Chesapeake Energy Starts Utica Shale Natural Gas Production In PA, Ohio

Chesapeake Energy Corporation Wednesday disclosed initial horizontal well drilling results in the wet gas and dry gas phases of the Utica Shale play in eastern Ohio and western Pennsylvania and also announced the achievement of certain corporate production milestones.

Chesapeake has drilled 12 horizontal wells in the discovery phase of its Utica Shale play and has achieved strong initial production success in the wet gas and dry gas phases of the play from this initial drilling. The company is early in the process of evaluating the oil phase of the play.

Results from the first four of the company’s completed horizontal wells in the wet gas and dry gas phases of the play are detailed below (the company’s other eight drilled horizontal wells are completing or waiting on completion):

-- The Thompson 3H in Beaver County, Pennsylvania was drilled to a lateral length of 4,322 feet and achieved a peak rate of 6.4 mmcf per day of dry natural gas.

-- The Buell 10-11-5 8H in Harrison County, Ohio was drilled to a lateral length of 6,418 feet and achieved a peak rate of 9.5 million cubic feet (mmcf) per day of natural gas and 1,425 barrels (bbls) per day of natural gas liquids and oil (liquids), or 3,010 barrels of oil equivalent (boe) per day;

-- The Mangun 22-15-5 8H in Carroll County, Ohio was drilled to a lateral length of 6,231 feet and achieved a peak rate of 3.1 mmcf per day of natural gas and 1,015 bbls per day of liquids, or 1,530 boe per day;

-- The Neider 10-14-5 3H in Carroll County, Ohio was drilled to a lateral length of 4,152 feet and achieved a peak rate of 3.8 mmcf per day of natural gas and 980 bbls per day of liquids, or 1,615 boe per day; and

The production rates listed above assume maximum ethane recovery. Chesapeake is processing the wet natural gas stream from the three Ohio wells at a nearby processing facility where ethane is currently being minimally recovered due to temporary market limitations. The company has multiple projects and initiatives underway to process and market future production of NGLs including ethane.

Additionally, Chesapeake has recently achieved key production milestones and set new corporate all-time production records. The company’s gross operated production has recently reached 6.1 billion cubic feet of natural gas equivalent (bcfe) per day and its net production has exceeded 3.45 bcfe per day, including approximately 95,000 bbls per day of liquids.

By the end of 2012 and 2015 Chesapeake plans to increase its net liquids production by 50 percent and 150 percent to more than 150,000 bbls per day and more than 250,000 bbls per day, respectively, while maintaining its net natural gas production at current levels. As recently as in 2009, the company’s full-year liquids production averaged only 32,000 bbls per day.

Aubrey K. McClendon, Chesapeake’s Chief Executive Officer commented, “We are pleased to announce very strong initial drilling results from the wet gas and dry gas phases of our Utica Shale discovery. Chesapeake has built a commanding presence in the play with 1.25 million net acres of leasehold acquired to date, with our current primary leasing efforts focused in the wet gas phase of the play. We estimate the company’s leasehold covers approximately 40 percent of the potentially drillable acres in the core of the play.

"The company is targeting a development program with average drilling and completion costs of approximately $5.0 - $6.0 million per well. Chesapeake is currently drilling with five operated rigs in the Utica Shale play and plans to increase its operated rigs up to 10 rigs by year-end 2011, up to 20 rigs by year-end 2012 and up to 40 rigs by year-end 2014.

“I am proud to announce the achievement of these important production milestones and congratulate Chesapeake’s 12,000 employees for delivering this outstanding success.”