Chesapeake Going for Oil
Updates to add more quotes, analyst comment, details)
By Jason Womack
Of DOW JONES NEWSWIRES
HOUSTON (Dow Jones)--Chesapeake Energy Corp. (CHK), a leading U.S. natural gas producer, said Thursday it will dedicate more of its resources to finding oil.
The strategy represents a big shift for the company, which has gobbled up land in the nation's most promising onshore natural gas fields and pursued a breakneck drilling pace to bring those new gas supplies to market.
Chesapeake and other independent natural gas producers such as Southwestern Energy Co. (SWN), Petrohawk Energy Corp. (HK) and Devon Energy Corp (DVN), have pioneered drilling for gas from deeply buried onshore formations of shale rock. Once considered uneconomical to exploit, shale-gas production has boomed over the past couple of years. These fresh supplies, combined with the economic downturn, helped push gas prices to their lowest in more than seven years in September, though winter's cold has brought prices back up somewhat.
The market for oil has proved more resilient, with prices more than doubling over the last twelve months, making that commodity much more attractive to producers. Last week, EOG Resources Inc. (EOG) said it will invest more heavily in oil related projects in the future.
Aubrey McClendon, Chesapeake's chief executive, said during a conference call with investors that once the company has met the obligation on its shale gas leases, it will pare back its gas drilling in places like the Fayetteville Shale in Arkansas, the Haynesville Shale in Louisiana and the Barnett Shale in Texas. To secure acreage, producers must establish production before the lease expires.
"We will begin ramping down activity in those areas and allocating those rigs to the oil areas," McClendon said during a conference call with investors.
The company plans to cut its Fayetteville Shale drilling activity in half by the end of 2010, when its acreage there will be held by production.
Chesapeake has identified six oil fields, where it holds a combined 600,000 acres and plans to add 400,000 more acres over the next year. The company will use horizontal drilling, an innovation widely used to extract shale gas, to tap those oil resources.
"If you are a good shale player--and Chesapeake is a top-tier shale producer--it makes sense to look at oil," said David Pursell, an analyst with the Houston-based energy investment bank Tudor Pickering Holt & Co.
-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com
Views: 294
Replies to This Discussion
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Permalink Reply by Linda Blunt on
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I listened to their conference call this a.m. and found their interest in oil interesting. If you want to listen to the conference, use the link below:
http://www.chk.com/Investors/Pages/Calls.aspx
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Permalink Reply by Skip Peel - Mineral Consultant on -
There is a current supply glut of nat gas and prospects for that glut to grow in the next three to eight years as additional shale gas plays go through their initial leasing/HBP phase. Plays that yield nat gas liquids and oil provide a more balanced production mix that will allow producers to avoid being just a "dry gas" company. That niche is beginning to look very crowded. And Chesapeake is not the first to seek a more balanced mix.
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Permalink Reply by JHH on
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Linda, I tried the link... filled out the form and hit the button. Nothing happened. Maybe because i'm on a Mac computer. will try on a PC later. Thanks, jhh
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Permalink Reply by Les Bamburg on
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LP, all are west of the Mississippi including the Cleveland oil play in the Anadarko Basin. Chesapeake is staying mum on most of the plays because they are still leasing. Several should be located in the Rockies south of the Bakken oil play.
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Permalink Reply by Roy on
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A friend owens acerage in Texas and has been offeres a lease. Chesapeak has just had aproved the creation of a new field there named Whitehorse Shale.
Oil, Gas & Mineral Lcase
The E/2NE/4NE/4 of Section 46,
Block 59, Township 1, T & P RR Co. Survey,
Culberson County, Texas
Hope this helps
Roy
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Permalink Reply by Bobi Carr ("parker") on
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Roy,
Why would you presume it is oil and not gas?
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Permalink Reply by Roy on
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I haven't assumed anything. I have not spent any time researching Texas. Maybe one of our Texas members could illucidate.
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Permalink Reply by om28v on
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It appears to be in the A-2067 just north of Screw Bean Draw. Most of the wells there are green ( oil ) however, there are gas lines and some wells marked gas also. This is far West Texas, real west, like two counties from the end ( El Paso ).
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Permalink Reply by Roy on
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This company offered $150 an acer and 3/16 royalty 5year on a very bad lease. I have advised ataining legal consult. Any recomendations accepted with Thanks.
SHAW INTERESTS, INC.
OIL & GAS PROPERTIES
310 W. WALL, SUITE 305
February 11 2010
MIDLAND, TX 79701 (432) 685-1404
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Permalink Reply by om28v on
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I clicked on some random well there, a 2580 ft. verticle. I set there records back as far as they will go ( 1993 ) and the well has put out 3mm bbls and 580mmcf of casinghead to date. Wow. That's enough looking out there for me , 56 million in royalties @ 25% on just one hole, just for the crude, not counting the gas. Wow.
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