Noble Energy (NYSE:NBL) plans to aggressively develop properties in the Denver Julesburg Basin, to help meet the company's goal of growing production at a 17% compound annual rate through 2016.
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Denver Julesburg Basin
Noble Energy has a total of 840,000 net acres under lease, in the Denver Julesburg Basin, which extends, mostly, into parts of Colorado and Wyoming. The company is focused on the Niobrara formation, here, and is looking to increase production, from this play, to 70,000 barrels of oil equivalent (BOE) per day in 2016, up from current levels of 14,000 BOE per day.
Noble Energy will allocate $8 billion in capital to develop the Denver Julesburg Basin from 2012 to 2016, with more than 70% of this capital used for horizontal development.
If the company is successful here, production from the basin would double, and reach 134,000 BOE per day by 2016, with 66% of this production composed of crude oil and natural gas liquids. (Learn more in Understanding Oil Industry Terminology.)
Noble Energy is concentrating on the Wattenberg Field, and is engaged in a horizontal development program on its 400,000 net acre position here. The company has 58 producing horizontal wells in this field, and reported liquid contents ranging from 40 to 90%.
Noble Energy has improved, operationally, since entering this play, and has increased well performance sharply. The company's first eight wells had an average estimated ultimate recovery (EUR) of 270,000 BOE, compared to an average EUR of 355,000 BOE for the last 18 wells completed in the Niobrara. Noble Energy has achieved this productivity gain through longer laterals, and additional fracturing stages. (For additional reading, see Oil And Gas Industry Primer.)
Noble Energy is planning to double its operated rig count in the Wattenberg Field within two years, and estimates that it has 3,900 future drilling locations on its acreage, in this area. The company estimates that the Niobrara has potential net risked resources of 600 million BOE.
Noble Energy also has 440,000 net acres exposed to the Niobrara, outside of the Wattenberg Field, and is at the initial stages of exploring this acreage. The company plans to operate one rig outside the Wattenberg Field, and will drill two wells during the fourth quarter of 2011. (For related reading, see A Guide To Investing In Oil Markets.)
EOG Resources (NYSE:EOG) is generally credited with kicking off the horizontal well development of the Niobrara. The company has 220,000 net acres under lease, and estimates that it has proved up approximately 76% of its position through horizontal development.
Another company, that is involved with the Niobrara, is Anadarko Petroleum (NYSE:APC), which recently reported 11 successful horizontal wells in this play. The company estimates that its properties hold between 500 million and 1.5 billion BOE of net resources.
Carrizo Oil and Gas (Nasdaq:CRZO) is at the beginning of its development of the Niobrara, and has approximately 61,658 net acres under lease in Colorado. The company recently reported five successful horizontal wells, here, and plans to spend $35 million in the Niobrara in 2012.
Rex Energy (Nasdaq:REXX) has not been as successful as others in the Niobrara, and reported two non-commercial wells, here, in October 2011. The company is now considering strategic alternatives for its position here. (For additional reading, see What Determines Oil Prices?)
The Bottom Line
Noble Energy has a solid plan to generate growth off the company's assets in the Niobrara over the next five years, and appears confident that it can succeed here. However, other operators have found the play more difficult to develop, and investors might want to exercise caution before crediting full value to these properties.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.