Land that Anadarko Petroleum Corp. has long controlled in northern Colorado in the Wattenberg Field holds a huge liquids-rich resource potential of 500 million to 1.5 billion boe net, executives disclosed last week. Separately, Noble Energy Inc., which controls 400,000 net acres in the play, said it has identified 1.3 billion boe of net risked resources with the potential for even more.

Based on initial drilling results, the resource estimates for the Niobrara and Codell formations, which are about 70% weighted to liquids, may rival those in the Bakken and Eagle Ford shales.

“It’s a really cool play,” Anadarko COO Al Walker said last Tuesday at the Bank of America Merrill Lynch 2011 Global Energy Conference. “It takes into account an old field where we’ve been the operator through a predecessor company for 30 years. And it’s never been a more valuable asset than it is currently.”

The “best horizontal well to date,” the Dolph 27-1HZ, demonstrated an initial production (IP) rate of more than 1,100 b/d of oil and more than 2.4 MMcf/d of gas, resulting in an estimated ultimate recovery of better than 600,000 boe. The Dolph well, which cost less than $4 million to drill and complete, also paid out in “less than four months,” Walker said.

Anadarko has found “high” IP rates “across the field. We’ve had pretty good results from 11 wells, and they don’t represent what we believe they will perform at…”

Chuck Meloy, senior vice president for worldwide operations, who also spoke at the energy conference, said the field is “located right in the heart of one of our existing core areas. Our activity, which has primarily targeted the Niobrara formation within the Wattenberg Field boundaries, has achieved high liquids yields and excellent well performance with average IP rates of about 800 boe/d.

“The value of this resource is further enhanced by our extensive mineral ownership throughout the [Colorado] Land Grant that provides royalty revenue on both operated and nonoperated activity.”

Anadarko already is the largest net producer in Colorado’s Denver-Julesburg (DJ) Basin, with current output of more than 70,000 boe/d. The company has more than 350,000 net acres in the Wattenberg Field and operates more than 5,200 existing wells with an average working interest of about 96%; average net revenue interest is about 88%.

Anadarko holds not only acreage but it has amassed a considerable stable of operated midstream infrastructure in the field that includes takeaway capacity and natural gas liquids processing, as well as the White Cliffs Oil Pipeline, which together give the company “additional economic advantage,” said Meloy. “We expect the alignment of our assets, coupled with future investments in expansion opportunities, will continue to enhance field recoveries, access to premium markets and robust margins.”

Like many of the unconventional plays in North America that are now being rediscovered through horizontal drilling and hydraulic fracturing, the Wattenberg Field has been explored for a long time. Anadarko acquired the field, as well as a bevy of other properties, in 2006 when it paid $21.1 billion to buy Kerr-McGee Corp. and Western Gas Resources.

The acquisition set in motion Anadarko’s long-term strategy to create a domestic onshore presence that would rival its estimable deepwater portfolio, Walker said.

“What we did in 2006 was to focus on the onshore to complement the deepwater from an exploration and development perspective,” he told the audience. The base assets in the Wattenberg field alone added “25 Tcfe-plus” of resources.

Anadarko’s list of unconventional properties in North America includes a sizeable position in the Marcellus Shale, where its resource estimate is 6 Tcf-plus. There are 300,000 net acres of potential in the Utica Shale. In addition, it also has an enviable land position in the Haynesville Shale, another gassy play.

Unlike the traditional dry gas or oily plays, which may offer “good wellhead economics,” the Wattenberg offers a “unique” opportunity, said Walker.

“It’s not a coincidence” that Anadarko acquired midstream assets in the Wattenberg area before announcing the latest well results, he said. Earlier this year Anadarko paid more than $575 million to acquire full ownership in the Wattenberg Processing Plant (see NGI, March 28). The company also now owns the Platte Valley Plant, a processor it bought from Encana Corp. And it has ownership in Colorado’s Fort Lupton Plant as well (see NGI, Jan. 24).

“We wanted good takeaway for the gas and good wellhead economics for the liquids,” Walker said. Anadarko now has its sights set on 1,200-2,700 horizontal drill sites in the Niobrara and Codell formations, which are estimated to have ultimate recoveries of 300-600 million boe/well.

“At current prices, this gives us quite attractive economics in the field, as we think about capital deployment,” said Walker. “These are big numbers. We might spend $1 billion a year on this field, and it does a good job of generating cash…

“Everything you like to see in a play, this pretty much has it,” he said of Wattenberg. “It’s largely liquids and it starts out from a run, not a stand, like in the Utica where we don’t have production. [The Utica Shale] has a lot of potential…it may be one of the better onshore plays, but most importantly, it doesn’t have existing infrastructure. We’re ahead of the curve in solving that…”

What “supercharges” the economics in the Niobrara and Codell plays are the mineral ownership that Anadarko holds, he said. The company has a “royalty benefit from nonoperated wells” on the state Land Grant lands. “We don’t have to drill wells in order to benefit from it. That really helps us. It’s great to see our neighbors doing well and in turn, it’s great from a royalty perspective. It’s not an insignificant position. And it’s one we’ve been waiting a while to talk about.”

What attracted Anadarko to the development were the liquids, and that’s why it’s also unique, said Walker. “There’s a lot of natural fracturing within the Niobrara and Codell, and that helps with the recovery perspective. A significant number of vertical wells have been drilled over time in the field. We have good data and well control data.”

Based on the drilling results from the first 11 wells, Anadarko’s management team believes the “unique characteristics in horizontal drilling over time will allow us to take further advantage of a great field.”

The Woodlands, TX-based producer is planning further tests to define the optimum spacing and lateral lengths for the Niobrara and Codell formations. It also plans to increase the Wattenberg horizontal drilling program to seven rigs by the end of 2012, while increasing the number of horizontal wells drilled next year to about 160 from about 40 in 2011.

The Wattenberg results in Colorado may only be the tip of the iceberg, said Walker.

“Outside the Wattenberg field, we’re also exploring additional liquids-rich horizontal opportunities where we hold another 550,000 net acres in the greater DJ Basin and 360,000 net acres in the Powder River Basin. Each area is prospective for the horizontal Niobrara, as well as other horizons that we will evaluate over time.”

Noble executives revealed some of their Wattenberg data during an investor conference in Houston (see related story).

Senior Vice President Ted Brown, who runs Noble’s U.S.-northern region, told investors that horizontal wells in the Niobrara “yield significant, repeatable results.” The company was encouraged enough to add another 200,000 net acres in the northeast extension of the play. Across the DJ Basin Noble has more than 800,000 net acres.

“We are forecasting 15% a year compounded annual growth rates over the next five years,” Brown said of the Wattenberg play. The company today has 58 producing wells with output of close to 70,000 boe/d, weighted 54% to liquids. Over the next five years the liquids component is expected to reach 66%.

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