Chesapeake Energy offers first estimate of production estimates for Ohio wells

Source: Akron Beacon Journal

Chesapeake Energy Co. remains very satisfied with the results it is seeing from its liquids-rich Utica shale wells in eastern Ohio.

The Utica shale “will be solid for a lot of years to come,” company spokesman Steve Dixon said Thursday as the company held an earnings teleconference with analysts.

Chesapeake, an Oklahoma-based energy company and the No. 1 driller in Ohio, also offered its first estimates on what those wells will produce. It is projecting what the industry calls estimated ultimate recovery (EUR) of 5 billion to 10 billion cubic feet of equivalents from each well over its lifetime in its core area of Carroll and surrounding counties.

Those EUR estimates from Ohio’s Utica shale formations are significantly higher than what has been reported from wells drilled in shallower Marcellus shale in Pennsylvania.

Chesapeake and another driller, Range Resources, both have reported EURs from the Marcellus shale as high as 4.2 billion cubic feet of equivalents (combined natural gas, liquid gas and oil from a well). The U.S. Geological Survey later reported that the average Marcellus well has an EUR of 1.1 billion cubic feet of equivalents.

Marcellus wells in Pennsylvania tend to produce natural gas only, with small volumes of liquids.

As of Dec. 31, Chesapeake has drilled 184 wells in the Utica shale. Of that total, 45 wells are in production, 47 are awaiting pipelines and 92 are in various stages of completion.

The company is operating 14 drilling rigs in Ohio and plans to average 14 rigs in 2013. It said it expects production growth from the Utica shale to jump significantly this year with the completion of two natural gas-processing complexes other companies are operating in eastern Ohio.

Chesapeake also offered production information on four wells that were completed in late 2012:

• The Cain well in Jefferson County’s Springfield Township with 1,540 barrels of oil equivalents per day. That includes 6.7 million cubic feet of natural gas and 425 barrels of natural gas liquids (ethane, butane and propane).

• The Walters well in Carroll County’s Perry Township with 1,140 barrels of oil equivalents per day. That includes 3.6 million cubic feet of natural gas per day, plus 315 barrels of oil and 220 barrels of natural gas liquids.

• The Houyouse well in Carroll County’s Lee Township with 1,730 barrels of oil equivalents. That includes 5.4 million cubic feet of natural gas per day plus 525 barrels of oil and 305 barrels of natural gas liquids. Chesapeake had disclosed the totals from this well last fall.

• The Coe well in Carroll County’s Lee Township is producing 2,225 barrels of oil equivalents per day. About one-third is liquids. No other information was released.

There is very little information on production totals from Ohio wells. Companies have offered information on about 20. They must report production totals to the Ohio Department of Natural Resources by March 31. Last year, there was data from only nine Ohio wells.

Chesapeake said it still holds $1.15 billion from its partnership with the French energy company Total SA and Texas-based EnerVest Ltd. It expects to use all of those funds over the next two years to fund drilling operations in Ohio.

The three companies formed a partnership in early 2012 to develop 450,000 acres in eastern Ohio counties.

Chesapeake said it expects to spend $6 billion to develop wells in 2013 in the Utica shale and elsewhere. About 11 percent of those funds are slated for the Utica. It ranks third behind the Eagle Ford shale in south Texas and the Anadarko Basin in Oklahoma and Texas.

The company reported it reduced drilling costs sharply in 2012 and shortened the time it takes to drill a well in Ohio from 35 days to 22.

Chesapeake is also proceeding to sell off noncore areas in eastern Ohio and elsewhere. An upcoming sale on the Oklahoma-Kansas border will be announced soon.

It also reported that last year it scaled back its drilling with the number of working rigs dropping from 164 rigs to 85. It cited low prices for natural gas.

Chesapeake is the No. 2 producer of natural gas in the United States and the 11th largest producer of liquids. The company is continuing to shift from natural gas with its depressed prices to liquids.

Departing CEO Aubrey McClendon did not participate in the earnings call for the first time in 80 quarters. He is stepping down April 1, and a search is under way for his successor.

For the fourth quarter, the company reported a profit of $257 million, or 39 cents per share, on revenue of $3.5 billion. For the same period a year earlier, Chesapeake posted a profit of $429 million, or 63 cents per share, on revenue of $2.7 billion.

For 2012, Chesapeake lost $940 million or $1.46 a share on revenue of $12.3 billion. In 2011, the company showed a profit of $1.57 billion, or $2.32 per share, on revenue of $11.6 billion.