FOCUS: UNCONVENTIONAL OIL & GAS — Noble Energy sees northeastern Nevada as potential unconventional oil play

Dec. 3, 2012
Noble Energy Inc. is contemplating a tight oil play in northeastern Nevada where there has been little drilling by industry, executives told analysts in a briefing to outline the company's new venture exploration assets.

Noble Energy Inc. is contemplating a tight oil play in northeastern Nevada where there has been little drilling by industry, executives told analysts in a briefing to outline the company's new venture exploration assets.

Nevada is one of three frontier areas for Noble. The other frontier areas, involving conventional prospects, are deep oil offshore Israel and offshore Falkland Islands.

The mission of Noble's new ventures process is to identify opportunities with scale and running room that could potentially become future core areas and legacy assets for the company.

"We do not expect all of them to work," Chuck Davidson, Noble's chief executive officer, told analysts during an Oct. 11 webcast. "That is always true with exploration, but with the prospects that we have highlighted today, it would just take one to be successful to have a very meaningful impact on our company."

Assuming success in Nevada, Noble plans to invest $130 million during 4 years on land, seismic, and the first eight wells. The independent has acquired leases on 350,000 acres in what it describes as a new unconventional oil play.

One of Noble's slides depicts a Paleozoic trap play overlain by a Tertiary resource play and an even shallower rollover anticline play.

Noble has 100% working interest on that acreage, of which 66% is private land and 34% is federal land.

Previously, industry drilled seven wells on what is now Noble acreage. Davidson said those wells involved "30-year-old technology." Unlike other US unconventional plays where many companies are involved, only a few oil companies are working in Nevada.

Exploration efforts so far in Nevada have focused primarily on conventional plays. Older wells recovered oil from what Noble calls its "interval of interest," adding that previous activity predated the unconventional technology revolution.

Davidson said the company continues acquiring leases, and that more details will be revealed as more information becomes available on the Elko basin in the Antler thrust system where large Tertiary lakes created oil source rocks.

Noble is shooting 3D seismic surveys that are expected to be completed by yearend. The US Bureau of Land Management, Elko District, earlier this year authorized the seismic surveys on public land in the Tabor Flats area near Wells, Nev.

If oil and gas are discovered, Noble would have to submit an application for a permit to drill to the Elko District BLM office.

BLM documents described the seismic project as in Elko County about 4 miles northwest of Wells and 40 miles northeast of Elko on the north side of US Interstate 80. The seismic project encompasses 39,455 acres in Elko County, Nev., of which BLM administers 20,622 acres and handles the subsurface mineral rights for another 2,603 acres of private surface land.

Susan Cunningham, vice-president of Noble exploration, told analysts that the acreage initially will be tested using vertical wells. Horizontal drilling could follow depending upon test results. She said the depth range is 6,000-12,000 ft with a gross thickness of 1,500-2,000 ft.

Noble drilled a 1,000-ft shallow core well with 99% recovery. Cunningham describes the area as a lacustrine deposition similar to the Uinta basin in Utah and Railroad Valley, Nye County, Nev. She said interbedded lithologies include shales having high total organic carbon.

Assuming the play works out as anticipated, first production in Nevada is likely in late 2014, Cunningham said, adding she anticipates oil of 30-40° gravity based upon what Noble has learned so far. First production test results could be available in 2013.

"Coring some of these initial wells will be key to the program," Davidson said. "It will take a flow of information before we really understand it."

Noble estimates the play has a 55% chance of success based on results from old wells, some old 2D seismic information that was located from the past, and upon Noble's core samples from shallow wells. The company estimates its Nevada acreage could hold up to 1.3 billion boe.

"It was just good detective work," Cunningham said of how Noble came to select Nevada as a new venture exploration area. She expects Noble wells will go deeper than the previous wells drilled in that area.