With his seventh shale-related joint venture (JV) in hand, Chesapeake Energy Corp. CEO Aubrey McClendon said Friday the company has plans to take partners in three, maybe more, U.S. leaseholds in 2012. The long-time shale promoter also claimed a leadership position for the company in the new natural gas age.

Chesapeake “basically changed single handedly” the natural gas market in North America, McClendon said in an earnings conference call.

“During the past 11 years Chesapeake has increased its gross operating natural gas from 1.1 Bcf/d to 5.4 Bcf/d. In doing so, we have single handedly generated almost half of the industry’s growth in natural gas production.” Chesapeake’s gas output “grew 475% over the past decade…Collectively, the rest of the industry grew [gas output] 12% over the past decade.”

The Oklahoma City-based producer Thursday announced its seventh shale-related JV, involving a portion of its Utica Shale leasehold with an undisclosed foreign partner for an estimated $3.4 billion. Two transactions are on the table to monetize a portion of Chesapeake’s 1.5 million net acres in the Utica Shale of Ohio.

In JV agreement the producer has a letter of intent (LOI) with an undisclosed “international major energy company” under which the foreign company would acquire an undivided one-quarter stake in 650,000 net acres of the Utica play in the wet natural gas area. Of the acreage to be provided through the JV, Chesapeake owns about 570,000 net acres while 80,000 net acres are owned by Houston-based EnerVest Ltd. and its affiliates (see related story).

The JV transaction, which would cover all or a portion of 10 counties in eastern Ohio, is worth about $15,000/acre net, or about $2.14 billion to Chesapeake and $300 million to EnerVest. Close to $640 million is to be paid to Chesapeake by the foreign investor when the transaction closes, with another $1.5 billion paid in the form of a drilling and completion cost carry, which is expected to be completed by the end of 2014.

Chesapeake would operate the JV and conduct all of the leasing, drilling, completion, operations and marketing activities for the area of mutual interest (AMI). The JV partner would have the option to acquire a one-quarter stake of any additional acreage acquired by Chesapeake in the AMI and the option to participate for a one-quarter interest in midstream infrastructure related to production generated from the assets. Closing is expected by mid-December.

In the second transaction, Chesapeake sold $500 million of perpetual preferred shares of its newly formed entity CHK Utica LLC to EIG Global Energy Partners. Chesapeake plans to sell up to $750 million of additional CHK Utica preferred shares to other investors, including limited partners of EIG, by the end of this month. CHK Utica owns about 700,000 net leasehold acres within the EIG AMI in the Utica Shale, which covers 13 counties in eastern Ohio.

While McClendon focused on pending deals, analysts on the conference call Friday peppered McClendon with questions about the company’s third quarter earnings report, which indicated rising debt levels and continued heavy spending in the U.S. onshore. Chesapeake’s common stock dropped 6.75% Friday to $27.07.

“I think the emphasis is misplaced on what we’re spending, not what we’re finding,” McClendon said. The debt levels are expected to decline in 4Q2011 as the company applies an expected $2.3 billion in cash from various transactions to its revolving line of credit.

“We will come up with the cash we need to run our business,” said McClendon.

McClendon told analysts that in the past 11 years the company had “built the largest combined inventories of onshore leasehold,” which now totals an estimated 15 million net acres, along with 30-plus million acres of 3-D seismic.

“The company has also accumulated the largest inventory of U.S. natural gas shale play leasehold,” estimated at 2.5 million net acres, “and now owns the leading position in 12 of what Chesapeake believes are the top 15 unconventional liquids-rich plays in the U.S. — the Granite Wash, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin; the Avalon, Bone Spring, Wolfcamp and Wolfberry plays in the Permian Basin; the Eagle Ford Shale in South Texas; the Niobrara Shale in the Powder River and Denver-Julesburg basins; the Bakken/Three Forks in the Williston Basin; and the Utica Shale in the Appalachian Basin.”

More partnerships are planned for the coming year.

“We might have three JVs in 2012,” McClendon said, acknowledging that partnerships are possible on its leaseholds in the Williston Basin in the Dakotas and the Mississippi Lime in Oklahoma and Kansas. In addition, “we are well on our way to 500,000 acres in another oil play that we’re not ready to discuss yet. Once we drill a few wells in it, we’ll have more to chat about.”

A second JV also is possible in the dry gas window in the Utica; the deal announced on Thursday was in the wet gas area.

In the still-to-be disclosed stealth play, Chesapeake has “multiple thousands” of acres and it’s “not in California and not in the Tuscaloosa Marine Shale,” both of which have become too expensive for entry. “The vast majority of the leasehold will be wrapped up within year’s end and then we’ll become more chatty.”

Including the Utica JV, Chesapeake in the past three years to date has secured partners to help fund its drilling program in the Haynesville, Barnett, Fayette, Marcellus, Niobrara and the Eagle Ford shales.

The new Utica partner “is very large, very well respected…and the deal is very attractive to them and to us. It’s a complete win-win for both companies.” In time, he said, the Utica will be “proven up as the best play” in the United States.

However, McClendon didn’t want to discuss any well results because “the last time we did acreage prices doubled within weeks.” Rex Energy Corp. a few days ago said it had completed a well in Butler County, PA, in the Utica formation with a 3,551-foot lateral length and 12 stages of fracture stimulation, which produced 9.2 MMcf/d over a 24-hour period.

“Rex had snappy Utica tests,” said the CEO. “Well test results should begin accelerating over 2012,” including some from Range Resources Corp., he added. “So far in the Utica we’ve spudded 19 horizontal wells and seven are now producing. The rest are drilling and completing…waiting on production or pipelines.” Ultimately, Chesapeake expects to spend $15-20 billion in the Utica Shale.

Like many other onshore producers Chesapeake has been shifting its drilling from dry natural gas to oily and natural gas liquids (NGL) deposits. The company in fact expects to keep its net gas production “essentially flat” for as long as the next five years, or until prices rebound, said McClendon.

Chesapeake doesn’t expect to continue its spectacular production growth. In next five years “it will be very different from now. We feel that the futures curve is pricing natural gas incorrectly…The same company that brought the gas oversupply has not decided to increase liquids production; natural gas won’t increase much from here.

“If natural gas demand picks up from coal-to-gas switching, from demand growth and if LNG [liquefied natural gas] exports begin in 2015, as we believe they will, we’ll grow our natural gas production to ensure U.S. gas markets remain well supplied.”

In 3Q2011 Chesapeake’s net income rose to $879 million ($1.23/share), operating cash flow was $1.41 billion and earnings before interest, taxes, depreciation and amortization was $2.01 billion. Revenue totaled nearly $4 billion.

Total natural gas, natural gas liquids (NGL) and oil production in the latest quarter was 306 Bcfe. Average daily output was 3.33 Bcfe/d, up 9% year/year (y/y) and 9% sequentially. Liquids output jumped 91% from a year ago and 21% sequentially.

Natural gas production, which rose 1% y/y, was 83% of total output at 254 Bcf. A year ago gas was 90% of Chesapeake’s output. Oil and NGL production climbed to 8,669 bbl in the latest period from 4,533 bbl and was up sequentially from 7,192 bbl. Average prices realized in 3Q2011 were $4.82/Mcf and $63.03/bbl, for a realized natural gas equivalent price of $5.78/Mcfe.

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