Chesapeake unconventional gas stake deep

Chesapeake Energy reported an 11% increase in proved reserves to 12.1 tcf of gas equivalent in 2008 and detailed the depth of the company's commitment to US unconventional gas.

Feb. 17, 2009

3 min read

By OGJ editors
HOUSTON, Feb. 17 -- Chesapeake Energy Corp., Oklahoma City, reported an 11% increase in proved reserves to 12.1 tcf of gas equivalent in 2008 and detailed the depth of the company's commitment to US unconventional gas.

Chesapeake, which is operating 112 drilling rigs in the US, replaced 239% of its 2008 production.

The company said it has leading positions in the four largest US shale gas plays—Haynesville, Marcellus, Barnett, and Fayetteville—in which it holds 2.44 million net acres and is producing a combined 870 MMcfd of gas.

Further, Chesapeake holds 8.16 million net acres in other unspecified unconventional plays, from which it is producing 780 MMcfd.

The company drilled 1,819 gross operated wells, 1,491 net wells with an 82% average working interest, in 2008 and participated in another 1,857 wells operated by other companies with 13% average working interest.

Since 2000, Chesapeake has acquired $12.6 billion in acreage and 3D seismic and owns the largest combined inventories of onshore leasehold at 15.2 million net acres and 3D seismic at 21.6 million acres in the US.

The company plans to direct 75% of its gross drilling capital expenditure in 2009-10 to the four main shale plays.

Chesapeake plans to average 26 rigs in the Haynesville in 2009 to develop its 460,000 net acres, and its joint venture partner Plains Exploration & Production Co. will pay 50% or $975 million of Chesapeake's drilling costs in 2009-10 in the play. Chesapeake estimates reaching 300 MMcfd net from the Haynesville at the end of 2009 compared with 70 MMcfd at present.

Chesapeake plans to greatly accelerate Marcellus shale drilling in 2009-10. It will average 14 rigs in 2009 to further develop its 1.25 million net acres, the play's largest holding. The company expects to end 2009 as the play's most active driller and largest gas producer. It is in joint venture there with StatoilHydro, which will carry 75% or $650 million of Chesapeake's drilling costs in 2009-10.

Chesapeake expects to reach a net 725 MMcfd from the North Texas Barnett shale play by the end of 2009 compared with 610 Mmcfed at present, the play's second largest, and 570 MMcfed in the last quarter of 2008.

Chesapeake will average 25 rigs in 2009 to further develop its 310,000 net acres in the Barnett, where it is discussing joint ventures with several large international energy companies.

The company plans to exit 2009 producing a net 235 MMcfed from the Fayetteville shale in Arkansas, where at 420,000 net acres it is the second largest lease owner in the core and top tier areas of the play. Current net output is 180 MMcfed.

Chesapeake expects to average 20 rigs in 2009, when its partner BP PLC will pick up $535 million or nearly all of its drilling costs.