Noble Energy (NYSE:NBL) plans to spend $24 billion in capital on its oil and gas portfolio over the next five years, with the goal of increasing production and reserves at double-digit compound annual rates, through 2016. This new growth target is well above the level established by the company in 2010.
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2016 Goals
Noble Energy estimates that the company's production will increase at a 17% compound annual growth rate (CAGR) over the next five years, reaching 490,000 barrels of oil equivalent (BOE) per day by 2016. The company is looking for proved reserves to grow at an even faster CAGR of 20% from 2010 to 2016, and reach 2.7 billion BOE by the same year. On a debt adjusted per share basis, Noble Energy expects production to grow at a 15% CAGR through 2016, up from the 10% rate given out last year. (For more on CAGR, see Compound Annual Growth Rate: What You Should Know.)

Noble Energy is not relying on any one part of its portfolio and expects all five of its core areas to contribute to this growth going forward. These areas include the Denver Julesburg Basin, Marcellus Shale, Deepwater Gulf of Mexico, Eastern Mediterranean and West Africa.

Capital Spending
These ambitious growth targets will require a large investment by Noble Energy, and the company will ramp up capital spending from $3 billion in 2011, to $5 billion in 2016. The cost of the five year growth plan will total $24 billion, up from the previous level of $13 billion.

Denver Julesburg Basin
Noble Energy has 840,000 net acres under lease in the Denver Julesburg basin and is currently producing 67,000 BOE per day from this area. The company is confident that it can increase production to 134,000 BOE per day by 2016. Most of this growth will come from the Niobrara play, where production is expected to increase fivefold, from 14,000 to 70,000 BOE per day, in five years.

Another company active in the Niobrara is Whiting Petroleum (NYSE:WLL), which has approximately 76,000 net acres at the Redtail prospect in Colorado. The company budgeted $42 million here in 2011 and plans to drill 14 wells.

Marcellus Shale
Noble Energy is in a joint venture with CONSOL Energy (NYSE:CNX) in the Marcellus Shale and has current net production of approximately 70 million cubic feet of natural gas equivalents per day. Noble Energy expects this area to have the highest growth rate over the next five years and sees net production at 600 million cubic feet of natural gas equivalents per day, by 2016.

Noble Energy is arriving late to the Marcellus Shale and many operators have current production close to what the company is projecting in five years. Cabot Oil and Gas (NYSE:COG) recently achieved production of 517 million cubic feet of natural gas equivalents per day during Oct. 2011.

Range Resources (NYSE:RRC) expects to exit 2011 with net production from the Marcellus Shale of 400 million cubic feet of natural gas equivalents per day.

Eastern Mediterranean
Noble Energy is active in the Eastern Mediterranean, where the company is involved in various areas offshore Israel and Cyprus. Noble Energy has allocated $6.4 billion in capital for its international portfolio from 2012 to 2016, with just over 50% dedicated to the Eastern Mediterranean.

In Israel, the company is producing from the Mari-B field and expects the nearby Noa Field to start up in the middle of 2012. Noble Energy is also appraising the Tamar prospect and raised its gross resource estimate here to 9 Tcf, compared to the previous estimate of 8.4 Tcf. The company expects first sales from Tamar in mid 2013.

Another major success for Noble Energy offshore Israel is the Leviathan prospect, which was discovered in 2010. The company is drilling its third appraisal well here and estimates that Leviathan might have as much as 16 Tcf of gross resources.

Noble Energy is currently drilling an exploratory well offshore Cyprus. The company said that the Cyprus A well has an estimated gross mean resource range between 3 and 9 Tcf, along with a 60% probability of success.

The Bottom Line
Noble has proven that it can succeed in the onshore development of emerging unconventional resource plays, as well as higher risk offshore oil and gas exploration. These accomplishments should give investors more confidence that the company's growth goals are achievable. (For related reading, see Peak Oil: What To Do When The Wells Run Dry.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Tickers in this Article: NBL, CNX, COG, RRC

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