ConocoPhillips (COP), Ultra Petroleum Corp. (UPL): Will the Niobrara Be a Boom or a Bust for Oil Companies?

The booms?
Other companies, like Quicksilver Resources Inc (NYSE:KWK), see great potential in its Niobrara acreage. It’s not alone; it recently closed an acquisition and exploration agreement with Royal Dutch Shell plc (ADR) (NYSE:RDS.A) that covers 320,000 acres and an area of mutual interest that covers 850,000 acres. Quicksilver not only picked up some cash in the deal but it also picked up a world-class partner. It’s also looking to further de-risk its acreage by signing on another third-party joint venture partner to help further fund its development. Quicksilver is very optimistic about the play and sees the Shell venture as validation of its efforts that this play will pan out.

Shell’s not the only energy giant that’s looking for big things from the Niobrara. ConocoPhillips (NYSE:COP) has amassed 130,000 acres in what it believes is the newly identified sweet spot in the play. Last year it drilled four horizontal wells and saw early production rates in line with its expectations. In fact, the company is seeing higher liquids yields than the Wattenberg, which has been a big driver of value for Anadarko Petroleum Corporation (NYSE:APC). Because of this, ConocoPhillips (NYSE:COP) plans to ramp up its activities this year and drill 32 wells.

My Foolish take
The bottom line here is that oil and gas exploration is really no different than real estate: It’s all about location. It would appear that both ConocoPhillips (NYSE:COP) and Quicksilver have succeeded in finding the best location in the play, whereas Rex and Ultra Petroleum Corp. (NYSE:UPL) ended up in the wrong neighborhood and have decided to give up. It’s a good reminder that even with all the oil and gas we’re finding these days, there’s still risk in exploration, and the Niobrara still has its share of them as companies continue to explore and develop it.

The article Will the Niobrara Be a Boom or a Bust for Oil Companies? originally appeared on

Fool contributor Matt DiLallo owns shares of ConocoPhillips. The Motley Fool recommends Ultra Petroleum. The Motley Fool owns shares of Ultra Petroleum and has the following options: Long Jan 2014 $30 Calls on Ultra Petroleum, Long Jan 2014 $40 Calls on Ultra Petroleum, and Long Jan 2014 $50 Calls on Ultra Petroleum.

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