While the terms of the deal weren't disclosed, Noble Energy (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.
