Chesapeake Energy (NYSE:CHK) has set an ambitious goal of quadrupling the company's production of oil and liquids by the end of 2015. One area the company is focused on to achieve this growth is in various plays in the Anadarko Basin.
IN PICTURES: 4 Biggest Investor Errors

Current and Future Production
Chesapeake Energy currently produces 56,000 barrels per day of oil and natural gas liquids, or about 10% of total company production. The company is targeting liquids and oil production of 100,000 barrels per day by the end of 2012, and 200,000 barrels per day by the end of 2015. If the company is successful, 25% of its total production will be from oil and natural gas liquids by the end of 2015.

Anadarko Basin
Chesapeake Energy currently gets 55% of its liquids production out of the Anadarko Basin. The company has 930,000 net acres in this basin, which the company defines as acreage prospective for various Granite Wash and Colony Wash plays in the Texas and Oklahoma panhandle areas. It also includes other Pennsylvanian and Mississippian age formations that the company is involved with.

Colony Granite Wash
Chesapeake Energy has 130,000 acres prospective for the Colony Granite Wash. The company has already been extensively developing this play and has 100 million barrels of oil equivalent (BOE) of proved reserves and current production of 28,000 BOE per day.

Chesapeake Energy is ramping up development here and will go from seven rigs currently drilling to an average of nine rigs in 2011. The company has budgeted to drill 50 net wells in 2011. Wells in the Colony Granite Wash produce a mix of oil, natural gas liquids and natural gas, with Chesapeake Energy estimating future production from here to be 48% oil and natural gas liquids.

Granite Wash
On the Texas side of the panhandle, Chesapeake Energy has 70,000 net acres exposed to the Granite Wash. The company has proved reserves of 110 million BOE, and net production of 21,000 BOE per day from this area.

Chesapeake Energy is currently operating seven rigs and plans to keep that flat in 2011 to drill 50 net wells in the play. Wells here also produce a mix of hydrocarbons at approximately the same proportion as the Colony Granite Wash, but with a slightly higher percentage of natural gas liquids.

Many other exploration and production companies are actively developing the Granite Wash in either Texas or Oklahoma. Penn Virginia (NYSE:PVA) is allocating 50% of its 2010 capital budget to explore and develop the Granite Wash. The company has three rigs drilling here.

Apache Corporation (NYSE:APA) has 200,000 gross acres and put to sales its first horizontal well here in September 2009. Forest Oil (NYSE:FST) has 102,000 net acres and plans to drill between 25 and 30 wells here in 2010.

Bottom Line
Chesapeake Energy is making large capital investments in the Anadarko Basin over the next few years to help move the company towards a greater balance between oil and natural gas production. The Granite and Colony wash areas are a major focus in the basin. (For related reading, take a look at Accounting For Differences In Oil And Gas Accounting.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing Basics

    Learn How To Trade Gold In 4 Steps

    Trading spot gold or gold futures, equities and options isn’t hard to learn, but the activity requires skill sets unique to these markets.
  5. Economics

    The Effect of Fed Fund Rate Hikes on Gold

    Explore the historical relationship between interest rate increases and the price of gold, and consider what effect a fed funds rate hike might have on gold.
  6. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  7. Savings

    Easy Ways to Go Green and Stay Budget Friendly

    Social entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
  8. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  9. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  10. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  1. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  2. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  4. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  5. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  6. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!