Shale Daily / Niobrara/Denver-Julesburg Basin / Rockies/Other

Information on the Niobrara-DJ Basin

Niobrara Map

 

Background Information

 

The Niobrara-DJ Basin is a crude oil and liquids rich gas play that is located in Northeast Colorado and Southeast Wyoming.  The Niobrara is located in several areas of the Rocky Mountains, including the Powder River in Wyoming and in parts of Northwest Colorado. The portion that lies within the DJ Basin is a combination shale/marl/chalk/sandstone formation that lies at depths 5500’-8500’, and is comprised of three separate zones, or “benches:” the A, B, and C benches. Just below the C bench sits the Codell tight sands formation, which is more of an emerging natural gas play, but is also garnering the interest of operators, especially those who are able to drill commingled Niobrara and Codell wells.

Niobrara Layers

The Niobrara within the DJ Basin is actually a combination of two basins in one. On the eastern side of the DJ Basin, the Niobrara reservoir holds widespread biogenic gas deposits that are similar to those in the Antrim Basin in Michigan. This “biogenic” Niobrara gas lies at shallower depths within Northeast Colorado, and parts of Nebraska and Kansas, than the more oil rich “thermogenic” Niobrara that we described in the first paragraph. The remainder of this article focuses on the “thermogenic” portion of the Niobrara.

The DJ Basin is certainly no stranger to exploration and production activity. The Wattenberg Field, which is located primarily in Southwest Weld County, Colorado, was discovered in 1970, and was one of the 15 largest proved gas fields in 2009, per the U.S Energy Information Administration. The majority of production from the Wattenberg to date has come from vertical drilling in the Niobrara/Codell formations, and the Muddy J Sandstone, which is a tight sands play that lies several hundred feet below the Codell.

Much of the horizontal drilling for the Niobrara and the Codell thus far has occurred in the Wattenberg Field in Weld County, Colorado, and to a lesser extent in and around the Silo Field in Southeast Wyoming, in part because many companies already held acreage in those areas, and also because those regions have existing infrastructure. Various companies have drilled horizontal Niobrara/Codell wells in other parts of the DJ Basin, but many of those non-Wattenberg areas do not have adequate infrastructure in place to support large scale development at this time.

Niobrara Rig Count

EOG Resources kicked off the trend toward horizontal drilling in the Niobrara DJ in October 2009, with its Jake well at the Hereford Ranch Field in Weld County. The industry seemed to cling to EOG’s every word about the commercial potential of horizontal Niobrara wells throughout 2010-2011, and were encouraged when then EOG CEO Mark Papa declared on EOG’s 1Q11 earnings conference call that “in our DJ Basin Niobrara oil play, recent results have shifted my feeling regarding the play from cautious to optimistic.” However, Papa followed on EOG’s 3Q & 4Q11 earnings call that they thought the Niobrara would just be a “contributory play for them, and not a game changer.” EOG has barely mentioned the Niobrara in any of its promotional literature since, and has deferred its development of the play.

Overall, initial industry results in the Niobrara-DJ have been mixed, and there are questions about whether all of the Niobrara will even be commercial. The big issue is the underlying geology. The Niobrara is a highly fractured zone, and that has been causing significant challenges for some operators in figuring out the best method for drilling and completing wells in the area.  However, Noble Energy (another early mover in the play) has reported sustained success with its horizontal drilling program in the Niobrara, and we believe its Well Ranch long lateral well of more than 9000’ lateral feet in the Northeast portion of the Wattenberg Field has further proven commercial viability of the Niobrara, at least within the Greater Wattenberg Area. The company is plowing ahead with its development of the play, and noted on its December 2013 Analyst Day meeting that it intends to move from 10 rigs in the DJ Basin in 2014 to 20 in 2018. Encana is placing heavy emphasis on developing its DJ Basin assets in 2014 as well.

Whiting Petroleum, Anadarko Petroleum, Bonanza Creek, and Bill Barrett have also all had rigs working the Niobrara/Codell at some point since the end of 2012. The weekly industry-wide rig count in the Niobrara-DJ has ranged between 40-50 rigs over most of the last two years or so, but settled in at 52 rigs for the week ended 12/13/13.

Counties

Colorado: Adams, Arapahoe, Boulder, Broomfield, Douglas, Elbert, Larimer, Jefferson, Morgan, Weld

Wyoming: Laramie, Goshen, Platte

Local Major Pipelines

Natural Gas: Cheyenne Hub, Cheyenne Plains, CIG, PSCO, Rockies Express, Southern Star, Tallgrass, WIC