YOUNGSTOWN, Ohio – Chesapeake Energy Corp. said it plans to more than double its oil and wet gas production by 2015, creating more opportunity in unconventional shale plays such as the liquids-rich Utica shale in eastern Ohio.
Chesapeake CEO Aubrey McClendon said in a conference call Wednesday that shale formations such as Eagle Ford in east Texas and Utica, which runs deep underneath portions of the Mahoning Valley, present some of the best opportunities for growth in the industry and for the company.
McClendon said that Chesapeake is on course to boost its liquids gas production by more than 70% this year, or 63,000 barrels per day. At this rate, the CEO said that the company is on track to rank among the top five producers of liquids in the United States by 2015.
Chesapeake is the second-largest producer of natural dry gas in the country, behind Exxon Mobil Corp., and controls the most drilling leases in Mahoning, Trumbull and Columbiana counties. Energy giants in recent months have abandoned dry gas exploration because of excess supply in the market and depressed prices, and have instead focused on tapping into the more profitable liquids market.
"We're very excited about the Utica," McClendon told analysts Wednesday. The company to date has invested $2.2 billion in the play, and has sold off 25% of its acreage for a total of $2.3 billion. "We've recovered 105% of our cost to date, and still have 80% of our acreage left," he reported. "That's exceptional under any circumstances."
The company expects to ramp up to 20 Utica rigs by the end of this year, noted Steve Dixon, chief operating officer. Thus far, it's drilled 42 wells in the play, seven of which are in production.
Chesapeake also announced it would install 200 miles of pipeline throughout the Utica.
The company scheduled the conference call after the release Tuesday of its fourth-quarter earnings, which saw profits during the period more than double.
Chesapeake reported earnings of $429 million for the quarter ending Dec. 31, compared to $180 million during the same period a year ago. The company also reported a natural gas and liquids hedging gain of $315 million.
The company said it produced more than 9.7 million barrels of crude oil and liquids, up 75% from year-ago numbers. Revenue for the company also increased by 38% to $2.73 billion, the company said.
Chesapeake also plans to continue selling assets in order to raise cash to offset debt that has made Wall Street analysts nervous. The company is targeting about $12 billion through the sales of oil fields, pipelines and rigs to narrow a gap caused by declining natural gas prices. The company is especially considering selling its position in the Permian Basin.
"We've articulated a strong plan of action that should enable us to generate $10 billion to $12 billion in proceeds from asset monetization this year," McClendon said. He projected by 2014 that the company would break even between its cash flow and capital expenditures.
"Our output is not only increasing in size, but also increasing in value," he said.
Copyright 2012 The Business Journal, Youngstown, Ohio.