While the Bakken and Eagle Ford shale oil plays understandably attract the spotlight in the world of new oil production, a lesser known play in Colorado may soon make its presence felt. The Niobrara in northeastern Colorado (see map below) may contain more than 7 billion barrels of recoverable oil. Let’s look at three companies investing in this play.
Map courtesy of FrackingOil.com
Classic exploration and development
Two companies actively producing oil and natural gas in the Niobrara are Anadarko Petroleum Corporation (NYSE:APC) and Noble Energy, Inc. (NYSE:NBL). These companies are similar in that they boast multibillion dollar market capitalizations, own substantial worldwide assets, and plan to spend at least $1 billion in Colorado in the upcoming year.
Of the two, Noble Energy, Inc. (NYSE:NBL) plans the more aggressive exploration agenda. The company budgeted $1.7 billion for 2013 and anticipates a 50% increase in the number of wells for the same year. Looking ahead, Noble plans to drill 500 wells a year through 2016. Why all this activity? Noble Energy, Inc. (NYSE:NBL) estimates its properties hold over 2 billion barrels of oil. Even better, Noble calculates development costs are equal to or less than such plays as the Bakken or Eagle Ford. The company anticipates its Colorado assets generating significant cash flow in 2014.
As an investment, Noble Energy, Inc. (NYSE:NBL) represents a growth stock, and its dividend yields less than 1%. And grown it has; the stock climbed almost 50% in the past year and sells for roughly 23 times earnings. Driving these results has been an international portfolio of oil and gas assets. From the coasts of Israel, Mozambique, Equatorial New Guinea and the Gulf of Mexico, Noble Energy, Inc. (NYSE:NBL) generates oil, gas and profits for its investors. The future holds more of the same.
Anadarko Petroleum Corporation (NYSE:APC) plans to spend just over $1 billion in the Niobrara this year. Its holdings contain up to 1.5 billion barrels of oil or equivalent. With low development costs and expandable infrastructure in place, Anadarko Petroleum Corporation (NYSE:APC) believes its Colorado fields may be the single best onshore US asset the company owns. To monetize this asset, Anadarko Petroleum Corporation (NYSE:APC) plans to double the number of wells active in the Niobrara to 300 by the end of 2013.
Anadarko Petroleum Corporation (NYSE:APC) also represents a growth investment as its dividend yields less than 0.5%. The stock climbed over the past year, but lagged the growth of Noble Energy, Inc. (NYSE:NBL). Perhaps one reason for the muted enthusiasm is Anadarko’s liability connected to the Macondo oil rig explosion and oil spill. As a partner in the disastrous drilling platform, a judge has ruled Anadarko Petroleum Corporation (NYSE:APC) must face an investor lawsuit claiming the company’s CEO misled investors regarding Anadarko’s stake in the rig. Settlement costs also adversely impacted last quarter’s earnings despite improved cash flow and earnings from operations.