Still in early stages of development, Niobrara may yield huge oil potential
The Niobrara formation is a commercial hydrocarbon reservoir located in Colorado and Wyoming (and small parts of Nebraska and Kansas). Natural gas has long been produced in the Denver-Julesburg Basin in eastern Colorado, and new fracturing methods have enabled the production of oil from the Niobrara in recent years.
Because of its huge oil potential, the Niobrara has become a Mecca for production companies. OGFJ has identified approximately 50 operators working in the Niobrara. Among the larger players are Noble Energy, EOG Resources, Apache Corp., Anadarko Petroleum, Carrizo Oil & Gas, Delta Petroleum, Chesapeake Energy, Bill Barrett Corp., Chevron, El Paso Corp., Encana, Samson Oil & Gas, MDU Resources, New Frontier Energy, PDC Energy, PetroQuest Energy, Quicksilver Resources, Questar Corp., Rex Energy, Continental Resources, SM Energy, Whiting Petroleum, and Yates Petroleum.
While there are plenty of big companies operating in the Niobrara, a recent report from IHS noted that their research indicated that there are more than 550,000 acres in the Niobrara that belong to small private companies – acreage that could be available as potential acquisition targets. Sven Del Pozzo, a senior principal energy equity analyst and author of the IHS study, said, "We believe private E&Ps may consider selling their Niobrara assets in the current heated market."
The 'Jake' well
Last year, there was considerable talk about EOG Resources' "Jake" well, a horizontal Niobrara discovery in Colorado's Weld County, in the northern D-J Basin. The well flowed an average 1,750 barrels of oil and 360,000 cubic feet of gas per day for its first eight days on production. The following month, it produced an average of 680 barrels a day for 30 days. In all, the well reportedly produced more than 50,000 barrels of oil in the first 90 days. That stoked a great deal of interest in the play, and companies such as EOG are betting big on the Niobrara. EOG alone has leased over 400,000 acres. At this point, reserves estimates are little better than a guess until more wells are drilled.
Photo courtesy of Chesapeake Energy
The Niobrara extends into Wyoming, and active exploration is also taking place in the southern Powder River Basin in Wyoming. The Niobrara has plenty of prospective drilling sites since the shale occurs across a vast, tectonically active area. It can be anywhere from 150 to 1,500 feet thick, depending upon locale. Natural fracturing can be extensive, and the thermal maturity of the Niobrara varies a great deal, so it can yield either oil or gas or both, depending on local conditions.
And in recent news from the Niobrara:
- Marubeni Corp. has paid Houston-based Marathon Oil $270 million for about a third of its assets in the Niobrara. The Japanese trading company will receive a 30% working interest in about 180,000 net acres in the D-J Basin of southeastern Wyoming and northern Colorado. The transaction values the properties at about $5,000 per acre.
- In July, Australia-based Samson Oil & Gas Ltd. said it is working with Chesapeake Energy in Goshen County, Wyo. They are drilling two wells in the Codell sandstone directly underneath the Niobrara formation, to depths of 11,447 feet and 11,272 feet, respectively. The completion in the Codell is expected to also fracture the Niobrara formation in both wells. One analyst noted that if this works in the northern D-J Basin, it will have positive implications for such plays in this area as GMX, Bill Barrett Corp., and Recovery Energy, as well as Chesapeake and Samson.
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