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Chesapeake Energy's Other Natural Gas Plays
Although Chesapeake Energy (NYSE:CHK) is a large player in the Haynesville Shale, the company also has extensive properties in many other basins that primarily produce natural gas. These areas don't get as much attention from investors, but they are a significant part of the company's asset base.
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Barnett Shale
The Barnett Shale is Chesapeake Energy's second largest natural gas shale play after the Haynesville Shale. The company reported average production of 555 million cubic feet per day from the Barnett Shale in September 2010, or 21% of the company's total.
Chesapeake Energy has 220,000 net acres in the Barnett Shale and is operating 21 rigs in the play. The company also entered a joint venture here with Total SA (NYSE:TOT), and sold a 25% share of its Barnett Shale assets for $2.25 billion in a combination of cash and a drilling carry.
Bossier Shale
Chesapeake Energy also has exposure to the Bossier Shale, another productive formation that lies above the Haynesville shale and overlaps it in areas of East Texas and Louisiana. Chesapeake Energy estimates that 195,000 acres is prospective for the Bossier Shale. The company has very little production or proved reserves in the Bossier Shale at the current time.
Fayetteville Shale
Chesapeake Energy has 465,000 net acres in the Fayetteville Shale, and production in September 2010 was 390 million cubic feet per day. This represented 14% of the company's total natural gas production of 2.9 Bcf per day.
Chesapeake Energy's joint venture here is with BP (NYSE:BP), which paid $1.9 billion in 2008 for a 25% share in a combination of cash and a drilling carry.
Marcellus Shale
Chesapeake Energy's final natural gas shale play is the Marcellus Shale where the company has 1.55 million acres to develop. The company reported average production of 155 million cubic feet per day of natural gas in September 2010, or 6% of the company's total. Chesapeake Energy's partner here is Statoil (NYSE:STO), which paid $3.775 billion for a 32.5% of the Marcellus Shale.
Chesapeake Energy is planning on increasing its rig count here from 27 currently to 34 by the end of 2011. This may be due to the pre-tax rate of return on Marcellus Shale wells relative to other natural gas shale plays. Chesapeake Energy estimates that the company will earn a 40% pre-tax rate of return on Marcellus Shale wells at a $4.00 per mcf natural gas price and assuming a EUR of 5.25 Bcfe.
Bottom Line
Chesapeake Energy's biggest natural gas operation is in the Haynesville Shale in Louisiana and Texas, but the company has extensive properties in other basins that primarily produce natural gas. (To learn more, see our Oil & Gas Industry Primer.)
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IN PICTURES: 9 Simple Investing Ratios You Need To Know
Barnett Shale
The Barnett Shale is Chesapeake Energy's second largest natural gas shale play after the Haynesville Shale. The company reported average production of 555 million cubic feet per day from the Barnett Shale in September 2010, or 21% of the company's total.
Chesapeake Energy has 220,000 net acres in the Barnett Shale and is operating 21 rigs in the play. The company also entered a joint venture here with Total SA (NYSE:TOT), and sold a 25% share of its Barnett Shale assets for $2.25 billion in a combination of cash and a drilling carry.
Bossier Shale
Chesapeake Energy also has exposure to the Bossier Shale, another productive formation that lies above the Haynesville shale and overlaps it in areas of East Texas and Louisiana. Chesapeake Energy estimates that 195,000 acres is prospective for the Bossier Shale. The company has very little production or proved reserves in the Bossier Shale at the current time.
Chesapeake Energy has 465,000 net acres in the Fayetteville Shale, and production in September 2010 was 390 million cubic feet per day. This represented 14% of the company's total natural gas production of 2.9 Bcf per day.
Chesapeake Energy's joint venture here is with BP (NYSE:BP), which paid $1.9 billion in 2008 for a 25% share in a combination of cash and a drilling carry.
Marcellus Shale
Chesapeake Energy's final natural gas shale play is the Marcellus Shale where the company has 1.55 million acres to develop. The company reported average production of 155 million cubic feet per day of natural gas in September 2010, or 6% of the company's total. Chesapeake Energy's partner here is Statoil (NYSE:STO), which paid $3.775 billion for a 32.5% of the Marcellus Shale.
Chesapeake Energy is planning on increasing its rig count here from 27 currently to 34 by the end of 2011. This may be due to the pre-tax rate of return on Marcellus Shale wells relative to other natural gas shale plays. Chesapeake Energy estimates that the company will earn a 40% pre-tax rate of return on Marcellus Shale wells at a $4.00 per mcf natural gas price and assuming a EUR of 5.25 Bcfe.
Bottom Line
Chesapeake Energy's biggest natural gas operation is in the Haynesville Shale in Louisiana and Texas, but the company has extensive properties in other basins that primarily produce natural gas. (To learn more, see our Oil & Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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