WPX Niobrara Gas Discovery

WPX Corporate LogoSeeking AlphaRichard Zeits of Zeits Energy Analytics

Presenting at an industry conference last week, WPX Energy (WPX) provided an update on what the company believes to be its “major discovery” in the Niobrara Shale in the Piceance Basin.

In January, WPX announced its successful horizontal test in the Piceance Niobrara which, according to the company, indicated 20-30 Tcf resource potential on the company’s 180,000 acres in the play. According to WPX, the Niobrara and Mancos tests show “hydrocarbon saturation across tremendous thickness in a highly over-pressurized environment… The potential of this new resource is huge…” WPX’s resource estimate is indeed quite staggering and, if proven up by further exploration, would easily compete with the most productive areas in the Haynesville Shale in terms of resource per section.

Recently, the rich stream of news on the Niobrara has primarily been related to several horizontal plays in the Rockies targeting oil (the DJ Basin Niobrara play has already proven to be a major success and is moving towards full development mode). WPX’s announcement relates to a play in the same geological formation but in a different area, in the Piceance Basin. The play targets natural gas.

Does North America Need Yet Another Natural Gas Shale?

It certainly does if natural gas can be extracted and delivered to end users at a competitively low cost. The Rockies region has a major advantage: pipeline takeaway capacity for its gas is ample and connects the area to a variety of consuming regions. From a supply cost perspective, early production results for WPX’s test are very impressive and suggest that the emerging play may be competitive with the most productive gas shales in North America.

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