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CHK » Topics » Upward by 22% in the 2006 Second Quarter

This excerpt taken from the CHK 8-K filed Jun 8, 2006.

Upward by 22% in the 2006 Second Quarter

 

As of March 31, 2006, the company’s Barnett Shale proved reserves were 464 bcfe of the company’s total proved reserves of 7.8 tcfe. Following a review of Chesapeake’s Barnett Shale drilling results over the past 18 months and a comprehensive study of industry production data, the company has raised its estimate of average recoverable reserves on its existing proved Barnett Shale assets by approximately 100 bcfe, or an increase of 22%. Pro forma for the announced Barnett Shale acquisitions, its increased estimate of recoverable reserves and its anticipated development plan, Chesapeake estimates its total proved and unproved Barnett Shale reserve potential on its 153,000 net acres to be approximately 4.0 tcfe as of June 30, 2006.

 

With the anticipated growth in the company’s proved reserves base and pro forma for the acquisitions announced today, Chesapeake expects to report 8.2 – 8.4 tcfe of proved reserves (based on March 31, 2006 oil and natural gas prices) and total proved and unproved reserves of approximately 20 tcfe as of June 30, 2006. To calculate its unproved reserves, Chesapeake uses a probability-weighted statistical approach to estimate the potential number of drillsites and potential unproved reserves associated with such drillsites.

 

Today’s developments follow a consistent path of achievement for Chesapeake in the Barnett Shale. In the 18 months prior to today’s announcements, Chesapeake invested approximately $800 million to acquire approximately 55,000 net acres in three significant transactions with Hallwood Energy Corporation and a private independent producer. In those acquisitions, the company acquired 49 mmcfe of initial net daily production and approximately 250 bcfe of proved reserves. After investing an additional $212 million to drill 91 wells in Johnson and Tarrant Counties, Chesapeake’s Barnett Shale net production now exceeds 110 mmcfe per day and development costs to date have averaged only $1.47 per mcfe.

 

 

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The keys to success for Chesapeake in the Barnett Shale play have been threefold:

 

 

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focus on acquiring leasehold in the Johnson and Tarrant County “sweet spot” where the Barnett Shale is greater than 250 feet thick, where the frac barrier is non-water bearing and where the shale is thermally mature and in the dry gas window;

 

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utilize the company’s horizontal drilling expertise to generate better production and lower costs. Since 1990, Chesapeake has drilled almost 800 horizontal wells in the U.S. and has been a leader in improving horizontal drilling and completion technologies; and

 

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leverage the company’s industry-leading shale expertise. Chesapeake is the only company in the U.S. active in shale plays in West Texas, North Texas, southeastern Oklahoma, Arkansas and throughout the Appalachian Basin.

 

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