Chesapeake Energy Corporation (NYSE:CHK) provided some insight into its plans for exploiting its massive bet on the Utica Shale formations underground in eastern Ohio, described by its CEO, Aubrey McClendon, as the “the biggest thing to hit Ohio since the plow.”
According to the company, it will aggressively develop its properties in that region, given that it produces oil and natural gas liquids, and not simply gas.
Though it has drilled 87 wells in the region, only 28 are completed and operational. These wells, on average, produce 1,000 42-gallon barrels of oil equivalent per day, comprising 205 barrels of oil, 3.8 million cft. of natural gas, and 150 barrels of natural gas liquids, like ethane, butane, and propane. “While we agree with the view that the Utica is an emerging play, and there is little publicly available well information, we have drilled and tested a sufficient number of wells for us to have a high level of confidence,” Jim Gipson, a Chesapeake Energy Corporation (NYSE:CHK) spokesman, had said in May.
The company operates 11 drilling rigs on these properties, that comprise 1.3 million hectares, leased in eastern Ohio. This number is planned to be increased to 16 rigs by the end of December. Out of these, the core area of focus for the company is Carrol, Harrison, Columbiana, and adjacent counties.
The area is promising, but viewed as unproven, and developing it would be a vast strain on Chesapeake’s already stretched financial resources, more so when natural gas prices are at their lowest point in many years. According to Ohio officials, the Utica Shale belt could hold anything from 1.3 billion, to 5.5 billion barrels of oil, and Chesapeake officials are hoping to garner a superior rate of return from Utica, compared to any of its other assets.
Chesapeake Energy Corporation (NYSE:CHK) is not alone in Utica – other oil companies in the fray include BP, PLC (NYSE:BP), Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Anadarko Petroleum Corporation (NYSE:APC), and Devon Energy Corporation (NYSE:DVN) In December, French oil company, Total SA (NYSE:TOT) (EPA:FP), paid Chesapeake $610 million for a stake in its holdings in the Utica, with the understanding to cover $1.4 billion of drilling expenses. Yet Chesapeake is certainly the biggest – it holds 162 out of the 223 drilling permits issued by the state.
How this huge bet will ultimately turn out for Chesapeake will only be known as more drilling is undertaken and the production assessed.