Chesapeake Energy seeks shale partners
Chesapeake Energy Corp. is in talks with potential partners to help develop Barnett Shale and other U.S. properties, CEO Aubrey McClendon said Wednesday.
"There is a high degree of international energy company interest in gas shale in the U.S.," the natural gas producer's top executive said on a conference call with analysts and investors. "We have multiple ongoing conversations with multiple international energy companies, some of which involve the Barnett and some of which involve other plays."
Shale formations, which are more costly to develop than traditional wells, provide new sources for natural gas in states including Texas, where the Barnett is located. Oklahoma City-based Chesapeake explores for gas in Barnett, Haynesville Shale in Louisiana and Texas, and Marcellus Shale in the Northeast.
The company in July agreed to form a joint venture with Plains Exploration & Production Co. to help develop Haynesville. In November, Chesapeake agreed to join StatoilHydro ASA of Norway in its first venture outside of the U.S. to develop unconventional natural-gas assets in China, Ukraine and Romania.
Chesapeake on reported a fourth-quarter loss Tuesday of $860 million after writing down the value of properties because of tumbling energy prices.
"There is a high degree of international energy company interest in gas shale in the U.S.," the natural gas producer's top executive said on a conference call with analysts and investors. "We have multiple ongoing conversations with multiple international energy companies, some of which involve the Barnett and some of which involve other plays."
Shale formations, which are more costly to develop than traditional wells, provide new sources for natural gas in states including Texas, where the Barnett is located. Oklahoma City-based Chesapeake explores for gas in Barnett, Haynesville Shale in Louisiana and Texas, and Marcellus Shale in the Northeast.
The company in July agreed to form a joint venture with Plains Exploration & Production Co. to help develop Haynesville. In November, Chesapeake agreed to join StatoilHydro ASA of Norway in its first venture outside of the U.S. to develop unconventional natural-gas assets in China, Ukraine and Romania.
Chesapeake on reported a fourth-quarter loss Tuesday of $860 million after writing down the value of properties because of tumbling energy prices.
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Replies to This Discussion
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Permalink Reply by The_Baron on
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I don't know, they already have HA partners, and the article is vague,
"We have multiple ongoing conversations with multiple international energy companies, some of which involve the Barnett and some of which involve other plays."
Doesn't say much really, but shows they might need some money...
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Permalink Reply by David Ivy on
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I attended a conference on mustones (shales) and heard one of the PetroHawk VPs say that at least one of the reasons that they have reduced the pace of leasehold acquisition is that they simply have a plate full. I think this is probably true of most of the operators in the play there simply is not enough time or for that matter rigs available to drill up the inventory of projects that they already have. Even with falling prices wells are still going to cost somewhere in the neighborhood of $6MM. Add another 1 to $2.5MM for leasehold and infrastructure costs and it requires a lot of cash to drill everybody a well. Add in steep decline curves on these wells and economics get skinny for these types of projects.
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Permalink Reply by Spring Branch,mineral owner on -
I would call it a "significant" decline in just a three month period. Not sure how you could look at it any other way.
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Permalink Reply by Bobi Carr ("parker") on
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Most of what I have read, anticipates that the higher IP rates will not decline as significantly over time.
But of course this information is put out by the same companies who are making and selling the kool-aid.
Time will tell.
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Permalink Reply by Spring Branch,mineral owner on
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I have read that on average, the higher IP rates result in higher average EUR's per well. I have not read that the higher IP rates result in lower decline rates in percentage terms.
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Permalink Reply by Grillin' - MmmMmm on
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The write down was a Non-cash right down...financial accounting entries which in no way impacts the company's ability to spend money!!
It will be interesting to see who partners up with them. Whomever it is will have to pay a boat load of money up front and then pay a large part of ?CHK's drilling costs during the first few years. The deal they did with Plains in the Haynesville has Plains paying 100% of the cost to earn 25 or 30% of the well (or maybe 20%??). Did same deal with BP in OK and similar deal with StatoilHydro in Marcellus. Don't think they'll get that good of a deal these days but they will get some leverage and well over $1 billion in cold hard cash.
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Permalink Reply by Sandstone on
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Mmmarkk, it is my understanding that BP bought out CHK 100% in OK. CHK doesn't own any of it.
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Permalink Reply by Grillin' - MmmMmm on
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You are correct. Way too much caffeine or not enough, one of the two. BP bought 100% in OK but did a JV in Arkansas. Sorry bout that. Their deal in AR is similar to the Plains deal in HS.
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Permalink Reply by Sandstone on
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Regarding the JV between Plains and Chesapeake - Plains paid 1.65 billion cash for 20% of CHK's assets in the Haynesville plus agreed to pay 50% of CHK's 80% drilling and completion costs until they had invested another $1.65 billion.
If I understand this correctly, Plains would drill and complete a well paying 60% (Plains 20% & 40% of CHK's 80%) of the cost. But once it is producing, Plains will get 60% of the production revenue until they recovered the 40% of CHK's share that they had paid; then Plains revenue would go down to 20% and CHK would go from 40% to 80% of the revenue. CHK would only have to tie up 4 million of their cash on a $10 million well.
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Permalink Reply by Sandstone on
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I think you are right. XTO was another one I was surprised about. Have you seen the new Exxon/Mobil ads on tv? They make reference to a new technolgy just beginning in the US and it sounded like Shale to me. Do you know if they are active in any shale play in the US?
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Permalink Reply by Grillin' - MmmMmm on
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I'm rummaging through the SEC documents to verify the drilling carry terms. From what I have been told, Plains will carry the cost but will only get revenue for its 20%, not the additional interest that they are carrying CHK for. In their revenue/production build ups for the analysts, it appears that CHK is claiming their 80%, not the reduced amount but I need to make sure that lines up with the filing. I'll also check on PXP's website.
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