Could This Oil Field Be the Next Bakken?

insidermonkey.com ^ | October 17, 2013 at 1:35 pm | fool.com

[ckilmer]

Could This Oil Field Be the Next Bakken?

Business is rockin' in the Bakken. Within the next year output is expected to surpass one million barrels per day, up from almost nothing ten years ago. Such growth has been a boon for investors as evident in the share price performance of companies like Continental Resources, Inc. (NYSE:CLR), Kodiak Oil & Gas Corp (USA) (NYSE:KOG), and Oasis Petroleum Inc. (NYSE:OAS).

But the hunt is now on for the next great American shale play. And one formation in particular just might have the potential to rival the Bakken: the Colorado Niobrara.

A spotty track record Readers may be surprised to hear Colorado listed as the next big oil play for a couple of reasons. First, the Centennial State is better known for cold beers and snow-capped mountains than drilling rigs and oil production. Second, the Niobrara has been a capital sink hole.

Source: Energy Information Administration

At EOG Resources Inc (NYSE:EOG) the Niobrara is far down on the company's priority list. President and CEO William Thomas complained about 'inconsistent results' and warned other operators to expect the same problem. Remember these guys are worth listening to as they were among the first to start drilling in the now booming Bakken and the Texas Eagle Ford fields.

Ultra Petroleum Corp. (NYSE:UPL) also came up dry in the Niobrara. Drilling results ultimately revealed that the play was not commercial and the company abandoned its exploration efforts to refocus on natural gas.

But recent drilling results suggest the play might have potential after all. It turns out the Niobrara is spotty. The difference between a successful well and a dry hole all comes down to location, and the key to investment success in the play will come down to finding the operators with the best acreage.

Today a lot of smart money is starting to move into the region. Noble Energy, Inc. (NYSE:NBL) CEO Charles Davidson describes the Niobrara as a 'top-tier oil play,' and his company plans to invest $1.7 billion in the formation this year. Results have been so good management has accelerated its development program, aiming to triple production within five years.

Energy giant Anadarko Petroleum Corporation (NYSE:APC), which owns about 350,000 acres in the region with as much as 1.5 billion barrels of recoverable reserves, is also betting big on the play. The company has budgeted $1.5 billion to develope its acreage with plans to drill 150 wells this year. Even for a big company like Anadarko, those are substantial figures.

The biggest play since the Bakken All of this activity has sparked a boom in the Colorado energy industry. According to numbers provided by the Colorado Oil and Gas Conservation, state oil production hit a 50-year high of 48 million barrels in 2012, up 26% year over year. Early reserve estimates suggest that the play could hold an estimated 3.6 billion barrels of recoverable oil equivalent -- roughly on par with its Bakken rival. Drilling economics also compare favorably to the Bakken. According to figures provided by Noble, the average well in the Niobrara costs in the neighborhood of $4 million to $5 million to complete. That compares to about $8 million to $9 million in North Dakota. There's also sufficient transportation infrastructure to handle expansion in Colorado. That's something that can't be said further north.

All of this means operators with the best acreage are producing great returns for investors. Whiting Petroleum Corp (NYSE:WLL) CEO James Volker claims that the company is generating a 400% return on every well it drills in the Niobrara. The company has highlighted the play as its most important expansion opportunity outside of the Bakken.

Foolish bottom line Unlike the Bakken or the Eagle Ford, the Niobrara's spotty track record means that it's still a long way from joining the ranks of America's top shale plays. But new drilling results hold promise. This is definitely a formation investors should keep their eyes on.

[X-spurt]

Once we reach our “oil independence” and figure out the best way to use NG or electrical for crusin, the ChiComs and socialist EU can have all the fun fighting over and harvesting the Empty Quarter.

[ckilmer]

Nuclear power plants generate/produce electricity. What fuel do they use to operate?
..........
Thorium will likely be the big breaking story over the next decade. The US had working reactors during the 60’s but abandoned them in the early 70’s for dumb reasons. lftr Thorium reactors are not only safe but they also have virtually no radiation. They can be used to burn uranium wastes. Portable low cost versions can be made in factory and shipped to locations where there’re needed. Best of all they can produce electricity for 1/4-1/10 of current cheapest coal costs.
for more info
google lftr thorium reactors

[ckilmer]

Oil in Colorado? Seems I read a story about that once.
..........
Yeah Colorado has run out of oil several times.

But new imaging technology plus fracking and horizontal drilling is enabling them to find more oil and pull it up economically.

[cloudmountain]

Do I smell a free lunch?
I didn't think it existed.

I read a sci fi story once where humans went on and on and on with all the free lunches with everything under the sun, including the sun itself, used for fuel.

FINALLY, at the very end, when ALL, that is, ALL sources for fuel and power were 100% exhausted. Humanity was at its very end of existence.

Then,

was heard:

LET THERE BE LIGHT.

Great sci fi, innit? :o)

[ckilmer]

Do I smell a free lunch?
I didn’t think it existed.
............
There is no such thing as a free lunch. Everything gets paid for. You don’t want to be mixing up theology and physics.

What you do smell is new money.

The USA has essentially been bleeding money since the 1970’s. US Oil production peaked in 1970 and in 1973 the first arab oil embargo came that jacked up the price of oil. The USA was designed for cheap energy. Expensive foreign energy has essentially sapped 500 billion annually from the US economy for 30 years.

It will take another 30 years for the USA to fully recapitalize. But yeah we’re in the very first years of that process. Bottom line. What this means is ignore the gold bugs, the doom and gloomers, and the end of the worlders. That stuff may still happen but not this time and not for reasons of a poor economy.

On top of the wild increase in USA oil production somewhere out there in the next decade or two— 4th generation nuclear reactors will cut the cost of energy. This will cause an enormous boost in the wealth of everyone. (The rich of course will get richer. But the middle class will stop shrinking and start expanding again.)

if you want to do nuclear research on your own — google the keywords +lftr +thorium +reactor

[ckilmer]

http://www.liveleak.com/view?i=a92_1381546319&comments=1

[cloudmountain]

Liquid fluoride thorium reactor explained in 5 minutes.
Read more at http://www.liveleak.com/view?i=a92_1381546319&comments=1#Ku4aKX0YQ0e8fTvo.99

Amazing stuff and process.

[cloudmountain]

This country can't keep pulling stuff from the money tree. Capital must come IN some times. Mustn't it? Or is the gubmin money tree indefatigable?

[ckilmer]

This country can’t keep pulling stuff from the money tree. Capital must come IN some times. Mustn’t it? Or is the gubmin money tree indefatigable?
.............
What added oil production does is keep money from flowing out.

The USA is adding 1 million barrels@day production in 2013 (as it did in 2011 & 2012 & will do the same for the next 4-5 years. Five years from now the USA will become a net oil exporter. That won’t reverse capital flows into the USA. That won’t happen until another great technological revolution picks up steam. That would be advanced robotics and 3d printing. These two together will return much of the industry that has gone to China—back to the USA.

Then the capital flows will come to the USA.

The government’s money printing machine would place the USA in serious do do if not for the enormous growth in oil production.

If not for the oil production growth, the dollar would go down the toilet. As it is, the dollar has been going roughly sideways since the oil boom began in 2009. That is the downward pressure on the dollar of the money printing has been met by the upward pressure on the dollar of oil production.

The US dollar has been the world’s reserve currency. This has given the USA enormous advantages. The USA can essentially borrow money at zero percent interest rates. The Chinese are working overtime to undermine the reserve status of the dollar but imho things like US oil production will thwart their efforts.

A big issue in congress that the dems have totally screwed up is offshore US corporate profits. American corporations have 1 trillion dollars sitting in offshore accounts that they can’t repatriate or invest in the USA because of the tax consequences of moving the money back into the USA. Until congress can lower the taxes to make it logical for them to repatriate their offshore capital—the money will remain abroad.