Diverse unconventional resource plays characterize Western US

Sept. 1, 2012
The most important Western US unconventional resource play not named Bakken is the Niobrara, which is found in various states, but most notably in the Denver-Julesburg basin in Colorado, Wyoming, and a small portion of western Nebraska.

The most important Western US unconventional resource play not named Bakken is the Niobrara, which is found in various states, but most notably in the Denver-Julesburg basin in Colorado, Wyoming, and a small portion of western Nebraska. It also occurs in several other locales in the West, most notably in Montana and a tiny sliver of northern New Mexico. It goes under the names Niobrara-Mowry, Niobrara-FM, Hilliard Baxter Mancos-Niobrara, and Pierre-Niobrara.

Check out the latest North American shale maps from PennWell at www.ogfj.com to see the precise locations of various basins and unconventional resource plays.

Another large Western shale play is the Monterey shale in southern and central California. It is located both onshore and offshore. Major players there include Occidental Petroleum and Venoco Inc.

Recent Niobrara activity

Denver-based Petroleum Development Corp. recently acquired Core Wattenberg assets that contain significant liquid-rich horizontal drilling opportunities from a private party for a purchase price of approximately $330.6 million.

The assets are located almost entirely in the Core Wattenberg Field of Weld and Adams Counties, Colo., and are approximately 94% operated. They include an estimated 35,000 net acres prospective for horizontal development of the Niobrara and Codell formations. The acquired leasehold is 100% held by production and has an average working interest of approximately 93% with an average net revenue interest of approximately 81%.

Current net production is approximately 2,800 barrels of oil equivalent per day from approximately 700 wells producing primarily from the Niobrara and Codell formations.

Ryder Scott, the company’s independent petroleum engineering consulting firm, estimates net proved reserves of 29.2 million barrels of oil equivalent using year-end 2011 SEC flat pricing and an effective date of April 1, 2012. The proved reserves are approximately 58% crude oil and natural gas liquids, and are approximately 54% proved developed.

The company has identified 180 gross proven plus probable Horizontal Niobrara drilling locations on the acquisition properties using current PDC spacing methodology of five gross (four net) wells per 640-acre section. It anticipates the acquired Horizontal Niobrara acreage will deliver, on a gross well basis, reserves of 300 to 500 thousand barrels of oil equivalent per well and generate an estimated $4 to $8 million of present value per well, discounted at 10% and further assuming current cost estimates of $4.2 million dollars per well and utilizing the January 31, 2012 NYMEX commodity price strip.

Houston-based Noble Energy has expanded its operations in Colorado and plans to invest $8 billion over the next five years, including $1.3 billion in 2012. The company is developing horizontal wells that stretch nearly two miles through the oil-rich Niobrara formation. Noble has grown its holdings to 880,000 acres and is experimenting with increasing the density of wells drilled from the same pad.

Noble is one of three major drillers in the Colorado portion of the Niobrara. The others are Anadarko Petroleum and EOG Resources.

Results from Anadarko’s first 11 horizontal Niobrara and Codell wells in the Wattenberg field of northeastern Colorado show strong initial production (IP) rates and could serve as a catalyst for potential joint venture agreements. Average IP was 827 boe/d with nearly 70% oil. IPs range from 555 to 1,505 boe/d. One outlier well produced 75% gas; others actually averaged an oil ratio of 77%, with a range of 66% to 86%.

Anadarko’s best well to date, the Dolph 27-1HZ, demonstrated an IP rate of more than 1,100 barrels of oil per day with more than 2.4 million cubic feet of natural gas per day, resulting in an estimated ultimate recovery (EUR) of better than 600,000 barrels of oil equivalent.

Monterey Shale

The Monterey shale play in California has major differences from other unconventional resource plays currently being developed through horizontal drilling and multi-stage hydraulic fracturing technology. An oil-prone play, it is significantly younger geologically than most shale plays currently being exploited. At shallower depths, it has very low permeability and needs stimulation in order to produce oil. Farther down, the shale becomes more brittle and contains natural fractures. Because the areas where it is found are tectonically active (i.e. earthquakes), there are numerous hydrocarbon traps.

Best practices in the Monterey shale do not call for multi-stage fracs, which are common in other shale plays. Instead, operators like Occidental Petroleum, the largest lease-holder in the Monterey shale, prefer large-volume hydrofluoric acid jobs. Oxy says that the multi-stage fracs don’t work in the Monterey shale and the company has concluded that acid jobs yield better results overall.

Venoco Inc., a Denver-based operator, has been operating in the offshore Monterey shale since 1997. More recently, Venoco has begun onshore operations in California’s San Joaquin basin.

Other Monterey shale players and potential players include Berry Petroleum, Canadian Natural Resources, Gasco Energy, Newfield Exploration, Plains Exploration & Production, Western Energy Production, and Zodiac Exploration.