Chesapeake Energy Corp.'s U.S. natural gas output should surpass that of leaders BP plc and Anadarko Petroleum Corp. within the next two months, CEO Aubrey McClendon said Friday.
Speaking at the company's annual shareholder meeting, McClendon said Chesapeake's daily gas production in 1Q2008 was only 86 MMcf/d below that of BP's U.S. output. Chesapeake's average output in 2007 was 1,957 MMcf/d, which was 23% higher than in 2006. The company, with 33,700 drilling locations in gas-rich basins across the United States, has its largest backlog of drilling opportunities in history, he said.
"We're here trying to produce more clean-burning, American-produced natural gas to meet America's demand for a fuel that can allow us to import less oil from unfriendly places around the world, hopefully burn a little less coal, have a better environment and at the same time, create jobs and wealth right here in the U.S.," he said.
Chesapeake's investors Friday cheered news of the company's expansion into the emerging Haynesville Shale and sent the share price up more than 5% by early afternoon.
The Oklahoma City-based producer's share price stood at $59.15 around 1 p.m. EDT, up $3.07 from its opening bid, to make it one of the biggest gainers on the New York Stock Exchange.
Chesapeake now owns or has commitments for around 500,000 net acres of leasehold in the Haynesville Shale, McClendon said. In March Chesapeake said it controlled 200,000 net acres, and McClendon said the company's goal was to capture 500,000 net acres by the end of 2009 (see NGI, March 31). Chesapeake could control "as much as 20 Tcfe over time," said the CEO.
"In the past month, the company has successfully completed two additional horizontal wells in the play at flow rates comparable to its first four horizontal wells and the company anticipates completing two more horizontal wells by the end of June," Chesapeake said. "As a result of ongoing drilling success in the play, the company has elected to continue its leasehold acquisition efforts."
Chesapeake now is using five operated rigs to develop its Haynesville Shale leasehold and expects to operate "at least 12 rigs by year-end 2008 and at least 30 rigs by year-end 2009."
The company's "technical analysis of the play over the past two years combined with the impressive drilling results on our first six horizontal wells and wells recently drilled by others in the industry continue to support our assessment that the Haynesville Shale play could potentially have a larger impact on the company than any other play in which we have participated to date," said McClendon.
Following the news, John Gerdes of SunTrust Robinson Humphrey/the Gerdes Group said initial drilling results "suggest horizontal Bossier/Haynesville Shale wells should recover +3 Bcfe for a drill/complete cost of $7 million."
RBC Capital Markets analyst Scott Hanold said Chesapeake should have more quantitative results about the Haynesville Shale in the last six months of 2008.
"Notably," Hanold wrote in a note, "Chesapeake now indicates its Haynesville leasing effort will include East Texas, which is where Penn Virginia Corp. recently has seen strong results" (see NGI, June 2). "We think East Texas could be a sweet spot."
XTO Energy Inc. late last year said it would pour most of its capital budget into emerging gas plays in East Texas and Louisiana (see NGI, Nov. 19, 2007), and other explorers are expanding development in East Texas and northwestern Louisiana, including Anadarko Petroleum Corp., Apache Corp., Cabot Oil & Gas, Devon Energy Corp., Cubic Energy Inc., GMX Resources, Goodrich Petroleum Corp. and Penn Virginia (see NGI, Jan. 21; Sept. 24, 2007; Aug. 6, 2007; June 18, 2007). EnCana Corp. also is a neighbor, operating in the Amoruso Field of the Deep Bossier in East Texas, a field that CEO Randy Ereseman called "the best emerging unconventional gas play in North America" (see NGI, Nov. 12, 2007).
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