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.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

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.)

Wattenberg Field
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.)

Other Operators
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.

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

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

Related Articles
  1. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  2. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  5. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  10. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
RELATED FAQS
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center