Chesapeake Energy Corp. believes the Utica shale in eastern Ohio offers a major new liquids-rich play based on 3,200 ft of proprietary core samples it obtained from nine wells and production results from three wells.
“As a result of its analysis, the company believes the Utica shale will be characterized by a western oil phase, a central wet gas phase, and an eastern dry gas phase,” said Aubrey K. McClendon, Chesapeake's chief executive officer.
Based on 2 years of proprietary petrophysical and engineering research, McClendon expects the Utica play “will be economically superior to the Eagle Ford shale” in South Texas for his company. Chesapeake’s data on the Utica includes 2,000 well logs and petrophysical data on 200 wells.
Chesapeake has 1.25 million net leasehold acres in the Ohio Utica where it is running five operated rigs. The company expects to have eight Utica rigs by the end of 2011, 16-20 rigs by yearend 2012, and 40 rigs by yearend 2014. McClendon said Chesapeake has spent $1.5-2 billion on leases there and continues to acquire more acreage.
McClendon said Chesapeake is seeking a joint venture partner or other financial alternatives for its Utica operations. “Any solution will have upfront cash,” he said.
The Oklahoma City independent increased its planned overall drilling and completion capital expenditure budget for each of full-year 2011 and 2012 by $500 million to a range of $6-6.5 billion/year. McClendon attributed the increase to oil service inflation and a more accelerated drilling program in the Utica.
The producer has offset some service inflation through subsidiaries that own drilling rigs, pressure pumping equipment, and various other services. All those are organized under Chesapeake Oilfield Services LLC.
Chesapeake reported that 81 of its 166 operated rigs are on focused on unconventional natural gas plays, 82 are drilling for unconventional liquids-rich plays, and three are drilling conventional gas plays.
During this year’s first half, Chesapeake drilled 759 gross operated well (480 net wells with an average working interest of 63%) and participated in another 708 gross nonoperated wells (104 net wells with an average working interest of 15%).
Since 2000, it has accumulated a leasehold position of 2.5 million net acres in US gas shale plays and owns a leading position in 12 of what Chesapeake believes are the top 15 unconventional liquids-rich plays in the US: the Granite Wash, Cleveland, Tonkawa, and Mississippian plays in the Anadarko basin; the Avalon, Bone Spring, Wolfcamp, and Wolfberry plays in the Permian basin; the Eagle Ford; the Niobrara in the Power River and DJ basins; the Bakken-Three Forks in the Williston basin; and the Utica in the Appalachian basin. Chesapeake has production in some but not all of these plays yet.
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