Chesapeake Energy

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Chesapeake Energy Corporation (NYSE: CHK) is the number two driller of natural gas in the U.S and the largest Marcellus shale leaseholder. Its headquarters is in the near-northwest side of Oklahoma City, Oklahoma.

Chesapeake has 1.45 million acres under lease in the Marcellus shale with total proved reserves of 125 Bcfe. Much of its activity in this formation is conducted through its subsidiary, Chesapeake Appalachia LLC headquartered in Charleston, West Virginia.

Chesapeake well site, Susquehanna Co., PA
Photo credit - Dave Messersmith, Penn State Cooperative Extension

1 Latest Operating Results
2 2008 Development Timeline
3 2009 Development Timeline
4 Spotlight Issues
5 Executive contacts

Latest Operating Results

As of July 31, 2009 Chesapeake had average production from Marcellus shale of 30 Mmcfe/d and expected this to rise by year end 2009 to 80 Mmcfe/d. The company had drilled and completed 25 Marcellus horizontal wells since the beginning of 2008. The company planned to operate 19 rigs for the balance of the year and drill 69 net wells. A few of its most notable wells from the second quarter '09 included:

Well                  Location                 30 day averge rate Mmcfe/d
----                  --------                 --------------------------
Vargson-1H           Bradford Co., PA                    4.6
Evanchick-2H             "         "                     5.3
Messenger-3H         Wetel Co., WV                       3.5

2008 Development Timeline

Chesapeake pursued a very aggressive leasing program throughout the Marcellus shale.

Leasing and Drilling Activities

Typical activities during the year:

A September, 2008 report indicated that Chesapeake was drilling in the Elmira, N.Y area.

The company also had a large number of drilling permits either accepted or pending in Pennsylvania especially in Bradford, Susquehanna, and Wyoming Counties.

An October, 2008 report noted a great deal of leasing activity by Chesapeake Appalachia LLC in Bradford County, Pennsylvania. The Bradford County Registrar of Deeds stated that so far 2,018 gas leases had been signed with Chesapeake and recorded during 2008.

Also in late December, 2008 the company had taken out drilling permits in the Town of Hancock in Delaware County, New York. Five wells were proposed with drilling slated to begin in 2009.

Delaware Basin Water Withdrawals

In October, Chesapeake had applied for a permit to the Delaware River Basin Commission (DRBC) to withdraw roughly 100,000 gallons per day of water from the East Branch at Peas Eddy, Delaware County, New York. The water was for use use in drilling and fracking gas wells.

Statoil-Hydro Oil Joint Venture

In November, 2008 Statoil-Hydro Oil bought about a one-third share in Chesapeake's Marcellus leasehold for $3.4 billion. This sum consisted of $1.25 billion in cash and an agreement by Statoil-Hydro to fund $2.13 billion of Chesapeake's Marcellus drilling costs.

2009 Development Timeline

During the first half of 2009 Chesapeake intensified its Marcellus exploration activities especially in northeastern Pennsylvania and northern West Virginia

Robson Well

In January, 2009 the company was found taking out a drilling permit for the Robson Well on Foxhill Road near Brill Road in Oregon Township, about four miles north of Honesdale in Wayne County, Pennsylvania. This well targeted the Oriskany Sandstone. Since considerably less fracking fluid is required for Oriskany wells, there was no review of the well permit by the Delaware River Basin Commission, nor did the Pennsylvania Department of Environmental Protection (DEP) need a Marcellus Addendum for it.

Robson well site shrouded in fog, Wayne Co., PA
Photo credit - Dave Messersmith, Penn State Cooperative Extension

Nevertheless, there was some concern expressed by environmental advocacy groups that once the well infrastructure, such as holding pit and gas pipelines, was in place that Chesapeake might then reapply to permit the well for drilling to the Marcellus formation. DEP approved clearing the well pad, and the drilling permit was issued in February. A late April, 2009 report found Ziegenfuss Drilling, casing the well point with reinforced steel. In July, 2009 there was a spectacular partial rig collapse as drilling was underway. No injuries were reported.

Towanda Field Office

In 2009, Chesapeake opened a field office in Towanda, Bradford County, Pennsylvania located on Fox Chase Road in a former Ames department store. This office coordinates Marcellus shale development for the company and outreach to residents, community groups and local governments.

West Virginia: Parks and Helicopters

A June, 2009 report found Chesapeake having proposed to the Wheeling, WV Park Commission to lease drilling rights in Oglebay and Wheeling parks in northern West Virginia. The lease was to be approximately 2,200 acres.

Another report, later in June, was made of Chesapeake using helicopters to conduct seismic testing in Wetzel County, West Virginia. Dawson Geophysical Co was contractor.

According to one September, 2009 account, Chesapeake was believed to own a large leasehold in Marion, Monongalia, and Preston counties.

Drilling in Bradford County

A late June, 2009 report identified a site where two wells had been drilled by Chesapeake in Bradford County, PA on the 80-acre Morris Otten farm in rural Asylum Township about 45 northwest of Scranton, PA.

Water issues in northeast Pennsylvania

A March, 2009 report indicated Chesapeake had applied to the DRBC to withdraw 1 million gallons of water per per day for 30 days from the East Branch of the Delaware River, near Hancock, NY in Delaware County.

Also, in a June, 2009 report Chesapeake had applied for withdrawal of 499,000 gallon/day from Wyalusing Creek, in Rush Twp about twenty miles west of Montrose in Susquehanna County, PA. It was approved by the Susquehanna River Basin Commission for use on a well on the Venderfeltz farm.

July, 2009 found Chesapeake again applying to the DRBC for permission to withdraw one million gallons of water per day from the West Branch of the Delaware River in Buckingham Township, located in Wayne County, PA. In order to minimize the environmental impact on the neighboring communities, the company planned to remove the water using a pipeline system rather than with tanker trucks.

Leasing In Wyoming, Susquehanna, Bradford and Broome Counties

Chesapeake was in the news in September, 2009 when it had made nearly identical offers to two large landholder groups in northeastern Pennsylvania:

Wyoming County Landowners Group - 37,000 acres - 600-700 landowners.
The Friendsville Group in Susquehanna and Bradford Counties, PA and Broome County, NY - 30,000 acres - 600 landowners.

The terms of both offers were very similar - $5,750 signing bonus, 5 year lease, 20% royalties. The Friendsville offer had essentially been a counter-offer to one made earlier to the group by Fortuna Energy.

Spotlight Issues

The July, 2009 Chesapeake operations update indicated a very high investment return on wells in the Marcellus shale--as estimated at a long run price of $7 for gas and $70 for oil. At 71%, it is more than twice the IRR for Chesapeake's Barnett shale wells. IRR, or "internal rate of return", is a measure often used for comparing rates of return on alternative investments.
In the same report the company increased its estimated ultimately recoverable (EUR) gas from 3.75 to 4.2 bcfe per Marcellus well and indicated that decline rates on their wells were lower than expected. This is in line with the experience reported by at least one other major company that has been extensively drilling the Marcellus shale formation.

Executive contacts

Aubrey McClendon is Chesapeake's Chairman, CEO and co-founder.
Scott Rotruck is Vice President of Corporate Development and spokesman on Marcellus shale drilling.
Yvonne E. Marciano is an Albany, NY-based attorney who represents Chesapeake Energy in New York State.
Mike John is Vice President of Corporate Development for Chesapeake’s Eastern Division, headquartered in Charleston, West Virginia.
Brian L. Grove is Director of Corporate Development in Chesapeake's northeastern Pennsylvania field office located in Towanda, Bradford County.
B.J. Carney is a Senior Geophysicist-Appalachia.
Maribeth Anderson is Chesapeake's Corporate Development Manager.

Retrieved from "http://www.waytogoto.com/wiki/index.php/Chesapeake_Energy"

  Vargson-1H           Bradford Co., PA                    4.6
  Evanchick-2H             "         "                     5.3
- Messenger-3H         Wetzel Co., WV                      3.5
+ Messenger-3H         Wetel Co., WV                       3.5
 === 2008 Development Timeline ===
 July, 2009 found Chesapeake again applying to the DRBC for permission to withdraw one million gallons of water per day from the West Branch of the Delaware River in Buckingham Township, located in [[Wayne County|Wayne County, PA]]. In order to minimize the environmental impact on the neighboring communities, the company planned to remove the water using a pipeline system rather than with tanker trucks.
+==== Leasing In Wyoming, Susquehanna, Bradford and Broome Counties ====
+Chesapeake was in the news in September, 2009 when it had made nearly identical offers to two large landholder groups in northeastern Pennsylvania:
+* Wyoming County Landowners Group - 37,000 acres - 600-700 landowners.
+* The Friendsville Group in Susquehanna and Bradford Counties, PA and Broome County, NY - 30,000 acres - 600 landowners.
+The terms of both offers were very similar - $5,750 signing bonus, 5 year lease, 20% royalties. The Friendsville offer had essentially been a counter-offer to one made earlier to the group by [[Fortuna Energy Inc|Fortuna Energy]].
 === Spotlight Issues ===