(Flashback) BREAKING NEWS: Notes from Chesapeake's Conference Call

Chesapeake Conference Call July 2, 2008 9:00am
Chairman/CEO Aubrey McClendon (Summarized)
• Win-win partnerships between Chesapeake and PXP - Great news for Chesapeake shareholders
• Haynesville 4th largest gas field in the world
• Chesapeake has invested $2.5B in Haynesville
• Play just underway, data suggest 250TCS
• Barnett had 50TCS, which is only 20% of Haynesville –
• Our country should realize how blessed we are as a nation, especially during this time of record high gas prices – can be very helpful in converting to hybrids
• We are so confident because 3.5 M acres defined as core area
• These wells are in a class of their own – calling them “triple X monsters” – likely to get better over time – 8th well, 2 days ago brought on the best so far: 4.5-8.5 BCSE
- claimed that the reason for withholding info was to prevent other companies from receiving a blueprint to their technical practices
- 4 corners work from all the companies that have outlined the shale from their drilling.
- Haynesville Shale will move quickly.
- PXP retains the ability to sell their interest in the HS
- Do not forsee selling hshale--wanted to buy more
- Chesapeake retains first right of refusal
- Ches - 4,000 landmen in the HShale - 1,000 in Barnett, scouring the field.
- Dollars per acre was set by Ches.....$30,000 per acre....paid that price because Ches is going to agressively work HShale to increase the rate of return, deploying PXP capital smartly was the goal.
- Mix of Shale and Sands? Looking for 100% shale...looking for great black shale with the right porosity and organic composition. When you hear the flow rates their will be skepticism but it goes back to the high rates of pressure. The consistency and simplicity is the reason for the dynamic production.
- Flow rates - what are the infrastructure restraints? On top of the game large structure that handles other plays so will be moving fast. We are east so we are closer to the markets...so better pricing. Do the math and HShale could do [better? He kinda trailed off here] because we are closer to the eastern markets.
- Great opportunity for the US to retrofit gas stations and use natural gas instead of foriegn oil.
- Potentially liberating event.
- Here in the HShale we may have 10 years of production.
- 60 rigs operating by 2010
- Play could not be in a better spot.
- Regulatory structure that is favorable
- Great pipeline structure...past many bottlenecks will help this happen much more quickly. Do have to extend supply lines...this helps drive down costs.
- Working through Twin Cities in Shreveport..has put togther an impressive organization..has a network set up..tough sledding to go door to door to buy leases.


• PXP partner – deep LA roots helpful as they develop Haynesville in the decades to come – if you snooze, you lose and Ches is not snoozing - Haynesville will develop similarly to Barnett but also differently – it will be easier than Barnett in some ways

Tags: Chesapeake, Haynesville, Shale

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Replies to This Discussion

Permalink Reply by BeatBama on July 7, 2008 at 5:29
...
Permalink Reply by joevic on July 3, 2008 at 14:53
Do you know the town and range for this Sustainable Forest area?
Permalink Reply by Les Bamburg on July 3, 2008 at 18:06
Joel, the Chesapeake Sustainable Forests 23 #1 is in Sec 23 - T15N - R16W.
Permalink Reply by Lerret on July 3, 2008 at 5:27
Not to throw water on this...but You sell out to Plains AFTER you spent the money to find and begin to develop it? Chesapeake is not an energy company. They are a Real Estate Flipper, creating a deal, hyping their deal, then selling it out to the desperate who haven't been able to buy acreage because Chesapeake is sucking up all the earth in America. All these companies have cash running out the wazoo and no good deals to spend it on. They are siezing on the resource plays because they don't have any real geologists. They have forensic geologists who tell them when they miss the shale....that's not a difficult call. Check across the street from Chesapeake's HDQ. That's where all the good geologists are. It's a cemetery. All they got are a bunch of newbies.

Has anyone asked the simple questions? How do you get a rig today? Where is the tubing coming from? What is the long term potential for the Haynesville? Lots of Austin Chalk plays made big oil for a time in the late 1970's....who's drilling there now?

I smell a rat. Chesapeake is selling out to Plains who will now assume most of the risk in the play (and there is plenty of that). Chesapeake is eagar to tout their numbers before selling out...but as we found in Arkansas they won't publish their IPs like every other company did for 40 years...inquiring minds want to know why.

BTW, to the one who suggested they open the wells and this is on choke. It is on choke for a reason. "opening" the choke could damage the well and reduce the ultimate recovery. Also, might cone a lot of water into the hole. It is choked to prevent damaging the formations.
Permalink Reply by BeatBama on July 3, 2008 at 5:35
Chesapeake sold to plains to raise capital.
Permalink Reply by Snake Stewart on July 3, 2008 at 5:50
Hello Lerret ,
I for one am certainly glad you are not throwing water on this ! Are you implying that this is a sham ?
Permalink Reply by Muddigger on July 3, 2008 at 6:54
Sounds like someone doesn't have mineral rights. But very true about the choke. I want my HS well when it gets here to be flowing @ 9500# on 20/64 positive choke bean spotting about 18 million a day and please Jesus no H2S and very low, like 2% CO2.
Permalink Reply by Melinda on July 3, 2008 at 8:26
CaddoVisitor

Please comment on the section that states 4.5-8.5 BCSE. Please explain what that means.
Permalink Reply by DrWAVeSport Cd1 on July 3, 2008 at 8:28
To Mr. Chesapeake:

Bravo to you. That PXP deal makes you a master at your game!
That deal has to be one of the all-time, record-breaking "lease" flips/hedged moves I have seen to date in the HSP/O&G race.

My hat is off to you, Mr. McLendon...as the young people say..."You Rock"

DrWAVeSport 7/3/2008
Permalink Reply by Alamo on July 3, 2008 at 10:51
Chesapeake is agressive,so hold their feet to the fire. And remember that they only announced the news about the Haynesville Shale's (HS) possibilities AFTER Petrohawk and Goodrich Petroleum made their work efforts in the HS public! They have admitted as much in the Chesapeake CEO's comments on March 24, 2008. They had been working the HS for 2 years prior to that announcement! Can you imagine how many people they swindled during that "silent" 2 year period? That may have been so-called "Good Business" practices on their behalf BUT I wonder if the recipients of those kind of business practices would label them, "Good Business"?

The Real Estate Center at Texas A&M says, "Look before you Lease"! How right those Aggies are. The oil and gas operators (OG) are not all billionaire companies by being stupid.

DO NOT GIVE YOUR NATURAL GAS PROPERTY AWAY. The OG companies will make unimaginable money in developing and producing the HS. Lets hope that those that OWN that gas will ALSO share in the billions of dollars to be made there. You, the mineral owners, OWN that gas and the OG should be more like partners in the venture rather than rapists.

If the OGs could get it for nothing that's exactly what they would do--Remember that "Good Business" song and dance? Can anyone imagine just how sick those Lessors (mineral owners) are that leased 2 or so years ago must feel now? I don't imagine Chesapeake Energy and the rest of the OGs that "scalped" those citizens 2 years back are now coming around offering to re-negotiate those earlier leases--- again its just that old "Good Business" refrain at work. Remember it's YOUR minerals ,make them deal fairly in the negotiation process. You won't have a second opportunity to get it right. The OGs know what the Haynesville Shale represents---billions of dollars so share in those riches.

Another admonition from the experts at the Texas Real Estate Center at TAMU--"DON'T SIGN ANYTHING UNTIL YOU KNOW EVERYTHING"---you can bet on the fact that the OGs do know everything and they need to share some of that information.
Permalink Reply by DrWAVeSport Cd1 on July 3, 2008 at 11:05
Alamo:

DITTO! If not for the internet...
Permalink Reply by Jaybird on July 3, 2008 at 11:37
Just wanted to comment to everyone on this situation.

The internet is amazing and DrWaveSport is right!

We have land (255 acres) in Claiborne parish and we leased in 2005 to KCS/Petrohawk. $125.00 per acre bonus and 1/6 Royalty. Our lease is up in 16 days and it looks as if we will be able to re-negotiate our land because they have not drilled on or force pooled our land to this date nor have they filed for any applications to drill on our sections of land.

Our land is "Flanking" the Haynesville Shale is how a representative from EL Paso Energy put it to me. Just by EL Paso saying that makes me think they know alot more than they are telling us. Even if we aren't in the HS that's ok. We have Natural Gas under our land...we know that from when they drilled in the early 80's for oil.

KCS/Petrohawk did have plans to put a delineation Well in our section in 2007 and because of the activity everywhere else it seems it has delayed KCS/Petrohawk to starting that well.

We would have been held by production at 1/6 royalty for the rest of the wells life which could be forever.

We are doing our homework and will be ready for the next go-around and we will do it right this time.

So I have to say to everyone....don't sign anything until you know everything! ( Got that saying from Alamo! )

Good luck to all!

Jaybird

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