Gas field could be most vital discoveryRelated Information By Jack Money Business Writer Chesapeake Energy Corp. hinted Tuesday that its unconventional natural gas field in Louisiana unveiled this week has a chance to be its most significant find and likely "the most important operational announcement in the company's 19-year history.” Aubrey McClendon, chairman and chief executive of Chesapeake, talked about the find during a morning conference call with investment analysts.McClendon called the Louisiana find in the Haynesville Shale "major” and said his company estimates it holds at least 7.5 trillion cubic feet equivalent of natural gas and perhaps as much as 20 trillion cubic feet equivalent. To give some perspective to that number, consider this:
The company's reported proved reserves in the Barnett Shale at the end of 2007 were just more than 2 trillion cubic feet equivalent. "We have tried hard during the past two years to keep our work on this new play secret, and we were successful until the last month or so, when other companies started to release information,” McClendon said.
The company also announced gas finds in southwest Oklahoma and the Texas Panhandle, and five oil projects in four states. Specifics about the locations of most of the fields were not disclosed, though some reports suggested the Haynesville field may be near Shreveport, La. McClendon said the company already has 200,000 net acres in the Haynesville field and wants to get 500,000 total. "Since we have a two-year head start on the Haynesville Shale land grab, we believe we will be formidable competition for anyone wanting to take us on in this play,” McClendon said.
He said the company already has drilled three horizontal wells in the field that have been successful. In fact, they are "much better than the first three horizontal wells drilled in any other new shale play to date,” he said. The company has four rigs drilling there right now, and it plans to increase that number to 10 by the end of 2008. "My belief this morning is that the Haynesville Shale has the chance of being the most significant play in the company's history,” McClendon said. As for the oil projects, company officials said they range in size from 1,000 acres to 1 million acres and that two of them already are producing oil. Test drilling will begin during the next year. McClendon said he is pleased the company is getting into those fields at a time when, at a British thermal unit equivalency measurement, oil is selling at nearly two times more than natural gas.
The fields could yield as much as a billion barrels of oil, he said. Analysts also were pleased with McClendon's comments about the company. Sheraz Mian, with Zacks Investment Research, said the announcement is causing "all of us who like the stock a little bit more excited about it.” He said, though, that this is just what analysts like to see when it comes to big energy companies: They need to be producing, and they need to be lining up new areas to explore along the way.
"Chesapeake is one of those few operators in the exploration and production part of the business who have the luxury of getting to put together a very detailed pipeline of project and prospects across the country,” Mian said.
"They have a fairly large and detailed inventory of projects that they can work on for years without needing to acquire anything new.”
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