If ever there was an explorer for other producers to take a page from, it just might be Noble Energy Inc., which has quietly become one of the players to watch in the U.S. onshore.
The Houston-based producer, long known for its prowess in the deepwater Gulf of Mexico (GOM) and overseas, has in the past five years quietly built a mammoth oil and gas liquids-based enterprise in the Denver-Julesburg (DJ) Basin of Colorado that ranks second in net acreage only to Anadarko Petroleum Corp. (see Shale Daily, Nov. 16).
Come January, as Noble begins in earnest its exploration and development through its newly completed Marcellus Shale joint venture (JV) with Consol Energy Inc., the company plans to transfer what it's learned in the West to the Northeast.
In October Noble and Consol finalized their JV to develop properties in southwest Pennsylvania and northeast West Virginia (see Shale Daily, Oct. 5; Aug. 19). The transaction gave Noble half of Consol's 663,350 net-acre leasehold, including a half-stake in existing wells.
Consol holds sway over the dry gas operations, which are found on about 80% of the property, while Noble will manage the wet gas development. And that suits the company to a tee.
"We will be taking our learnings [from the DJ Basin] and applying them over to the Marcellus," said John Lewis, Noble's vice president of the U.S.-Southern Region told investors Tuesday. "We are taking a subsurface approach that we use in the Niobrara and also transferring some of the processes developed there in the Niobrara" to boost efficiencies in Consol's and Noble's operations.
Although the dry gas and wet gas targets require different methods of production, Noble and Consol have found synergies and have much to learn from each other, said Lewis. Noble now has an office in Canonsburg, PA, to collaborate. And earlier this month "Consol folks were in Denver reviewing how Noble does permitting and how we work up there to learn how to decrease permitting cycle times in the Marcellus."
Net risked resources to Noble in the Marcellus initially have been estimated at 7.4 Tcfe. Around 87% of the properties is held by production, which allows the partners to be more flexible with their development plans and to lower costs. The transaction also gave Noble established infrastructure in the red-hot play.
Initially Consol is focused on a sweet spot in southwestern Pennsylvania, and "there is sufficient acreage to keep us busy for several years," said Lewis. "We are going to be very systematic in our approach and add to the efficiencies."
The early results are "better than expected," he said. At the partners' touted Hutchinson 10-well pad in southwestern Pennsylvania, initial production (IP) rates averaged 5-12 MMcf/d. Five of the wells had IP rates of 5-8 MMcf/d, while the other half had IP rates of 9-12 MMcf/d.
Noble and Consol have developed "joint rolling three-year plans," said Lewis. Not only will there be a "systematic development of wells and infrastructure," but the joint plans allow the partners to "challenge each other" and incorporate best practices learned.
By 2016 "and beyond," Noble expects to have 380 wells a year drilled in the Marcellus and to be operating "about 40%," he said. Most of the 2012-13 program, which is overseen by Consol, will be focused on Pennsylvania's Greene and Washington counties.
In the coming year 39 wells are scheduled to be drilled with one rig ramping to three rigs. The following year Noble has an 81-well program planned with three rigs in operation, ramping up to four. In 2014 and 2015 another 131 wells are planned using five to six rigs.
Water, which has been a paramount issue for natural gas drillers that use hydraulic fracturing (fracking), won't be for the Marcellus partners, said Lewis. A water sourcing plan is in place for southwestern Pennsylvania an "an infrastructure buildout is under way" to move water by pipeline. Once installed, the piped water should be enough for 16 fracking stages a day.
"We are developing other options for the post-2013 period to move and process gas" also, he said. The gas gathering system installed and under construction is sufficient through 2012. Firm transportation and processing contracts cover production through mid-2014.
Over the longer term, Noble plans to dedicate around 85% of its Marcellus capital spending on drilling and completing wells, which should result in "rapid production growth." By 2015 production is forecast to hit 600 MMcfe/d, and eventually reach the "900 MMcf/d to 1 Bcf/d range."
Noble's total company compound annual production growth rate is expected to average 17% over the next five years to about 490,000 boe/d and growth should continue in double digits 10 years from now, CEO Chuck Davidson told investors Tuesday.
"We have seen more change within this company in the past 16 months than at any time since the merger with Patina," which was seven years ago, Davidson said. In 2004 Noble paid $3.4 billion to buy Rocky Mountain producer Patina Oil & Gas Corp., which gave it the DJ Basin holdings. "All of these changes are positive but a lot has happened since June 2010," when the company last met with investors.
"If you look at 2021, only 15% of our production in that year comes from future exploration," said Davidson. "These are known projects. I've never been in such a position. I've been in a position where I was looking for my next meal for the next year. But I've never been in a position where I know I'm going to get that meal 10 years out."
A lot of eyes are on the Marcellus, but Noble hasn't taken its sights off the DJ Basin, said Ted Brown, senior vice president of the U.S.-Northern Region.
Noble controls more than 800,000 total acres in Colorado, including 400,000 net acres in the Wattenberg Field, where Noble has identified 1.3 billion boe of net risked resources with the potential for even more. It now has 58 producing wells in the Niobrara formation of the field that to date has produced 18,000 boe/d gross and 14,000 boe/d net.
The Marcellus, DJ Basin and GOM give Noble a trifecta of opportunities in the United States. But the company hasn't completed its exploration quest, said Susan Cunningham, senior vice president of Exploration and Business Innovation.
Cunningham offered few details but she told investors that Noble has "three new emerging plays" in North American in which it has leased a total of 200,000 acres to date.