Chesapeake Energy.
Posted on 09/11/2014 1:51:17 PM PDT by ckilmer
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September 11, 2014 | Comments (1)
Chesapeake Energy.
Few people are as bullish on the future of the Utica shale as the founder and former CEO of Chesapeake Energy (NYSE: CHK ) , Aubrey McClendon. He famously once called it the "biggest thing economically to hit Ohio, since maybe the plow." More recently, he called it "extraordinary" and said that "pound for pound, it's the best gas rock in the U.S." What's different this time is McClendon is no longer alone in his view on the play, as Royal Dutch Shell (NYSE: RDS-A ) (NYSE: RDS-B ) recently made a significant discovery that indicates the Utica shale extends well past Ohio.
McClendon's recent bullish comments on the play came at an energy conference in Texas. His newest venture, American Energy Partners, has amassed billions of dollars in investor money to pour into the Utica and other shale plays in America. However, because the company is private, McClendon's comments offer the only real insight into how successful it is in drilling in the Utica shale.
McClendon's former employer, Chesapeake Energy, also appears bullish on the Utica. At its analyst day earlier this year, Chesapeake called it a world-class asset. The company, which has over 1 million net acres in the play, was an early mover under McClendon's direction; because of that it has developed best-in-class knowledge of the rocks underneath Ohio, as it has taken over a mile of core samples and accumulated more than 600 square miles of 3D seismic data in order to best place its wells. This data has made Chesapeake the most efficient operator in the play, more than doubling its rate of return in the past year, as noted on the following slide.
Source: Chesapeake Energy Investor Presentation.
The high-return wells indicated on that slide are being drilled in what is known as the wet gas window, which is rich in natural gas liquids such as propane and ethane. However, Chesapeake Energy and other producers are also starting to see strong results in the dry natural gas portion of the play. Chesapeake Energy highlighted these dry gas wells in the following slide.
Source: Chesapeake Energy Investor Presentation.
Most of these wells were drilled along Ohio's border with West Virginia and Pennsylvania. However, the industry appears to be just scratching the surface of the Utica shale's potential, as recent wells by Royal Dutch Shell are showing strong natural gas production, too. The big difference is that these wells were drilled more than 300 miles to the east in Tioga County, Pa.
Royal Dutch Shell's wells, which are near the Pennsylvania-New York border, could extend the play hundreds of miles further to the east than energy companies previously thought. Shell is particularly optimistic because the initial production rates of its first two wells are as good, if not better, than the wells Chesapeake Energy and others in the industry are drilling in Ohio.
Shell's first well, Gee, had an initial production rate of 11.2 million cubic feet per day when it was completed nearly a year ago. Its second well, Neal, saw peak daily production of 26.5 cubic feet of natural gas per day once drilling finished this past February. Shell has actually been quietly withholding these results because it wasn't ready to broadcast to its peers that it was sitting on a potentially major natural gas discovery. These results, now made public, suggest the Utica shale is much bigger than producers originally thought.
It appears McClendon was not only was right about the Utica shale, but he might have even underestimated its potential. While it isn't loaded with oil as he had hoped, it is loaded with more natural gas than anyone expected. It has the potential to fuel strong returns for Utica shale producers and investors in the years ahead.
Royal Dutch Shell (NYSE: RDS-A ) (NYSE: RDS-B ) recently made a significant discovery that indicates the Utica shale extends well past Ohio.
recent wells by Royal Dutch Shell are showing strong natural gas production, too. The big difference is that these wells were drilled more than 300 miles to the east in Tioga County, Pa.
Royal Dutch Shell’s wells, which are near the Pennsylvania-New York border, could extend the play hundreds of miles further to the east than energy companies previously thought. Shell is particularly optimistic because the initial production rates of its first two wells are as good, if not better, than the wells Chesapeake Energy and others in the industry are drilling in Ohio.
Shell’s first well, Gee, had an initial production rate of 11.2 million cubic feet per day when it was completed nearly a year ago. Its second well, Neal, saw peak daily production of 26.5 cubic feet of natural gas per day once drilling finished this past February. Shell has actually been quietly withholding these results because it wasn’t ready to broadcast to its peers that it was sitting on a potentially major natural gas discovery. These results, now made public, suggest the Utica shale is much bigger than producers originally thought.
After watching Chesapeake these past 10 years, I’ve come to the conclusion - Aubrey McClendon is the gas industry’s equivalent of Donald Trump combined with Bill Clinton.
He’s a borderline shyster and self-promoter who nearly bankrupted Cheasapeake, and is pumping this info out because his new company is probably planning an IPO.
GTL NOW MORE THAN EVER!.....................
Regardless of the play, you still can’t make significant rates of return in dry gas. The only people in these plays are ones who aren’t in the Bakken, Eagle Ford, Permian, etc.
As Ed McMahon would say, “You are correct, sir.”
What does a brand-new, no one’s ever heard of them company like Royal Dutch Shell know about oil exploration?
He’s everything you say and then some. McClendon is no choirboy and maybe even a criminal. But he is one of four or five guys so bullish on shale and fracking they changed the whole global energy situation monumentally, long-term, and in our favor. The implications are astonishing. For a detailed look into what these guys did I recommend “The Frackers,” by Gregory Zuckerman.
“What does a brand-new, no one’s ever heard of them company like Royal Dutch Shell know about oil exploration?”
I suggest you read post #5
Aubrey is the original shyster.
I suggest you try and frame my post as sarcasm. Do you really think that I think that RDS is a new company?
“I suggest you try and frame my post as sarcasm. Do you really think that I think that RDS is a new company?”
And did you not realize I was doing the same?
I know you and admire your posts most extensively.
BTW, I retire Monday, not military but engineering.
Likely find me here even more.
Or I could find you another gig. That’s what I do.
“Or I could find you another gig. That’s what I do.”
Am retiring from an oil company.
Could stay on or get another gig if I wanted.
It’s what I do.
Of course. If you reconsider, I’ll probably be here.
Hang on just a second... What kind of gigs do you get? I’m looking to work more...
Seriously.
“Hang on just a second... What kind of gigs do you get? I’m looking to work more...”
Oil company I am retiring from hires mostly non-Americans as we cannot find qualified talent in engineering.
the Universities are churning out non-engineers and the other countries of the world are turning out engineers.
Starting our of college are +$100k.
Not sure of the difference between being a shyster and a huckster, maybe a carnival barker, but you certainly nailed McClendon,
What’s the point of posting graphics that can’t be read?
Regardless of the play, you still can’t make significant rates of return in dry gas. The only people in these plays are ones who aren’t in the Bakken, Eagle Ford, Permian, etc.
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You have to be right when the initial gas flow rate is X. However, when the initial gas flow rate for the same investment is 10X or 30X—then likely there is some profit there.
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