1 Oil & Gas King You Can't Afford To Overlook
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Noble Energy (NYSE: NBL), which is usually in the news for global exploration and drilling, has announced that it will focus on the DJ Basin in the next five years. The company will also use horizontal drilling as opposed to vertical drilling in and around northern Colorado. These developments will increase the company’s profitability in the long run, and going forward, we can expect accelerated profits each year. Noble will be one of the hottest energy stocks during the next five years because of its focus on the DJ Basin and its utilization of horizontal drilling techniques in that region.
What DJ Basin Holds for Noble
On December 6, Noble Energy announced that its projected compound annual growth rate over the next five years is 17%. This includes an average production of 540,000 barrels of oil equivalent per day in 2017. Of this, 175 MBoe/d is due to net horizontal production at the DJ Basin facility in the U.S. Noble Energy's top tier Niobrara field in the DJ Basin has already increased by 60% over last year's estimates. The company has identified 9,500 horizontal well locations, and it will increase its drilling to more than 500 locations per year by 2017.
Oil production will triple within a span of five years, according to a statement the company released to investors on December 6th. The region where Noble will drill (from Greater Wattenberg Area to Northern Colorado) is oil rich to the tune of 80%. While current production is about 90 MBoe/d, the company is expected to cross the 110 MBoe/d mark in 2013. Moreover, horizontal drilling will be conducted in Northern Colorado too, where oil concentration is higher than in the Wattenberg area.
Why Horizontal Drilling Is a Great Idea in DJ Basin
Horizontal drilling is particularly suited to the terrain in which Denver-Julesberg Basin is located. The rocky terrain is asymmetric and the crystalline formations are not conducive to vertical drilling. By using slanted drill pipes and horizontal drilling techniques, more areas can be reached and explored for shale gas without drilling all over the place. As the area is not near any international border, there will not be any oil resources related disputes as was seen during the Iraq-Kuwait war.
Moreover, several wellheads can be grouped together so that a smaller surface area is disturbed. Horizontal drilling is the safest way to drill when there is a city (like Denver) nearby. Noble Energy's focus on horizontal drilling in Colorado is much appreciated by industry watchers. The company has used horizontal drilling to ensure tighter well spacing and improved drilling completions. Moreover, multiple target zones ensure more oil is produced within a shorter time when compared with vertical drilling.
Noble’s Competitors in the DJ Basin
Noble's most formidable competitor in the DJ Basin is Anadarko Petroleum (NYSE: APC). Anadarko has approximately 1.5 billion barrels of oil in its reserves in the region. The company has also identified more than 2,000 drilling sites. However, these numbers are still lower than Noble's, and it continues to be the largest operator in the region. Bill Barrett (NYSE: BBG) entered the region in 2011 and has 7 MMBoe at a total of 216 gross producing wells. The company is not a threat to Noble. Bill Barrett has also sought to explore and drill horizontally in nearby Wyoming.
Marathon Oil (NYSE: MRO), the other global-level competitor began leasing its liquids-rich play in the DJ basin in 2010. Marathon Oil has almost 151,000 acres in the DJ Basin. Marathon Oil has not taken a proactive role in northern Colorado or southeast Wyoming yet. Another smaller player in the region is Recovery Energy (RECV). The company focuses its exploration and development strategies in and around DJ Basin. The company uses horizontal drilling and artificial stimulation technology to explore and drill.
Charles Davidson, Noble's chief executive, informed investors and media groups that the company’s development in the DJ Basin has been accelerated. The company plans to invest $1.7 billion in the region next year, of which much of the funds shall be used to hone existing infrastructure and build new facilities. The very fact that Noble is so bullish about DJ Basin in Colorado shows how profitable the coming years are going to be.
Long-term investors can look forward to increased profitability and payouts, as each year, oil and shale gas production will multiply. In addition, the U.S. is one of the most oil-company friendly nations in the world. It is easier to do business here than in war torn nations where employees and workers are at constant security-related risks. Going forward, Noble's discretionary cash flow will exceed $7 billion by 2017, and the company's profitability will be very high because of an energized and increased production rate at its U.S. facilities.
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