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HOUSTON—Noble Energy Inc. (NBL) has been streamlining and cutting costs in the Denver-Julesburg (D-J) Basin, something the company hopes to continue when it closes on its new digs in the Permian and Eagle Ford.
In Northern Colorado, the company has been trimming fat smartly—saving enough miles on its trucks to travel to the moon and back more than 20 times.
The accomplishment comes by consolidating its trucking operations into a central facility that allows it to more efficiently crisscross the 500,000 net acres it holds there.
Since 2013, the company has cut 10 million truck miles off its odometers, said Gary Willingham, executive vice president of operations at Noble, during a recent Houston Energy Breakfast. The company expects to clip another 10 million miles off this year and roughly 16 million miles in 2016.
“It’s a cost-savings strategy for one thing, but more importantly it’s a safety issue,” he said.
Moving crude by truck is a dangerous business, said Jim Summers, partner at ERM Group Inc., which provides environmental, health, safety, risk and social consulting services.
Compared to pipelines, moving crude by truck is 37 times more likely to result in an accident, he said at the industry event. Rail has a similar risk, with chances of an accident about 28 times higher than by pipe.
The industry, which in recent years has been scrambling to move a plethora of product, has increasingly moved away from pipeline and toward these more dangerous transportation alternatives, Summers said. In some cases, pipe hasn’t been by choice because infrastructure in areas such as North Dakota is lacking.
“This industry spent 50 to 70 years building a pipeline infrastructure backbone to move products, natural gas and crude, around the country. And the unconventional revolution completely radically changed that landscape,” he said.
Under those circumstances, Noble is being careful and steadfast on its trucking methods and incorporating them into the company’s Marcellus acreage.
“One thing that we’ve had the advantage of is having two huge positions in two of the better plays and being able share learnings across those,” he said. “So we can test something in one area and very quickly implement it somewhere else.”
Through a sharpened business focus and a transition to horizontal drilling, Willingham said that Noble has unlocked a huge resource potential.
In 10 years, the company’s reserves in the D-J Basin have nearly tripled to 451 million barrels of oil equivalent (MMboe) from about 152 MMboe in 2004.
“As we’ve grown these basin-wide resource plays, it really has become much more of a manufacturing process," he said. "Especially in these climbing price environments, cost efficiency and scale are kind of that much more important."
However, Noble will soon have two new core plays in Texas to explore.
In May, Noble entered an agreement with Rosetta Resources Inc. (ROSE) to acquire the company in a $3.9 billion, all-stock deal, gaining 56,000 net acres in the Permian Basin and 50,000 in the Eagle Ford Shale. The deal is expected to close in the third quarter of 2015.
Willingham said he’s looking forward to applying some of the same concepts Noble has developed to the company’s newly acquired positions.
He said the Permian acreage lends itself to the same type of integrated development plan concept that Noble has done in the D-J Basin.
“We’ll bring a lot of those same concepts of longer laterals, consolidated facilities and driving efficiencies down there,” he said.
Contact the author, Emily Moser, at emoser@hartenergy.com.
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