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Chesapeake Eyes Rewards from Billions in Investments
OKLAHOMA CITY -- Chesapeake Energy Corp. executives say that the billions of dollars in up-front investments its made to develop lease positions in shale plays across the country will likely pay off in terms of measured, sustainable returns for the company and its investors.
"Now is the time to develop our core assets and to focus on delivering strong financial performance," said Steve Dixon, acting CEO of Chesapeake during the company's annual meeting Friday. "We are entering a period of sustained value realization for our company and our shareholders."
In a related investors presentation released Monday, the company said it continues to focus on developing its "core of the core" strategy by improving its liquids production mix, and selling those non-core holdings.
Chesapeake, the largest leaseholder in eastern Ohio's Utica shale with more than one million acres under contract, is training its sites on developing the liquids rich window of the play, which the company has identified as stretching from Columbiana County south to Belmont County.
Pad drilling efficiencies, plus new pipeline and processing infrastructure, would also allow Chesapeake to place many of the large inventory of drilled wells into production, Dixon said.
"Due to infrastructure constraints, over the past few years we've built a large inventory of wells drilled that are not yet turned to production," Dixon said. "Over the next two years, as infrastructure constraints are resolved, we'll be able to work off this excess well backlog and turn these wells to sales."
In the Utica, that means the completion of initial phases of three processing plants with which Chesapeake is contracted. The first train of Momentum Midstream's Kensington plant in Columbiana County is nearly completed, and has the capability to process 200 million cubic feet of gas per day. A second and third phase of that plant is scheduled.
Two other plants in West Virginia, one in Natrium and Hastings, are contracted to process Chesapeake gas.
As capacity increases at these plants, so too does the prospect for well production.
According to a Chesapeake investor presentation, the company is targeting production capacity in the Utica of 330 million cubic feet per day by the end of 2013.
During the first quarter of this year, average peak daily rate of 13 Chesapeake wells in the Utica stood at 1,200 barrels of oil equivalent per day. Thus far, the company has drilled 249 wells, 66 of these wells are producing, while 97 are in various stages of completion.
The company has also gained efficiencies in well pad development. For example, the first well drilled at the Coe unit in Carroll County cost $8.5 million. The next five wells at the pad averaged just $5.9 million to drill.
In all, Chesapeake has invested about 11% of its total capital expenditures in the Utica. The two largest plays related to expenditures are the Eagle Ford in Texas, with 35%, and the Greater Anadarko Basin, which straddles Texas and Oklahoma at 28%.
Chesapeake has 14 rigs active in the Utica play, and projects an estimated ultimate recovery of five to 10 billion cubic feet of natural gas in the play.
Published by The Business Journal, Youngstown, Ohio.
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