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BREAKING 9pm 7-1-08 Chesapeake Energy Announces $3.3B Haynesville Shale Joint Venture
Tuesday, Jul 01, 2008 7:21pm

SHREVEPORT, LA  (By: Tom Pace, Talk of the Town)  BREAKING: HAYNESVILLE SHALE NEWS  9pm  7-1-08    Chesapeake Energy Corp. has entered into a $3.3 Billion Haynesville Shale joint venture with Plains Exploration & Production of Houston, Texas. 

Kevin McCotter, Director of Corporate Development for Chesapeake Energy, made that major announcement late Monday, July 1st, to the monthly board meeting of the Associated General Contractors (AGC) of Northwest Louisiana. 

Citing their official news release, McCotter said the Chesapeake Energy (NYSE:CHK) and Plains Exploration & Production Company (NYSE:PXP) 
joint venture (the JV) will occur in North Louisiana and East Texas.

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are pleased to announce this joint venture with PXP and believe it creates substantial value for both companies. This transaction establishes a $16.5 billion valuation for our Haynesville Shale leasehold, all of which is located in the Core Area of this very significant discovery.

"We believe it also provides an important validation of Chesapeake's strategy of being a first mover in discovering and developing new unconventional resource plays," McClendon added. 

Many landowners have questioned what kind of gas production can be expected from the Haynesville Shale wells. McClendon answered that question with this statement: "The initial production rates on the eight horizontal wells we have completed have ranged from 5 to 15 million cubic feet of natural gas equivalent (mmcfe) per day on restricted chokes at flowing casing pressures of up to 6,500 PSI." 

He went on to say, "We have achieved outstanding drilling results in the play to date and believe Chesapeake's expertise in developing shale plays provides us with an opportunity to see even better results in the months and years ahead.  We believe these truly exceptional wells would have been capable of even greater initial production rates if produced on open chokes as Barnett and Fayetteville Shale wells commonly are produced.

"These production rates and flowing casing pressures, along with our geoscientific and petrophysical analysis of over 70 wells that have penetrated the Haynesville Shale to date, give us confidence that our mid-point EUR estimate of 6.5 bcfe for the Core Area of the Haynesville Shale is currently appropriate," said McClendon.

Another questioned being asked is how much does it cost for each well, to which McClendon said, "To date, our costs to drill and complete horizontal Haynesville Shale wells have averaged approximately $6.5 million and we anticipate that we will be able to reduce these costs by at least 10% once full-scale development of the play is underway based on other shale play experience. 

Regarding the Haynesville Shale Joint Venture, McClendon concluded, "The $1.65 billion in cash we are receiving from PXP and the additional $1.65 billion commitment will help fund a substantial portion of Chesapeake's Haynesville Shale leasehold, drilling and completion costs over the next few years, providing us with exceptional finding costs from this play of less than $1.00 per thousand cubic feet of natural gas equivalent (mcfe)."

  


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