The Niobrara of the Denver-Julesburg Basin (DJ Basin) began receiving recognition on the announcement that Samson was selling a large portion of its acreage to Chesapeake. The Niobrara formation can be very different from one location to another. It has been targeted in Colorado, Wyoming and Nebraska, and there are multiple pay zones, both vertical and horizontal. The bullish sentiment surrounding the DJ Basin has to do with these multiple pay zones and its location on a resistive anomaly.
ConocoPhillips purchased 46,000 net acres in the Niobrara from Lario Oil & Gas in July 2011.
Anadarko has 350,000 net acres in its core Wattenburg Field acreage. These wells are 60% oil and 70% total liquids. EURs are 300 to 600 MBOE and Anadarko has 170 horizontal wells planned in 2012.
EOG Resources has 300,000 net acres in Colorado just south of Silo field. It has three rigs operating and 10 completed wells. It has 59 permitted wells and four wells in 2010 with IP rates of between 700 and 1,100 BO/D. In 2011, two of its wells were restricted to 700 and 800 BO/D. EOG is a very good operator in this area.
Devon Energy has 300,000 net acres in the Niobrara, but sold one-third of it to Sinopec (along with acreage in four other prospective plays) for $2.2 billion. Part of Devon's acreage is in Goshen County to the west of Chesapeake's acreage.
Marathon has 144,000 net acres in the DJ Basin. It has two rigs running and has planned 17 to 24 net wells in 2012. Of its six producing wells, IP rates have been as high as 500 BO/D. Marathon has acreage in Goshen, Laramie and Weld Counties of Wyoming and Colorado.
Noble has 880,000 net acres in the DJ Basin. Its acreage is in and around both the Silo and Wattenberg fields. Its Wattenberg holdings total 410,000 net acres. Well results have been very good in Wattenberg, with its high GOR area producing 30-day IP rates of 750 BOE/D with 40% being liquids. The further extended from the core, we see 30-day IP rates drop to 480 BOE/D with 75% liquids. The average well has an EUR of 310 MBOE. Noble is currently down spacing this area between an 80 and 40 acre spacing. The company believes it can use long laterals (9,000 feet), pad drilling and 39 stage to improve EURs to 750 MBOE at a cost of $7 million to $8 million per well. To the northwest of Wattenberg Field, Noble has increased its acreage to 230,000 net acres. These wells are performing as well as the Wattenberg extension area producing 30-day IP rates of 550 BOE/D with liquids content of 85%.
Continental has 90,293 net acres in the DJ Basin. The bulk of its acreage is to the northeast of Wattenberg Field. Its most recent well had an IP rate of 739 BOE/D.
Chesapeake has approximately 24,000 net acres purchased from Samson in Goshen County. The company has drilled nine wells and has four completed wells here.
Encana has 48,000 net acres in the DJ Basin. The Niobrara is at an estimated depth of 7,000 to 8,000 feet. The company has completed five horizontal wells in 2011, and with plans to drill 18 wells in 2012. Currently, there are two wells on production with another nine being completed or waiting on completions in this area. IP rates have run from 260 BO/D to 540 BO/D. NGLs have added an additional 100 to 200 barrels per day.
Whiting has 73,611 net acres in the DJ Basin. This acreage is to the northeast of Wattenberg Field and to the southeast of the Silo Field. It estimates well costs to be $4 million to $5.5 million. It will drill eight wells here in 2012.
QEP Resources has 84,000 net acres just south of Silo Field.
SM Energy has 25,000 net acres in north Silo Field. It did complete one well in the area that had an IP rate of 800 BO/D.
Fidelity Oil & Gas has 65,000 net acres in the Niobrara. It currently has one rig running in this play. Of its $400 million budget, Fidelity will spend $25 million on developing this acreage. It expects EURs of 200 to 300 MBO. It had a disappointing first well, but is currently testing a second.
Bill Barrett Corp has 75,600 net acres in the DJ Basin. It plans to drill 36 gross horizontal Niobrara wells this year.
has 58,773 net acres in the Niobrara. It will spend $43 million on developing this area in 2012. expects EURs of 250 MBOE, and has a well spacing of 160 acres with no interference. Its first five wells have tested at 650 to 725 BO/D. Wells are producing 80% liquids at a cost of $3.6 million. Well designs have had laterals of 5,000 feet with 15 frac stages. Jake #2-01H had an IP rate of 1,558 BO/D and had a 90-day IP rate of 555 BO/D.
Bonanza Creek has 29,292 net acres in Wattenberg Field and it believes this area will support an 80 acre spacing. In 2012, it will run a four rig program in the Wattenberg: two rigs will drill 24 horizontal Niobrara wells and two vertical rigs will drill 92 vertical wells. Bonanza will use 68% of its $250 million 2012 capex to work the Wattenberg Field. It has completed four wells with an average IP rate of 788 BOE/D. Its 30-day rate was 458 BOE/D. The company is averaging a lateral of 3,985 feet with a 15 stage frac and a 72% cut of oil with respect to these four wells. Greater Wattenberg horizontal Niobrara economics are:
- 30-day IP rate of 469 BOE/D
- EUR of 312 MBOE
- 65% oil
- Well cost of $4 million per well
- 30-day IP rate of 65 BOE/D
- EUR of 78 MBOE
- Well cost of $985 million ($755 million initially and re-frac cost of $230 million)
- 30-day IP rate of 304 BOE/D
- EURs of 211 MBOE
- 320 acre spacing (could see additional)
- 90% oil
- Well cost of $5.1 million
PDC Energy has 74,100 net acres in the Wattenberg area. EURs are 300 to 500 MBOE, and 30-day IP rates are 450 to 800 BOE/D. Well costs average $4.2 million. In 2011, PDC drilled 17 horizontal Niobrara wells with an average lateral of 4,000 feet and 16 stages, which produced 70 to 80% liquids.
PetroQuest Energy has acreage south and southeast of Silo Field. It has one rig running and two good well results (831 and 1,605 B/D).
Samson has 16,391 net acres in Goshen County. Its horizontal Niobrara has had IP rates of 200 BO/D. It has used laterals of 4,500 feet with 15 stage completions. The company also has conventional Permian targets. Niobrara horizontals have EURs of .3 MMBO and Permian EURs are .2MMBO.
Crimson Exploration has 10,000 net acres in the DJ Basin. Well costs are $4.5 million to $5.5 million with EURs of 300 to 500 MBOE with 78% of well production being oil.
Emerald has a participation agreement with Slawson for a 50% working interest in its 21,000 net acres in the DJ Basin.
GMX Resources has 40,082 net acres in the DJ Basin. This acreage is to the north of Silo Field.
Double Eagle (Nasdaq:DBLE) has 6,674 acres in the Wyoming DJ Basin. This acreage is in two parts: The first is to the northeast of Marathon's acreage and the second leasehold is to the east of Bill Barrett's acreage.
Recovery Energy (Nasdaq:RECV) has 115,000 net acres prospective for the Niobrara. Well costs will run from $3 million to $5 million per well. Its acreage is around Silo Field, with the majority on the east side on the Wyoming/Nebraska state line. Recovery has planned to drill 12 to 16 vertical wells in 2012. While running this program, it is looking for a JV to help finance development of the Niobrara.
Sundance Energy has 11,650 net acres in the DJ Basin. Niobrara well costs will run $4 million to $6 million, with spacing of 120 acres while spacing in the Wattenberg is 20 acres. EURs in the Niobrara are from 225 to 358 MBOE, and Wattenberg 40 to 70 MBOE.
It is easy to get confused when identifying a resource play, due to different names being used to describe an area. The Niobrara can be found in several areas throughout the U.S., just like the Bakken is also found in the Alberta Basin. Because of this, care should be taken with respect to where the Niobrara is. Due to its high liquids content and lower well costs, the DJ Basin is where this article will focus. Looking at the map below, we see the areas that are getting attention by several oil producers.
Figure 15: This map displays areas receiving attention from oil and gas producers.
Northeast of Cheyenne, Wyoming is Silo Field. This seems to be the northern most area being targeted for oil and natural gas. There has not been as many wells drilled here, but it wasn't until January 2011 that there was much to be excited about. After Samson sold a large number of acres to Chesapeake (and even for a while before that), a land grab started in this northern portion of the play. The results have not been great here but many of the operators are just getting started, and when these companies get comfortable the IP rates should begin to rise.
At the Colorado/Wyoming border, EOG Resources has had some very good well completions. Southeast to this area is another hot spot. This area has performed better than Wattenberg Field and may be the best area in the play. Wattenberg Field has been the target of conventional oil wells for a very long time, and has also had very good results from its horizontal Niobrara completions.
There are a lot of good reasons to be excited about the DJ Basin. The horizontal Niobrara is still in its early stages with short laterals (4,500 feet and 16 stages) producing EURs of 400 MBOE at a well cost of approximately $4 million. Some producers have down spaced these horizontal wells to 120 acres. Noble recently completed a lateral of 9,000 feet with a 39 stage frac for $8 million. The results indicate longer laterals will be more economic than shorter ones. Some areas also have conventional targets that provide additional upside for well costs around $1 million. Conventional wells have had spacing as tight as 20 acres.
There has been some recent bearish sentiment towards the Niobrara of late. Some of this has to do with poor completions and problems with companies like Samson and Chesapeake. This has placed some downward pressure on some of these names although significant improvements to results have been seen around Wattenberg Field. If there was a reason to be bearish on the Niobrara, it would have to do with the unevenness of the play. Production can change significantly from one well to another, so there is some risk. The percentage of oil produced also can change significantly, from as low as 40% to as high as 85%.
Guide To Oil And Gas Plays In North America: Marcellus
InvestingThe Permian Basin will remain an active area for oil and gas exploration and development in 2012. Investors should examine the many small capitalization players active in this basin.
InvestingThe Energy Information Administration(EIA) recently released the 2012 Annual Energy Outlook and predicts significant growth in oil production in the United States over the next few decades.
InvestingProfit gusher: As GE and Baker Hughes form a new giant, the price of oil leases in West Texas is hitting record levels. Is a new oil boom underway?
InsightsThe Oklahoma energy company reached a $450 million deal for acreage and related assets in northern Louisiana.
InvestingDevon Energy developed the company's core properties in the Barnett Shale in the second quarter of 2011, while also setting up for growth.
InvestingThis will be an interesting week for investors as the earning season starts with two large oil service companies.
InvestingPetroleum Development Corp is set to develop its Marcellus Shale acreage in 2010.