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 companys Barnett Shale proved reserves were 464 bcfe of the companys total proved reserves of 7.8 tcfe. Following a review of Chesapeakes 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 companys 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.
Todays developments follow a consistent path of achievement for Chesapeake in the Barnett Shale. In the 18 months prior to todays 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, Chesapeakes Barnett Shale net production now exceeds 110 mmcfe per day and development costs to date have averaged only $1.47 per mcfe.
The keys to success for Chesapeake in the Barnett Shale play have been threefold: