Noble Energy Inc. has agreed to sell oil and natural gas properties in Kansas, including about 250 producing wells on approximately 14,000 net acres, to an affiliate of Citation Oil & Gas Corp. for $140 million as part of an ongoing divestiture plan, the Houston-based company said Monday.
Net production of the assets is about 1,000 boe/d with net proved reserves of approximately 7 million boe, Noble said. Production is almost entirely crude oil.
The transaction completes the first phase of company’s onshore non-core divestment plan, according to Noble COO David L. Stover. The company has in the past five years quietly built a mammoth oil and gas liquids-based enterprise in the Denver-Julesburg Basin of Colorado that ranks second in net acreage only to Anadarko Petroleum Corp. (see Shale Daily, Nov. 16, 2011). Earlier this year Noble announced it expected to invest $8 billion in the region over the next five years.
Drilling in the Niobrara portion has picked up rapidly, CEO Charles D. Davidson told analysts recently in the company’s second quarter conference call, as recorded in a transcript by seekingalpha.com. “It’s hard to believe it was only 15 months ago when we began seeing the upward inflection point in production from the horizontal Niobrara that told us that this program truly had the potential to dramatically change our company,” he said.
Since then Noble has gone from three to seven horizontal rigs and plans to have 10 running by the end of the year. “Our horizontal well count should easily top 250 by then,” Davidson said.
“The era of vertical drilling in Wattenberg is rapidly coming to a close. Our plans today for this region bear little resemblance to what they were 15 months ago. Field development plans have gone through dramatic changes in scale and scope, and major industry investments are being made in oil transportation, gas processing, gas and NGL transportation to accommodate this growth.”
Noble’s second quarter production from its new core area averaged 73,000 boe/d, including 40% crude oil and 17% NGLs. This was despite problems with third party processing and unseasonably warm weather which cut production by about 4,000 boe/d.
The sale to Citation has an effective date of April 1, 2012 and is expected to close in September.
Last month Noble said that it would sell oil and gas properties in the Permian Basin to privately held Sheridan Holding Co. II LLC of Houston for $320 million in a deal expected to close this month (see Shale Daily, July 25). That followed Noble’s announcement that it would sell oil and gas properties in western Oklahoma and the Texas Panhandle to Unit Petroleum Co., a subsidiary of Unit Corp., for $617 million (see Shale Daily, July 12). Those properties are primarily in the Granite Wash, Cleveland and Marmaton plays.
“These transactions, along with the sales of our Dumbarton and Lochranza assets in the North Sea, are expected to generate approximately $1.1 billion of after-tax proceeds by the end of the third quarter,” Stover said. “The next phase of our non-core divestment program, continuing into 2013, involves small asset packages in the Mid-continent, Gulf Coast, San Juan and Ark-La-Tex areas and our remaining assets in the North Sea.”
This year is the first in a multi-year period of growth for Noble as the company realizes the payoff from “multiple years of exploration success,” CEO Charles Davidson said earlier this year (see Shale Daily, Feb. 10). The producer, long known for its prowess in the deepwater Gulf of Mexico and overseas, now is adding on a major focus area in the Denver-Julesburg.
There were 16 rigs operating in the Niobrara-DJ Basin in the week ending Aug. 10, a significant increase from the five rigs in the play one year ago and two more rigs than in the previous week, according to NGI’s Shale Daily Unconventional Rig Count.
Privately held Citation, which is based in Houston, claims ownership interests in approximately 14,100 wells, with concentrated positions in the Midcontinent, Permian Basin and Rocky Mountain regions.
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