Weld County’s two largest oil and gas producers have agreed on a massive land trade that essentially keeps each company out of each other’s way, reduces truck traffic on the roads and, to some, is the epitome of operational efficiency.
Noble Energy and Anadarko Petroleum Corp. announced Monday an exchange of roughly 100,000 acres throughout the county that will put Noble’s territory north and east of Greeley and Anadarko’s from Greeley south.
The deal is expected to be effective Jan. 1.
The move is rather typical of companies operating in the same area and is a way for companies to reduce their costs as well as footprints, said industry analyst Pete Stark of IHS in Denver.
“It gives them the opportunity to have maximum operating efficiency... They’re just aggregating,” Stark said. “They think they can reduce their expenses and costs by 20 to 30 percent. It has huge economic consequences. There’s a huge, huge investment in operational excellence going on.”
David Stover, Noble Energy’s president and CEO, said in a news release that the efficiencies come in centralized field facilities, streamlined operations and reduced land work. It will have the effect of reducing each company’s cross-county truck traffic as well.
“The large contiguous acreage blocks will provide the opportunity to optimize drilling activities and add more extended-reach lateral wells to the program,” Stover said in the release.
Exploration companies are maximizing their drilling efforts in horizontal drilling by extending the lateral lengths of the wells, allowing them to hydraulically fracture them at several more stages. The end result is higher production.
Weld County Commissioner Sean Conway said the ultimate reduction in truck traffic falls in line with the county’s emphasis on working with the development companies.
“It has a benefit to everyone, with less congestion, less traffic, fewer emissions and fewer trucks,” Conway said. “It’s a safety issue. They can define their areas a little more clearly, and that’ll allow them to do business more efficiently.”
Anadarko comes out slightly ahead in oil production with the trade, which will add roughly 8,000 barrels of oil equivalent to the company’s portfolio. Anadarko paid Noble $105 million at closing and reimbursed Noble $202 million for capital spent to drill and complete wells on the exchanged areas, according to the release.
“They’ll make it up in spades by the improved operating efficiencies in each area,” Stark said.
For Anadarko, the exchange will enhance its core development area, while retaining the benefits of its Land Grant mineral ownership on approximately 21,000 acres of the lands to be conveyed to Noble, according to a news release.
“The trade is expected to achieve greater operating efficiencies, reduce costs and local impacts, and further improve safety performance,” said Chuck Meloy, Anadarko executive vice president, U.S. Onshore Exploration and Production, in a news release. “This exchange also demonstrates Anadarko’s active portfolio management and commitment to accelerating cash generation, as we anticipate increasing activity on our core Wattenberg acreage, where we are generating rates of return that exceed 100 percent.”