350 Million Reasons This Oil Producer Is Expanding in the Gulf of Mexico

Noble Energy Inc. bought some of BP plc's assets to expand its offshore operations in the Gulf of Mexico.

Jun 23, 2014 at 9:32AM

While the terms of the deal weren't disclosed, Noble Energy (NYSE:NBL) purchased part of BP plc's Gulf of Mexico assets to expand its offshore operations. For an undisclosed sum, Noble Energy received a 50% working interest in 13 offshore leases and an average 26% working interest in four additional leases. 

Investors are going to focus on the results from the Bright prospect's current drilling program, which is due out by the end of the third quarter of this year. The well is targeting 90 MMBoe-350 MMBoe in gross resources, which is mostly weighted toward oil. It still remains to be seen if those numbers will hold up, but by looking at Noble Energy's current Gulf of Mexico operations, shareholders can get an idea of what to expect. 

Comparing existing assets to new assets
The Big Bend project, which Noble is operating with a 54% working interest, is projected to start producing by the end of next year. Through the Big Bend project, Noble Energy is targeting 30 MMBoe-65 MMBoe in gross resources, with future exploration opportunities offering up an additional 30 MMBoe-50 MMBoe. With a peak production rate of 22,000 boe/d, 90% of which is crude, Noble stands to make a pretty penny on its investment. Within two years Noble Energy will have recouped its development costs, and future reserve discoveries will further enhance the free cash flow opportunities from the Big Bend project. 

Another Gulf of Mexico operation Noble Energy has a 50% working interest in is the Katmai prospect, which could hold as much as 160 MMBoe of gross resources. In Noble Energy's next earnings release, management plans on updating shareholders on its Katmai drilling results. If the Katmai turns up liquid gold, then investors can be rest assured that Noble Energy's future in the Gulf of Mexico will be a profitable one.

At the high end of its guidance, the amount of recoverable reserves the Big Bend and Katmai projects offer still falls short of the 350 MMBoe the Bright prospect could yield. The old saying, "You shouldn't count your chickens until they hatch" still holds true in this scenario, but based on Noble Energy's past successes in the Gulf, there is ample room for optimism. While success in the Big Bend or Katmai projects don't guarantee success in the Bright prospect, it does point toward Noble Energy's ability to pick the right places to develop in one of the best offshore plays around. 

Foolish conclusion
Without knowing how much Noble Energy paid BP for these assets, or what the drilling results are going to be, it's impossible to tell if Noble Energy got a good deal or not. But if history is any indicator of future success, Noble Energy may strike gold yet again. 

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Callum Turcan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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