Oil & Gas Output Showing Increase: Chesapeake reports boost in production of more than 40 percent

Source: The Intelligencer: Wheeling News-Register

MOUNDSVILLE – The Marcellus and Utica shale formations have become known for their untapped reserves of natural gas. The formations also may hold vast amounts of oil – something Chesapeake Energy is learning as it drills in the local area.

The company pumped 44 percent more oil from April to June than it did during the same period in 2012 from its local operations. And more could be on the way.

Chesapeake is the largest leasehold acreage holder in the Marcellus Shale, which spans from northern West Virginia across much of Pennsylvania into southern New York. The company also holds substantial acreage in Ohio’s Utica Shale.

Steve Dixon, Chesapeake’s chief operating officer, said the company should produce 40 million barrels of oil this year. Previous earnings reports indicated the Oklahoma City-based company has been producing oil in both Ohio and Marshall counties.

As companies such as Chesapeake continue drilling wells and pumping gas, the leases signed by Upper Ohio Valley mineral owners will begin to pay off, as landowners will receive checks for leases as high as $6,000 per acre with production royalties of as high as 20 percent.

In the Utica Shale, Chesapeake’s average daily production of natural gas increased by 48 percent from the first three months of this year to the second quarter of the year. The average Utica well that started producing in the months from April to June yielded about 6.6 million cubic feet of natural gas per day.

In the wet gas portion of the Marcellus Shale, Chesapeake’s average daily production was about 208 million cubic feet per day, a 56 percent increase from the second quarter of 2012.

During the quarter, Chesapeake reported adjusted net income available to common stockholders of $334 million, which compares to only $3 million in the 2012 second quarter.

“Chesapeake has an exceptionally broad and deep asset base, which offers tremendous opportunity for value creation,” said Doug Lawler, Chesapeake’s chief executive officer. “A comprehensive companywide review of our capital allocation and other processes is under way and I believe these initiatives will result in substantial further improvement in both near-term and long-term capital efficiency and returns.”

All the gas being produced needs a company to process it, and Williams Partners is one of the region’s largest. The company has invested about $4.5 billion in infrastructure to process natural gas in Marshall County alone.

Williams officials believe they will be able to process at least 2.5 billion cubic feet on natural gas per day.

Williams processes gas for several producers including Chesapeake, Gastar, Chevron, Stone Energy, Noble Energy and Trans Energy.

During the second quarter, Williams earned $256 million in net income, up from $243 million during the same period in 2012.

Williams’ Geismar plant in Louisiana is expected to be out of service until April 2014 as a result of the accident that took place there on June 13. The company will spend $102 million to repair the plant.

“We’re pleased to report a solid second quarter due to continued growth in our growing fee-based business, which more than offset both lower commodity margins and the impact of downtime at the Geismar facility,” said Alan Armstrong, chief executive officer of Williams.