US Chesapeake sprints to be first at shale basins

12 October 2011 19:44  [Source: ICIS news]

HOUSTON (ICIS)--Moving quickly into US shale basins with the backing of join ventures defines the strategy of Chesapeake Energy in developing these plays, a senior executive at Chesapeake Energy said on Wednesday.

“Experience is important when you consider the challenge in determining whether an opportunity will be good or not,” said Mike Stice, senior vice president of natural gas for Chesapeake Energy, CEO of Chesapeake Midstream partners and president of Chesapeake Midstream.

“You don’t ever know for sure [the basin’s potential] until you actually penetrate the natural resource. Mother Nature can be an extremely complicated adversary,” Stice said.

Chesapeake Energy has drilled more than 16,000 wells to tap into new unconventional resources. No other company in the world has drilled that many wells into shale plays, Stice said.

Stice made these and other comments at the InfoCast Marcellus Infrastructure Finance and Development Summit on 3 October in Pittsburgh, Pennsylvania. .

Some observers of the industry, particularly shale, have said Chesapeake’s strategy to be the first on the ground for each shale opportunity has been a huge risk.

“I will tell you the word ‘waiting’ and Chesapeake do not go in the same sentence,” Stice said. “We are a very aggressive company. We are a company that looks at the opportunities and pursues it in a fast pace. I don’t believe you will ever see Chesapeake sitting back and waiting.”

Stice said Chesapeake Energy has some of the most premier, down-hole scientists, geologists and geophysicists in production engineering, so the company has learned the difference between good and bad shale basins.

“If you go and look at Chesapeake’s track record, this has not really been a risk,” Stice said. “We have been able to go in and identify prospective opportunities early that ultimately fit our ambitions to grow this business.”

Chesapeake Energy has production in five shale plays throughout the US, including the Barnett, Bossier, Haynesville, Marcellus and Pearsall. The company also have production in unconventional liquid plays, which include the Anadarko Basin, the Eagle Ford shale, the Permian Basin, the Powder River and DJ Basins and the Utica Shale.

The company drilled the first wells in the Utica this year.

“[Chesapeake Energy president and CEO Aubrey McClendon] often tells the story that he likes to be the first mover, identifies the science and determines if the shale is one we can be confident in,” Stice said.

He acquires a leading position and funds development by selling down a position, such as selling about 25% of his position in the Barnett to Total, Stice said. Joint-ventures also help fund the production, from financial groups to other producers, both domestic and overseas.

The company has a joint venture with Statoil in the Marcellus; with Plains Exploration and Production in the Haynesville; and CNOOC International in the Eagle Ford.

Chesapeake is currently looking for a joint venture for its play in the Utica Shale, but Stice would not comment on any potential companies or discussions.

After more than seven years of experience in unconventional plays, with its first production in the Barnett in 2004, the company is moving to more liquid and rich gas production. These natural gas liquids (NGLs) could be sold as feedstock to petrochemical producers.

The Barnett, particularly, produces dry gas. The margin for production is minimal considering sub $4/MMBtu gas prices. Stice would not indicate margins for production in the Barnett.

“Obviously we are getting into the more liquid plays,” Stice said. “Gas prices are tied to Henry hub prices that are moderating a bit. The NGL in the gas is priced on oil, which you get a much higher net back.”

By: Sheena Martin
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