Companies evaluating Niobrara's potential

Aug. 5, 2013
The Niobrara formation, sometimes called the Niobrara Chalk, has emerged as the second-hottest liquids-rich play in the Rockies after the Bakken shale.

The Niobrara formation, sometimes called the Niobrara Chalk, has emerged as the second-hottest liquids-rich play in the Rockies after the Bakken shale. It is situated mainly in northeastern Colorado and parts of adjacent Wyoming, Nebraska, and Kansas, although parts of it are found in western Colorado and north to the Montana-Canada border. Primarily an oil play, it is being drilled mainly in the Denver-Julesburg Basin, which has long been a major oil and gas province.

An emerging play, the Niobrara is in its early stages and companies have been busy leasing land for future drilling. It has been compared by some to the Bakken shale formation farther to the north.

Although the Niobrara is not a shale play, operators are using similar techniques (horizontal drilling, multi-stage hydraulic fracturing, etc.) as are used in shale resources to optimize production in the formation.

Most of the Niobrara can be found in Colorado, Wyoming, and western Nebraska. However, portions of it extend as far south as the Raton Basin of northern New Mexico and as far north as north-central Montana.

Companies large and small have been flocking to the Niobrara, although Houston-based Noble Energy Corp. got in early and is the largest producer.

Global information company IHS points out that while there is growing optimism about the potential offered by the Rockies oil play, the Niobrara's true potential will take time to evaluate.

Crestwood completes Niobrara JV deal

In July, Crestwood Midstream Partners LP and the owner of its general partner, Inergy LP announced that Crestwood's subsidiary, Crestwood Niobrara LLC, had completed the acquisition of a 50% interest in Jackalope Gas Gathering Services LLC from RKI Exploration & Production LLC for a total cash consideration of $107.5 million. The other 50% interest in Jackalope is owned by Access Midstream Partners LP, which will continue to provide field operations and construction management for Jackalope. Crestwood will assume the commercial development role for the joint venture.

The Jackalope gathering and processing system is located in Converse County, Wyoming, in the emerging Powder River Basin Niobrara Shale play, and is currently composed of approximately 100 miles of gathering pipelines and 9,400 horsepower of compression equipment. The Jackalope System is being developed to gather and process rich natural gas produced from a 311,000-acre area of dedication from Chesapeake Energy Corp. and RKI, which have collectively accumulated the largest acreage block in the Powder River Basin Niobrara Shale play, spanning over 750,000 acres. The existing assets and future development are supported by a 20-year gathering and processing agreement with Chesapeake and RKI under which Jackalope receives cost-of-service based fees with annual redeterminations that provide for an attractive rate of return on invested capital.

WPX makes gas discovery in Niobrara

Tulsa-based WPX Energy Inc. has made a Niobrara gas discovery in western Colorado has the potential to more than double the company's current 18 trillion cubic feet equivalent of 3P reserves. The discovery well produced an initial high of 16 million cubic feet per day at a flowing pressure of 7,300 pounds per square inch. The well has since been choked back substantially to optimize reservoir performance and ensure maximum resource recovery. Over the past 30 days, it produced at an average rate of 12 million cubic feet per day.

WPX Energy holds lease rights to approximately 180,000 net acres of the Niobrara/Mancos shale play that underlies the company's leasehold position in the Piceance Basin. Substantial gathering and processing infrastructure is in place to accommodate additional gas volumes from the area, as is take-away capacity from the basin. Gas produced from the Niobrara and Mancos shales can be processed without modification to existing gas treatment facilities.

The Niobrara and Mancos shales are generally located at depths of 10,000 to 13,000 feet. The Williams Fork is a shallower formation, generally located at depths of 6,000 to 9,000 feet. In the Piceance Basin, WPX holds an average working interest of 66% in the Niobrara and Mancos shales.