Chesapeake Energy Corp. CEO Aubrey McClendon told financial analysts on Friday the company’s Utica Shale leasehold in Ohio “is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas.”

McClendon has always been his company’s biggest cheerleader, but the geologist in him has a good nose for shale. In 2008 he claimed that the emerging Haynesville Shale’s gas wells would be three times more prolific than those in the Barnett Shale (see Daily GPI, July 7, 2008). There are arguments about the abundance of resources in the two plays, but the Haynesville Shale today is the most prolific gas play in the United States and it has or will soon surpass the Barnett Shale in output (see Shale Daily, April 26; March 22).

On Friday the CEO expounded on the Utica during a conference call to discuss Chesapeake’s second quarter performance. The company, which is the leading leaseholder in the Ohio portion of the play, now has an estimated 1.25 million net acres in the eastern part of the state, he said.

“We believe the Utica Shale will be characterized by a western oil phase, a central wet gas phase and an eastern dry gas phase and is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas,” McClendon told analysts. Chesapeake now is drilling in the central part of the play.

Until now Chesapeake has been mum about its Utica development, although McClendon last year acknowledged that the company had purchased a sizable stake in the play from privately held Anschutz Exploration Co. (see Shale Daily, Nov. 5, 2010;Oct. 8, 2010). It also has partnered with Houston’s EnerVest Ltd. on close to 150,000 net acres in the leasehold.

“We felt like it was the right time to answer some questions and comment on the rumors out there,” McClendon said when asked why the company was promoting its Utica discovery at this time. “This is a nice first release of information about the play. People can digest it and we will be more chatty over time and other companies will be as well. We expect other companies to start drilling wells pretty quickly.”

Company data includes about 2,000 well logs, petrophysical data on about 200 wells, 3,200 feet of proprietary core samples from nine wells and production results from three wells. McClendon demurred when asked what the initial production rates were on the three wells. However, he said that based on internal data the acreage “could be worth $15-20 billion in increased value to the company.”

Five operated rigs now are in operation to further evaluate and develop the leasehold. By the end of this year the rig count is slated to increase to eight and be “at least” 16-20 by the end of 2012. Depending on its further development, the company could be using 40 rigs by the end of 2014, said McClendon.

Infrastructure to advance development is a question mark.

“Like everywhere we’ve been, there’s not been much infrastructure there and we quickly overwhelm it,” McClendon said. “But where we go, service companies follow. All of the delays and all of the challenges in a play like the Utica are some that we’ve met before…in the Barnett, Haynesville and Eagle Ford. We’ll meet them here.”

The Utica, however, also has a number of “advantages” that other unconventional resource areas, including the Marcellus, don’t necessarily have, he said. “There’s plenty of water and the topography is less changing than in West Virginia and eastern Pennsylvania.

“And activity can rejuvenate this area. We’re quite pleased with the quality and the size of the workforce…There are great transportation alternatives. We’re close to the Ohio River if we need to barge out oil. Just lots of advantages to eastern Ohio. If I picked another place to develop, this is pretty much mostly ideal for a big, new play.”

Ohio Gov. John Kasich, who McClendon said was a “strong” backer of Chesapeake’s plans, said the announcement about Utica development was “huge news for Ohioans and I’m simply thrilled to hear it.”

The company continues to acquire acreage in the Utica, and while the business climate may be right, there’s no rush to push development. “We’ve spent between $1.5 billion and $2 billion on leaseholds to date,” said the CEO. “We won’t be in as big a rush as we were in the Barnett and the Haynesville.”

Similar to other joint ventures it has completed in shale plays, Chesapeake wants to increase development in the Utica “through an industry joint venture process or through a number of other monetization alternatives” that could be completed by the end of the year. McClendon said the company has been approached by a several companies but he declined to comment on the progress of talks.

Chesapeake’s management team didn’t confine its remarks to the Utica. The company’s production, which is moving more to oils and liquids, also is progressing across the United States. Only in the gassy Haynesville are rigs actively coming down. Currently there are 30 rigs operating in the play with nine just about to be pulled out and by the end of the year there will be 15 rigs in operation. Higher production in the play could resume once gas prices climb, said McClendon.

Asked how strong Chesapeake’s gas production was in terms of its well performance, the CEO saw an opportunity to blast recent stories in the New York Times that claimed initial production rates from shale gas wells were strong but fell quickly over time.

“It’s really the opposite of what you read in the New York Times,” said McClendon. “As you drill more wells in the play [production] gets better, not worse. Our first Marcellus estimate was 3 Bcf/d. We’ve stepped it up as have others and we are finding that production now is about 5.7 Bcf/d…Production is overrunning our estimates predicated on lower EURs,” or estimated ultimate recovery rates.

In the Haynesville Shale and other plays “production rates over time have increased as we learn more about the play. Sometimes people forget that these are 200-foot shale formations and we still have a lot to learn about them. Where’s the right 20 feet, 30 feet to drill? Now we are more optimally place well bores…The Barnett started at 1.6 Bcf/d and now it’s up to 3.3 Bcf/d per well.

“This is what’s so different about what we do today. In the old days the first play was the best play. Now we drill the worst wells first and that’s one reason we are so optimistic about the Utica. It gives us a lot of optimism about what we see down the road. There’s outperformance generally across the board among the best gas wells in the Marcellus, the Haynesville and others.”

Chesapeake also reported second quarter results on Friday. Net income rose to $467 million (68 cents/share), nearly double the year-ago earnings of $235 million (37 cents). Profits were 4 cents higher than Wall Street estimates.

Total production in the latest period rose 9% year/year to 3 Bcfe/d.

Because of higher costs to drill wells in the onshore, the Oklahoma City-based independent plans to increase its drilling budget by $500 million through the end of 2011 and will spend up to $6.5 million this year and in 2012. The company today is operating close to 160 rigs across the United States, the most of any driller.