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CHK » Topics » Unconventional Gas Resource Plays

This excerpt taken from the CHK 8-K filed Feb 15, 2008.
Unconventional Gas Resource Plays– From its unconventional gas resource plays, the company is producing approximately 1.1 bcfe net per day.  In these plays, the company is currently using 96 operated drilling rigs to further develop its inventory of 3.6 million net acres.  Chesapeake’s proved developed reserves in unconventional gas resource plays are 3.0 tcfe, its proved undeveloped reserves are 2.4 tcfe and assuming 21,400 net wells are drilled in the years ahead, its estimated risked unproved reserves are 22.8 tcfe (45.2 tcfe of unrisked unproved reserves).  Six of Chesapeake’s most important unconventional gas resource plays are described below:

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Fort Worth Barnett Shale (North Texas):  The Fort Worth Barnett Shale is the largest and most prolific unconventional gas resource play in the U.S.  In this play, Chesapeake is the second-largest producer of natural gas, the most active driller and the largest leasehold owner in the Core and Tier 1 sweet spot of Tarrant, Johnson and western Dallas counties.  Chesapeake is producing approximately 410 mmcfe net per day from the Fort Worth Barnett Shale.  As a result of the company’s favorably positioned leasehold and its active drilling program, Chesapeake’s net production in the Fort Worth Barnett Shale play has increased by approximately 80 mmcfe per day, or 24%, over the past three months and has increased by approximately 235 mmcfe per day, or 134%, over the past year.  Chesapeake is currently using 39 operated rigs to further develop its 260,000 net acres of leasehold, of which 220,000 net acres are located in the prime Core and Tier 1 areas.  At its current pace of drilling, Chesapeake expects to be completing, on average, one new Barnett Shale well approximately every 15 hours through at least 2012.  Chesapeake’s proved developed reserves in the Fort Worth Barnett Shale are an estimated 1.2 tcfe, its proved undeveloped reserves are an estimated 840 bcfe and assuming an additional 3,550 net wells are drilled in the years ahead, its estimated risked unproved reserves are 5.9 tcfe (7.3 tcfe of unrisked unproved reserves).  The company’s targeted results for Core and Tier 1 horizontal Fort Worth Barnett Shale wells are 2.65 bcfe at a cost of $2.6 million on approximately 50-acre spacing.  Since entering the play in 2004, the company has drilled approximately 700 horizontal Fort Worth Barnett Shale wells.
 
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Fayetteville Shale (Arkansas):  In the Fayetteville Shale, Chesapeake is the second-largest leasehold owner in the Core area of the play and is producing approximately 100 mmcfe net per day.  Over the past three months, Chesapeake’s net production in the Fayetteville Shale play has increased by approximately 40 mmcfe per day, or 67% and, over the past year, has increased by approximately 90 mmcfe per day, or 900%.  Chesapeake is currently using 11 operated rigs to further develop its 585,000 net acres of leasehold in the Core area of the play.  Chesapeake’s proved developed reserves in the Fayetteville Shale are an estimated 190 bcfe, its proved undeveloped reserves are an estimated 145 bcfe and assuming an additional 5,725 net wells are drilled in the years ahead, its estimated risked unproved reserves are approximately 9.3 tcfe (21.5 tcfe of unrisked unproved reserves).  The company’s targeted results for horizontal Fayetteville Shale wells are 2.0 bcfe at a cost of $3.0 million on approximately 80-acre spacing.  Since entering the play in 2005, the company has drilled approximately 140 horizontal Fayetteville Shale wells.

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Sahara (primarily Mississippi, Chester and Hunton formations in Northwest Oklahoma):  In this vast play that extends across five counties in northwestern Oklahoma, Chesapeake is the largest producer of natural gas, the most active driller and the largest leasehold owner.  Chesapeake is producing approximately 180 mmcfe net per day in the Sahara area.  The company is currently using 12 operated rigs to further develop its 850,000 net acres of leasehold.  Chesapeake’s proved developed reserves in Sahara are an estimated 557 bcfe, its proved undeveloped reserves are an estimated 493 bcfe and assuming an additional 9,000 net wells are drilled in the years ahead, its estimated risked unproved reserves are approximately 3.5 tcfe (4.0 tcfe of unrisked unproved reserves).  The company’s targeted results for vertical Sahara wells are $0.9 million to develop 0.55 bcfe on approximately 70-acre spacing.  Since entering the play in 1999, the company has drilled approximately 1,400 vertical and horizontal Sahara wells.
 
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Deep Haley (primarily Strawn, Atoka and Morrow formations in West Texas):  In this West Texas Delaware Basin area, Chesapeake is the largest leasehold owner and the most active driller.  Chesapeake’s production from Deep Haley is approximately 100 mmcfe net per day.  The company is currently using nine operated rigs to further develop its 550,000 net acres of leasehold.  Chesapeake’s proved developed reserves in Deep Haley are an estimated 138 bcfe, its proved undeveloped reserves are an estimated 153 bcfe and assuming an additional 325 net wells are drilled in the years ahead, its estimated risked unproved reserves are approximately 1.3 tcfe (7.3 tcfe of unrisked unproved reserves).  The company’s targeted results for vertical Deep Haley wells are $12.0 million to develop 6.0 bcfe on approximately 320-acre spacing.  Since entering the play in 2004, the company has drilled approximately 60 Deep Haley wells.

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Ark-La-Tex (primarily Travis Peak, Cotton Valley, Pettit and Bossier formations):  In this large region covering most of East Texas and northern Louisiana, Chesapeake has assembled a strong portfolio of unconventional gas resource plays.  Chesapeake is one of the ten largest producers of natural gas, the third most active driller and one of the largest leasehold owners in the area.  Chesapeake is producing approximately 120 mmcfe net per day in the Ark-La-Tex area.  The company is currently using six operated rigs to further develop its 220,000 net acres of leasehold.  Chesapeake’s unconventional proved developed reserves in the Ark-La-Tex region are an estimated 371 bcfe, its proved undeveloped reserves are an estimated 244 bcfe and assuming an additional 950 net wells are drilled in the years ahead, its estimated unconventional risked unproved reserves are approximately 400 bcfe (1.9 tcfe of unrisked unproved reserves).  The company’s targeted results for medium-depth vertical Ark-La-Tex wells are $1.7 million to develop 0.9 bcfe on approximately 55-acre spacing.

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Granite, Atoka and Colony Washes (western Oklahoma and Texas Panhandle):  Chesapeake is the largest producer of natural gas, the most active driller and the largest leasehold owner in the various Wash plays of the Anadarko Basin.  Chesapeake is producing approximately 160 mmcfe net per day from these plays.  The company is currently using 11 operated rigs to further develop its 200,000 net acres of Wash leasehold.  Chesapeake’s proved developed reserves in the Wash plays are an estimated 430 bcfe, its proved undeveloped reserves are an estimated 451 bcfe and assuming an additional 1,225 net wells are drilled in the years ahead, its estimated risked unproved reserves are approximately 1.8 tcfe (2.5 tcfe of unrisked unproved reserves).  The company’s targeted results for vertical Granite and Atoka Wash wells are $3.3 million to develop 1.5 bcfe on approximately 80-acre spacing.  The company’s targeted results for horizontal Colony Wash wells are $6.5 million to develop 5.5 bcfe on approximately 160-acre spacing.
 
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