(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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Permalink Reply by Anna Mauck-Member Services on July 2, 2008 at 9:43
I found it interesting that the Ches. CEO pointed out we should be grateful as a country for the resources under our feet during this time of record high gas prices and the movement toward hybrids- indeed I am grateful!

My mind's been running as to all the good that can be done from donating some of our money to worthy causes. So exciting! And to think the numbers reported are on choked wells... what will happen when they're open!??!?!?
Permalink Reply by Les Bamburg on July 2, 2008 at 17:31
Please see following link for webcast replay and PXP presentation:

http://investor.plainsxp.com/phoenix.zhtml?c=132091&p=irol-pres...
Permalink Reply by Keith Mauck (Site Publisher) on July 3, 2008 at 0:18
Thanks for the link i was getting ready to dig that up
Permalink Reply by Cooter on July 3, 2008 at 2:07
Well I think we may have the actual names of the wells that were referred to in the conference call.

Feist
Williams
Hunter
SRLT
Chiggero
Clingman Acres
Bray
Sustainable Forest

Any of you close to these?
Permalink Reply by BeatBama on July 3, 2008 at 2:45
I'm trying to find these wells in the transcripts of the call, do I have to listen to it to find out about these?
Permalink Reply by Cooter on July 3, 2008 at 5:41
If i remember they didn't list them on the call
Permalink Reply by Les Bamburg on July 3, 2008 at 3:59
In addition you have the EnCana JW Adcock #3H, Petrohawk Plantation #63, PVA Fogle #5H & the Shell wells.
Permalink Reply by BeatBama on July 3, 2008 at 5:35
I'm trying to find out about the Chiggero No. 1
Permalink Reply by BeatBama on July 7, 2008 at 5:28
i assure you they are using their heads. it worked out well for the landowner though. i think it would be worth it to wait a couple of weeks to make some extra money, CHK doesn't have a choice, they pretty much have to put pipeline on this land. Why hurry it, make the most money possible, natural gas prices are going up, what does a couple of weeks matter? i also heard there was an issue with leasing the road which was fixed and was well worth the landowners wait. another thing to think about is that it is doubtful that there is just one landowner, sometimes land is owned by families and everyone has to approve for a deal to go through, not as easy as you think.
Permalink Reply by insomniacnla on July 7, 2008 at 8:05
Not all landowners are being greedy, even though I do not know the exact details of this deal but I was a landowner in a very similar situation a few years ago. Just because someone wants to be compensated for giving up a permanent right-of-way across their property to the well does not make them greedy as it can affect the value of their land. My neighbors had agreed to have a well drilled on their property a year before I was approached for a right-of-way and road across the entire length of my 20 acres. I knew that if I ever sold my place, this permanent right-of-way would most certainly affect the value of my farm. I would not want to purchase several acres out in the country that would be having salt water trucks drive across it every day, the peace and quiet of the country would no longer exist. It would also limit what a prospective buyer could to with my property, such as sub-dividing it, etc. The oil/gas company made a deal with my neighbors 1 year before ever talking to me about it. If they would have asked me back at the beginning, maybe they would have selected another location.
Permalink Reply by insomniacnla on July 7, 2008 at 8:43
Then it does appear our situations were different. How can landowners' demand more than what the lease provided? I thought that when a lease was signed, that was that. That when you gave surface rights, that the landowners cannot recind portions of the surface rights. How did it get resolved?
Permalink Reply by Alamo on July 8, 2008 at 15:36
My sentiments rest with the land owner. Who is in the best position to manage his property? The oil and gas operator(OG) or the land owner? If a road is necessary to produce gas or assist in the production process the OG should pay the reasonable damages to the property as well as any dimunition in the utilization and enjoyment of HIS property.

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