Niobrara Shale In 2011

By Eric Fox | January 21, 2011 AAA

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!

comments powered by Disqus
Related Analysis
  1. How Oil Is Tanking the Market - Ahead of Wall Street
    Stock Analysis

    How Oil Is Tanking the Market - Ahead of Wall Street

  2. Is Canada’s Lagging Energy Sector A Good Bet?
    Stock Analysis

    Is Canada’s Lagging Energy Sector A Good Bet?

  3. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  4. Still More Gains Ahead For Semiconductor Makers
    Stock Analysis

    Still More Gains Ahead For Semiconductor Makers

  5. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

Trading Center