Oil and Gas Lawyer Blog
Chesapeake Energy Corporation summarized its activities in the country’s “Big 6” shale plays in its Operational Update issued on February 16. The report reveals the huge impact Chesapeake has had on shale plays from New York to South Texas.
Chesapeake is the eighth largest E&P company ranked by total assets according to the Oil & Gas Financial Journal, behind ExxonMobil, Chevron, ConocoPhillips, Anadarko, Marathon, Occidental and XTO Energy. It also ranks eighth in exploratory spending and market capitalization, and twelfth in total revenue. (Chesapeake’s market cap is 18% of ExxonMobil’s.) In 2009, Chesapeake drilled 1,148 gross operated wells, which it called “the industry’s most active drilling program,” spending $2.941 billion. Its leashold inventory at the end of 2009 was 13.7 million net acres.
Here are some highlights from Chesapeake’s report:
Barnett Shale
Chesapeake is the second-largest producer in the Barnett and the most active driller. In January 2010, Chesapeake sold a 25% interest in its Barnett acreage to Total E&P USA for $2.25 billion ($800 million in cash and $1.45 billion by funding 60% of Chesapeake’s share of drilling and completion expenditures).
Net acreage: 220,000
Current daily production: 515 mmcfe
Estimated drilling density: 60 acres/well
Net leasehold investment: $13,400/net acre
2010 activity: 300 net wells with 28 rigs
Haynesville Shale
Chesapeake is the largest leasehold owner and most active driller of new wells in this play in Northwest Louisiana and East Texas. Chesapeake sold a 20% interest in its position to Plains Exploration & Production Company for $1.1 billion.
Net acreage: 535,000
Current daily production: 375 mmcfe
Estimated drilling density: 80 acres/well
Net leasehold investment: $4,600/net acre
2010 activity: 200 net wells with 41 rigs
Marcellus Shale
This play spans from northern West Virginia across Pennsylvania into southern New York. In 2009, Chesapeake sold a 32.5 interest in its Marcellus acreage to Statoil, and Statoil agreed to pay 75% of Chesapeke’s drilling costs up to $2.16 billion. Chesapeake says it is the largest leasehold owner in the play.
Net acreage: 1,570,000
Current daily production: 65 mmcfe
Estimated drilling density: 80 acres/well
Net leasehold investment: $330/net acre
2010 activity: 175 net wells with 32 rigs
Fayetteville Shale
Chesapeake calls the Fayetteville Shale the second most productive shale play in the U.S., and says it is the second-largest leasehold owner in the Core area of the play. It sold a 25% interest in its leasehold to BP for $883 million, recouping its entire leasehold investment in the play and “resulting in a per net acre cost of less than zero.”
Net acreage: 455,000
Current daily production: 340 mmcfe
Estimated drilling density: 80 acres/well
Net leasehold investment: $0/net acre
2010 activity: 175 net wells with 32 rigs
Bossier Shale
The Bossier Shale play has developed as a separate play overlapping in part the area of the Haynesville. Chesapeake reports it as a separate play in which it has 180,000 net acres, but it shows no rigs operating in the play and does not disclose any current production from the play.
Eagle Ford Shale
The newest shale play is in South Texas, running from Zavala and Dimmit Counties on the west through LaSalle, McMullen, Frio, Atascosa, Karnes and DeWitt Counties going east. Chesapeake said it had 80,000 acres in the play at the end of 2009, and now has 150,000 acres.
Chesapeake says that it “is currently using 118 operated drilling rigs to further develop its inventory of approximately 35,750 net drillsites, which represents more than a 10-year inventory of drilling projects.” Its 2009 fourth-quarter production was 241 bcfe, which was 93% gas and 7% oil and natural gas liquids, on a natural gas equivalent basis.
Chesapeake reported a net loss to common shareholders for 2009 of $5.853 billion ($9.57 per common share. Those results included “various items that are typically not included in published estimates of the company’s financial results by certain securities analysts,” according to Chesapeake, including $6.875 billion as a “non-cash after-tax impairment charge … related to the carrying value of natural gas and oil properties under the full-cost method of accounting.” Excluding those “items,” Chesapeake’s net income to common shareholders for the year was $1.585 billion, or $2.55 per common share.