Noble Investment Offers Royal Returns
An investment in the Niobrara could help push production up significantly for Noble Energy . Noble is devoting $10 billion to the play over the next five years, with $1.7 billion being spent in 2013.
Noble is going to spend 43% of its capital expenditure budget on the Niobrara in 2013 and plans on using the play to meet its annual 17% production growth through 2017. If Noble can reach its target it will be producing 540,000 barrels of oil equivalent by 2017. This is over double its current production of 260,000 boe/d.
Excitement over the Niobrara
In order to achieve its aggressive growth ambitions, Noble's investment in the Niobrara needs to pan out. According to its SEC filling it seems like it already has.
In the Denver-Julesburg Basin, which houses the Niobrara play, Noble sees 9,500 horizontal well locations it can drill. By 2017 Noble wants to be drilling 500 wells a year, which would increase production by 20% a year, resulting in a tripling of production.
For 2013 Noble plans on finishing 300 wells and bumping up production from 90,000 boe/d in 2012 to 110,000 boe/d by the end of 2013. A tripling of 2012 production levels due to more wells coming online would push up production by 180,000 boe/d and would allow Noble to hit its ambitious growth target.
Noble's investment in the Niobrara is going to pay off in a big pay and will allow for further investment in the play and for Noble to invest in other plays as well. Noble pays out a .8% dividend and is worth investing in due to high growth potential and a decent payout while investors watch oil production explode.
Other companies are exploring the area as well. In the Wattenburg play, which is right next to the Niobrara, Anadarko Petroleum has high expectations.
High returns and lots of places to drill
Anadarko is seeing a 100% or higher return on revenue at current prices. Margins as high as these help drive cash flow growth, which enables more money to be invested back into growing production.
That cash is going to enable Anadarko to exploit its 4,000 possible drilling locations in the play and drive up production. With one to one and a half billion barrels of oil equivalent in reserves, Anadarko's wells will have plenty of oil to pump out. Sale volumes were 48,000 boe/d in 2008, and by the end of 2013 it has guided for 120,000 boe/d.
Anadarko has many other projects going on around the world, but its Wattenburg expansion is paying off nicely and will keep increasing production for years to come.
Anadarko also has been actively reducing its debt, which is a very bullish sign. In 2011 Anadarko had a net debt to capital ratio of 41%, but by the second quarter of 2013 that was reduced to 29%. Less debt means Anadarko has more money to spend on pushing up production.
Another booming shale play in America is the Permian Basin in Texas, which offers great growth potential for Devon Energy .
Since 2012 Devon has found 1,500 new drilling locations in the Permian Basin, which provides Devon with a longer growth runway. Overall, Devon has 4,000 locations to drill for more oil in the Permian Basin, which will provide Devon years of production growth.
Devon plans on drilling 300 wells in 2013 with 29 rigs operating in the area. Devon is betting big on the Permian with 1.3 million net acres in the area. Devon has been able to reduce well completion times to 11 days in the Wolfcamp part of the Permian, which saves Devon 10% on well completions.
Devon has been able to reduce the time from spud to rig release in the Wolfcamp and other areas by 60%. Decreasing the time it takes to finish a well, coupled with lower costs, enables an E&P player like Devon to bring more wells online and further push up production.
Devon has big plans for the Permian, especially since it potentially holds 2.8 billion barrels of oil equivalent. The Permian is going to pumping out big profits for years to come.
Investments in shale plays while utilizing more efficient methods of production can lead to big gains in both production and the bottom line. Noble's investment in the Niobrara play is going to pay out royal dividends for years to come and is why Noble is worth investors' consideration.
The Niobrara is going to benefit more than just one company: Anadarko also has big plans for the area. The company has been both increasing production and building out infrastructure in the area for the long haul.
Devon is a major land holder in the Permian and plans on extracting as much of the 2.8 billion barrels of oil equivalent it can from the play while reducing the time and cost of drilling a well.
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The article Noble Investment Offers Royal Returns originally appeared on Fool.com.Callum Turcan has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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