Chesapeake continues focus on area shale play
SALEM – During its third quarter earnings call with investors this month, Chesapeake Energy Corp. CEO Doug Lawler was asked to comment on projected growth while lowering spending, especially in regard to future well profiles as compared to “average wells” on the acreage drilled to retain contracts.
Lawler said, “The single well pad drilling, the HBP (held by production) focus to keep the lease hold and continue the test the acreage that we have under lease initiatives have been significant in the past several years” but inefficient.
The comments were transcribed from the earnings call on the Seeking Alpha website.
As one of the largest independent oil and gas exploration companies in the nation, Chesapeake has far and away the largest Utica Shale drilling presence in the Columbiana and Carroll county areas.
Recent permitting activity continues to underscore that.
According to the Ohio Department of Natural Resources Utica/Point Pleasant Shale Well weekly report for Nov. 17-23, there were 44 drilling rigs operating in the play; 995 horizontal permits have been issued; 609 horizontal wells have been drilled; and 169 are producing.
Eight drilling permits were issued during the week including two in Hanover Township in Columbiana County; three in Loudon Township in Carroll County; and one each in Guernsey, Jefferson and Noble counties.
Six of the eight were issued to Chesapeake Exploration.
Regarding the drilling to retain oil and gas rights, he added, “… We still have to demonstrate our ability in the core of the core to show higher quality, better returns, and offset the inefficient production growth decline that will be taking place in the next few years.”
Lawler continued, “And so that really is the crux of the evaluation process and how we’re focusing where the capital can be directed to capture the best margins and the best returns, and to continue to show and demonstrate competitive growth.”
Last year, Chesapeake’s former CEO Aubrey McClendon referred to Carroll and ‘Columbiana counties as the “core of the core” regarding the companys’ assets in the Utica Shale play which he also said was the best thing to hit Ohio since the plow.
Chesapeake’s posted a 91-percent increase in production in the Utica over the second quarter of 2013 which translated into 164 million cubic feet of natural gas (and equivalents) per day.
Chesapeake has just over 200 wells in the works and has drilled 377 in the Utica.
Lawler said it is focusing on rig counts.
“At present, we’re in the 60 rig range (in all plays), and I think you can expect that through the rest of the fourth quarter …”
Lawler was asked to comment on the current Utica production in light of a slowdown in the Eagle Ford Play and the fire at the newly-opened Dominion Gas Natrium Processing and Fractionation facility in Marshall, W.Va. in September.
Lawler said, “We’ve been working closely with Dominion, and as we’ve looked there at that fire and how it’s impacted this, we had provided information that suggested we were going to be in the $330 million net exit rate there for Utica.
“We’ve had really, really good growth from the second to the third quarter in our volumes, and with the Kensington facility starting up in December, there’s an additional $200 million that will be coming available.
“So I don’t think that the surface related, whether it be processing, compression, or infrastructure issues right there are going to materially impact our operations and rig count in the Utica, just because these are short term in nature and we’ll be working through those and continuing to optimize on our own efficiencies and what we control.”