Recent results from Anadarko Petroleum Corp.’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 almost 70% oil. IPs range from 555 to 1,505 boe/d. One outlier well (REI 31-5HZ) produced 75% gas; others actually averaged an oil ratio of 77%, with range of 66%-86%, according to Jefferies & Co. Inc. analysts in a November 15 note to investors.
Anadarko's best horizontal well to date, the Dolph 27-1HZ, demonstrated an initial production (IP) rate of more than 1,100 barrels of oil per day (bopd) with more than 2.4 million cubic feet of natural gas per day (MMcf/d), resulting in an estimated EUR of better than 600,000 boe.
Wattenberg horizontal program highlights
• Future drilling locations: 1,200 - 2,700
• Estimated ultimate recoveries (EURs): 300,000 - 600,000 boe per well
• Net resources: 500 million - 1.5 billion boe
• Initial well costs: $4.0 - $5.0 million
• Liquids ratio: ~ 70%
While still in early stages of development, the Niobrara may yield huge oil potential. And these early results by Anadarko bode well for the company as it looks to ramp up operations in the liquids-rich play.
Jefferies analysts agree that the economics look good. “Modest” well costs–with best well cost to date at $3.8 million, little interference with nearby verticals, north to south cross sections showing continuity, and wells that have been producing for more than six months are all viewed positively by the analysts.
In addition, the mineral ownership through Land Grant and the earlier investment by Anadarko in midstream assets in the region add to the upside. “Anadarko has 400 mmcf/d of joint operated processing capacity and 3,000 miles of operated gas gathering lines as well as access to oil export capacity through the White Cliffs pipeline. In addition, APC is planning a 300 mmcf/d cryo expansion,” noted Jefferies.
Anadarko is the largest net producer in the liquids-rich Denver-Julesburg (DJ) Basin at greater than 70,000 boepd. The company holds interests in more than 350,000 net acres in the Wattenberg field, and operates more than 5,200 existing wells with an average working interest of approximately 96%, and an average net revenue interest of approximately 88%.
As part of its ongoing program, Anadarko will be conducting extensive tests to define the optimum spacing and lateral lengths for the Niobrara and Codell formations. The company also plans to increase the Wattenberg HZ drilling program to seven rigs by the end of 2012, while increasing the number of horizontal wells drilled during the year to approximately 160 from about 40 in 2011.
Thereafter a 200 well program is envisioned. The Niobrara horizontals are already producing 6,000 boepd, or almost 10% of the 70,000 boepd produced from the field.
"The results to date demonstrate the Wattenberg HZ program is among the most cost-efficient development projects in our US onshore portfolio, and with initial wells averaging payouts of 10 months, we expect it to quickly become a self-funding, significant cash-flow generator," said Meloy.
"With our extensive land position and the drilling results to date, we envision drilling another 1,200 to 2,700 horizontal wells in the core Wattenberg field acreage,” he continued.
Based on these 1,200 drilling locations and an estimated pv10 per location of $5 million for a 400,000 boe well, the Wattenberg resource could be worth over $6 billion to Anadarko, noted Jefferies. A joint venture on a third of the acreage could raise “at least raise $2 billion, or $4 per share” with an implied value per acre of $20,000, the analysts continued.
Results outside the Wattenberg field–where the company holds another 550,000 net acres in the greater DJ basin and 360,000 net acres in the Powder River Basin–are “less exciting, with average IPs of 350 boe/d from 15 operated wells (13 in Greater DJ),” noted Jefferies. The company is planning roughly 30 wells in these areas in 2012 in addition to evaluating a potential JV partner.