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Chesapeake Says It Expects Utica Ramp Up in 2014
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YOUNGSTOWN, Ohio -- Chesapeake Energy Corp. said it expects production of natural gas and natural gas liquids from its wells in eastern Ohio's Utica shale to reach 700 million cubic feet per day by the end of this year.
The company provided a Utica update along with its 2013 fourth quarter and year-end results Wednesday.
Utica net production averaged approximately 189 million cubic feet of natural gas and NGLs per day, an increase of 309% compared to the same period last year and a 15% boost from the third quarter, Chesapeake said.
However, delays in the Utica's midstream infrastructure build-out have hampered production efforts in this play, the company said. "The vast majority of Chesapeake's wells that are connected to sales lines are on restricted choke and have not been producing at full capacity," the company said in a statement.
Chesapeake operated an average of nine rigs and connected 49 wells to sales in the Utica, compared to 11 operated rigs and 63 wells connected during the third quarter of 2013. The average peak daily production rate of the 49 wells connected during the fourth quarter was approximately 7.7 million cubic feet per day.
"We finished the year strong," said Chris Doyle, senior vice president of Chesapeake's northern division, during a conference call with investors Wednesday. "I like where we are, I love the trajectory, looking to double capacity by the end of this year."
Weather issues and infrastructure delays have impacted production levels during the first quarter of 2014, he noted, but those issues should be resolved as Dominion's Natrium processing plant is now back online and a third train is expected to be added to Utica East Ohio's Kensington plant this summer.
The company has also become more efficient in its production methods, and has drilled more wells and has acquired more data than any other producer in the play, he remarks.
"We are in the pole position in terms of driving value," in the Utica, he says. During 2013, spud to rig release averaged 13 days, and the company recently finished drilling a second well that took just under eight days he says. "It's a massive efficiency we're seeing in the system right now. At the same time, we've just drilled a lateral that's over two miles long. So, we're testing what the right recipe is."
Much of Chesapeake's attention and investment in the Utica is devoted to improving its exploration and production methods, adds Doug Lawler, Chesapeake CEO.
"The focus and concentrated investments that we've had up to this point and time in the Utica have been directed at improving the profitability, improving the capital efficiency," he says, noting the Utica is a "very high quality asset in our portfolio. The funding levels as we go forward will be driven by how we can capture the greatest value."
As of Dec. 31, Chesapeake had drilled 425 wells in the Utica, which included 230 in production and 195 that were awaiting pipeline connection or were in various stages of completion, the company said.
For the full year 2013, Chesapeake reported net income of $474 million compared to $285 million a year earlier.
Published by The Business Journal, Youngstown, Ohio.
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