PDC announced $233 million Capital Program; Projected 19% year-over-year growth in production for 2011

PDC Energy expects production growth of 19% in 2011, as the company moves to accelerate development of oil and liquid assets in the onshore area of the United States. The company plan to spend $233 million in 2011 to develop its various properties in the United States. The company will put 75% of this capital into oil and liquid plays, including the Niobrara Shale and the Permian Basin.

PDC Energy expects to produce between 2.4 million and 2.5 million barrels of oil and other liquids in 2011, up 34% from 2010. The following map illustrates the company’s planned operational activities in 2011.

Niobrara Shale
PDC Energy has 74,100 net acres under lease in the Denver Julesburg Basin in Colorado, with much of this acreage in the Wattenberg Field.  The company plans to drill 14 horizontal wells into the Niobrara in 2011.

Permian Basin
PDC Energy has 12,800 net acres under lease in the Permian Basin, where the company is working in several different areas. In 2011, PDC Energy plans to drill 25 vertical wells there, and recomplete six others. 

The company is working on different formations, with a primary emphasis on the Clear Fork, Spraberry and Wolfberry zones.  Annual production from the Permian Basin is projected to double by the end of 2011, to approximately 75,000  boe.

Other Plays
Despite the emphasis in 2011 on oil and liquids, PDC Energy is not abandoning natural gas development. The company has 56,100 net acres under lease in the Appalachian Basin that is prospective for the Marcellus Shale. The company plans to drill nine wells into this formation on its acreage in West Virginia.  

PDC Energy also has 8,000 net acres under lease in the Piceance Basin in Colorado, and plans to drill 12 wells there in 2011. Other companies involved in the Piceance Basin include, which drilled 125 net wells there in 2010. Occidental Petroleum also operates in this area, and has 120,000 net acres under lease.

The company will leverage its onshore oil properties in the U.S., while still advancing its natural gas production. By targeting the Niobrara and Permian Basin formations, PDC hopes to increase its development of oil and other liquids by 19% in 2011.

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Asian companies creating traffic towards Niobrara Shale!! Marubeni acquires Niobrara Shale acreage from Marathon Oil for $270 million.

Marathon Oil signed an agreement with Marubeni Corp under which Marathon will assign a portion of its interest in the Niobrara shale play within the DJ Basin. Under the terms of the agreement, Marubeni will receive a 30% undivided working interest in Marathon's approximately 180,000 net acres in the DJ Basin for a total consideration of $270 million, or $5,000 per acre. Marathon began leasing acreage in the DJ Basin in 2010. The company is currently acquiring 2-D and 3-D seismic data and expects to participate in eight to 12 gross exploration wells by the end of the year. Marathon will be operator of the jointly owned leasehsold. Marubeni’s overall investment in the project, including future development costs, is about $1-$1.5 billion.

Source: Marathon- Howard Weil Energy Conference- Mar 2011

Niobrara Shale- The tasty pie for Asians!!

Recently, Niobrara Shale has gained interests from all the companies. The overall investments in the state lease sale awards increased from an average of $3.2 million in 2008-2009 rounds to an average of $37.5 million in 2010 lease rounds. In Wyoming, as per Wyoming Oil and Gas Commission, 202 horizontal well permits targeting Niobrara formation had been issued in the state as of November 24, 2010. In Colorado, during 2009-September 2010, there were 208 approved permits for Niobrara shale formation.

Last October, the Japanese company ITOCHU stepped into Niobrara Shale with an estimated investment of $390 million. Then, in Jan 2011, the Chinese (CNOOC) entered into a $1.3 billion Niobrara JV with Chesapeake. Now again the Japanese- Marubeni Corp!! The Asians are busy striking the unconventional deals in the US. Very soon Koreans may also enter the Niobrara Shale who had recently clinched a $1.6 billion Eagle Ford JV with Anadarko.

A look at the metrics of liquids rich resource plays: 

Source: Marathon Oil Mar 2011 PPT

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What is interesting in Marathon-Marubeni deal??

In January 2011, Chesapeake sold the Niobara acreage to CNOOC for $4,686/acre. In the three months period since then, the Niobara acreage metrics have increased by ~$300/acre. This is evident from Marathon reported metrics of $5,000/acre. Yes! Marathon is selling Niobrara acreage at a premium price.

Source: Derrick Petroleum E&P Transactions Database

For detailed discussion on Niobrara: http://mergersandacquisitionreviewcom.blogspot.com/2011/03/o-players-interest-towards-niobrara-is.html

Marathon Oil reported 2010 annual results; Added nine onshore exploration licenses with shale gas potential in Poland for a total of 11 licenses; Announced $5.27 billion capital, investment and exploration budget for 2011

Marathon’s annual 2010 sales volumes averaged 391,000 boepd down 2% over 2009 average of 400,000 boepd from continuing operations. This is due to the result of planned downtime associated with the turnaround of production facilities in Equatorial Guinea completed in the second quarter 2010, natural field declines and asset dispositions. The company achieved 95% reserve replacement ratio for the annual year 2010.

Marathon announced $5.267 billion capital, investment and exploration budget for 2011, consistent with prior guidance and a 9% increase from 2010 capital spending. The company aim at liquids rich opportunities such as the Bakken, Anadarko Woodford, Eagle Ford and Niobrara resource plays in the U.S.

The company’s capital spending in the upstream segments is approximately $3.7 billion or 71% of total spending for 2011. This Upstream program includes spending of $1.3 billion on base assets ($1 billion on E&P base and $300 million on Oil Sands Mining and Integrated Gas), $1.9 billion on growth assets such as liquids resource plays in the U.S., and $465 million specifically for impact exploration.

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