Chesapeake Energy

Chesapeake Energy

Type	Public
Industry	Petroleum
Founded	1989
Headquarters	Oklahoma City, Oklahoma, USA
Key people	Aubrey McClendon, Chairman of the Board & CEO Steven C. Dixon, Executive Vice President – Operations & Geosciences & COO Douglas J. Jacobson, Executive Vice President – Acquisitions & Divestitures Domenic J. Dell'Osso, Jr., Executive Vice President and Chief Financial Officer num_employees = 10,021[1]
Products	Natural Gas
Revenue	US$9.37 Billion (FY 2010)[2]
Operating income	US$2.9 Billion (FY 2010)[1]/>
Net income	US$1.77 Billion(FY 2010)[2]
Total assets	US$36.7 Billion (FY 2010)[3]
Total equity	US$15.5 Billion (FY 2009)[3]
Website	chk.com

Chesapeake Energy (NYSE: CHK) is the second largest producer of natural gas in the United States, a top 15 producer of U.S. liquids and the most active driller of new wells, according to an August 2011 investor presentation.^[4] It recorded 2Q 2011 natural gas production of an average of approximately 3.049 billion cubic feet (86,300,000 m³) of natural gas equivalent^[5], a 9 percent year-over-year increase. The 2010 full year was Chesapeake's 21st consecutive year of sequential production growth.

Chesapeake also claims 14,500,000 acres (59,000 km²) net of of U.S. onshore leasehold and 29,400,000 acres (119,000 km²) of 3-D seismic inventory.

The company's world headquarters is located at a corporate campus in the near northwest side of Oklahoma City, Oklahoma. The Fortune 500^[6] company's operations are focused on the development of onshore unconventional and conventional natural gas in the U.S. in the Barnett Shale, Haynesville Shale, Marcellus Shale, Anadarko Basin, Arkoma Basin, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and East Texas regions of the United States. Forbes magazine recognized it as the “Best Managed Oil-and-Gas Company” in 2007^[7] and it was named to Fortune Magazine’s 100 Best Companies to Work For List in 2008 through 2011.^[8] CEO Aubrey K. McClendon has also been recognized by Forbes as one of America’s top-performing executives.^[9] The company was named the 2009 Energy Producer at the Year by Platts Global Energy Awards and received the Industry Leadership Award for its role in championing natural gas as the fuel of the future. The company was also a finalist in the Deal of the Year, CEO of the Year and Community Development Program of the Year categories and is only one of two companies to receive multiple awards. It was the second time in three years that Chesapeake had been named Platts’ Energy Producer of the Year.^[10]

History

• 1989 - Founded by McClendon and former President and COO Tom L. Ward, Chesapeake began with 10 employees and a $50,000 initial investment. Focusing on a strategy of drilling horizontal natural gas wells in unconventional reservoirs, the company built a sizable position in the Golden Trend and Sholem Alechem fields of South-central Oklahoma and in the Giddings field of Southeast Texas.

• 1993 - The company completed its IPO at a split-adjusted price of $1.33 per share.

• 1995 - Chesapeake moves from the NASDAQ to the NYSE and changes its stock symbol to CHK.^[11]

• 1996–2000 - After struggling with attempts to extend the Austin Chalk play into western and central Louisiana and the coinciding price collapse of oil and natural gas in the late 1990s, the company modified its strategy to focus almost exclusively on natural gas production. This focus utilized the newest technologies to target a more diversified, longer reserve life and lower base risk asset base and began to incorporate acquisitions into the company’s business plan.

• 2003–2007 - The company experienced rapid growth thanks to upward shifts in U.S. natural gas prices. During this time, the company expanded its land positions into unconventional reservoirs such as fractured carbonates, tight sandstone and shales such as the Barnett, Fayetteville and Marcellus shales.

• 2006 - Chesapeake was added to the S&P 500, replacing Dana Corp.

• 2008 - Chesapeake announced its discovery of the Haynesville Shale in East Texas and northwestern Louisiana. The Haynesville Shale is projected to become the nation’s largest natural gas producer by 2015 and along with the Marcellus Shale, perhaps one of the five largest natural gas fields in the world over time.

• 2009 - The company celebrated its 20th anniversary by partnering with Orange County Choppers to create the world’s first compressed natural gas (CNG)-powered chopper.

Controversies

Bradford County blowout

On April 19, 2011, the company lost control of a natural gas well in the Marcellus shale which was being fracture stimulated. This caused a large spill of salt water and hazardous chemicals^[12][13][14] from the well, such as 2-butoxyethanol and methanol,^[15] into the surrounding countryside. The suspected cause was a cracked well casing. ^[16] By April 22, the leak had been stemmed.^[17] On May 2, the state of Maryland announced its intention to sue the company for violation Resource Conservation and Recovery Act and the Clean Water Act. ^[18][19][20]

Areas of Operation

Chesapeake owns leading positions in the Barnett, Haynesville, Bossier, Marcellus and Pearsall natural gas shale plays and in the Granite Wash, Cleveland, Tonkawa, Mississippian, Bone Spring, Avalon, Wolfcamp, Wolfberry, Eagle Ford, Niobrara, Bakken/Three Forks and Utica unconventional liquids plays.^[21] The company holds approximately 2,500,000 acres (10,000 km²) of gas shale play leasehold and an inventory of approximately 38,400 net risked drillsites, with 17.2 trillion cubic feet (490 km³) equivalent of total proved reserves and approximately 109×10^¹² cu ft (3,100 km³)e of risked unproven reserves.^[22]

Barnett Shale The Barnett Shale is located in North Texas. The company owns approximately 220,000 net leasehold acres on which it could drill 2,300 future net wells in addition to 965 net wells currently producing.^[23] Gross operated production in the Barnett set a record of more than 1.3×10^⁹ cu ft (37,000,000 m³) equivalent per day in 2010. In January 2009, Chesapeake announced that it had agreed to sell 25% of its Barnett holdings for $2.25 billion to Paris-based Total S.A.

Fayetteville Shale Chesapeake sold its interests and assets in the Fatetteville Shale in North-central Arkansas to BHP Billiton in 2011.^[24]

Marcellus Shale According to the company’s website, Chesapeake’s approximately 1,700,000 acres (6,900 km²) net in the Marcellus Shale play, which spans from northern West Virginia across much of Pennsylvania into southern New York, makes it the play’s largest leasehold owner. The company’s joint venture partner, Statoil (NYSE:STO, OSE:STL), owns approximately 570,000 acres (2,300 km²) additional net of Marcellus leasehold. The company is producing from more than 100 net wells in the Marcellus and estimates it could drill up to 21,000 additional net wells.^[25]

Utica Shale In August 2011, CEO Aubrey McClendon discussed the Utica Shale on "Mad Money." He said the oil-rich shale in eastern Ohio could be the largest producing field in the U.S., with a potential for 25,000 wells and 25 billion barrels (4.0×10⁹ m³) of oil over decades. The company claims 1.25 million acres (5,100 km²) of leasehold in the area.^[26]

Haynesville Shale The Haynesville Shale is located in northwest Louisiana and east Texas. Discovered by Chesapeake's geoscientists and engineers, is now the nation's largest producting natura gas shale play.^[27], and the company says it could ultimately exceeed 250 trillion cubic feet (7,100 km³) equivalent, making it one of the top five natural gas fields in the world. Chesapeake’s website states that the company is the largest leasehold owner and most active driller of new wells in the Haynesville Shale play in Northwest Louisiana and East Texas. Chesapeake owns approximately 530,000 acres (2,100 km²) net of leasehold in the play.

Chesapeake and its 20% joint venture partner, Plains Exploration and Production Company (NYSE:PXP) (which owns approximately 110,000 acres (450 km²) additional net), have drilled and completed 260 net wells in the Haynesville.

Bossier Shale The Bossier Shale is located in northwest Louisiana and East Texas. It is the largest leasehold owner in the play and currently owns 185,000 acres (750 km²) net of leasehold prospective for Bossier Shale.^[28]

Eagle Ford Shale The Eagle Ford Shale is located in southwest Texas. Chesapeake began leasing in August 2009 in the Eagle Ford Shale. They have a focused leasehold position in oil and wet gas windows and within areas that have optimal mix of permeability and thermal maturity. According to an October 2010 news release, Chesapeake entered a joint venture agreement with CNOOC International Limited. CNOOC will purchase a 33.3% undivided interest in Chesapeake's 600,000 net oil and natural gas leasehold land in the Eagle Ford Shale project.

References

1. ^ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTEzODB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
2. ^ ^{a b} Chesapeake Energy (CHK) annual SEC income statement filing via Wikinvest
3. ^ ^{a b} Chesapeake Energy (CHK) annual SEC balance sheet filing via Wikinvest
4. ^ http://www.chk.com/Investors/Pages/Presentations.aspx
5. ^ http://www.chk.com/News/Articles/Pages/1590490.aspx
6. ^ "Fortune 500 2008: Fortune 1000 1-100". CNN. http://money.cnn.com/magazines/fortune/fortune500/2008/full_list/. 
7. ^ "Chesapeake Energy: Nice Parking Lot". Forbes. December 21, 2006. http://www.forbes.com/2006/12/21/best-managed-energy-biz-cz_07platinum_cs_1221chesapeakeenergy.html. 
8. ^ "100 Best Companies to Work For 2010: Full list". CNN. http://money.cnn.com/magazines/fortune/bestcompanies/2010/full_list/. 
9. ^ Forbes. http://people.forbes.com/profile/aubrey-k-mcclendon/18103. 
10. ^ http://geaweb.platts.com/Winners.aspx?xmlFile=Winners2009.xml
11. ^ http://www.nyse.com/about/listed/chk.html
12. ^ http://www.nytimes.com/gwire/2011/05/04/04greenwire-pa-well-blowout-tests-natural-gas-industry-on-36297.html
13. ^ http://www.propublica.org/article/response-to-pa-gas-well-accident-took-13-hours-despite-state-plan-for-quick/single
14. ^ http://www.aps.anl.gov/Safety_and_Training/User_Safety/oshatoxicchem.html
15. ^ http://www.propublica.org/documents/item/chesapeake-hydrofracking-disclosure
16. ^ Helman, Christopher (April 20, 2011). "Chesapeake Energy Suffers Gas Well Blowout On Anniversary Of BP Spill". Forbes. http://www.forbes.com/sites/christopherhelman/2011/04/20/chesapeake-energy-suffers-gas-well-blowout-on-anniversary-of-bp-spill/. Retrieved October 26, 2011. 
17. ^ McAllister, Edward (April 22, 2011). "Chesapeake stems flow from blown Pennsylvania gas well". Reuters. http://www.reuters.com/article/2011/04/22/us-chesapeake-blowout-idUSTRE73K5OH20110422. Retrieved October 26, 2011. 
18. ^ "Attorney General Gansler Notifies Chesapeake Energy of the State's Intent to Sue for Endangering the Health of Citizens and the Environment". May 2, 2011. http://www.oag.state.md.us/Press/2011/050211.html. Retrieved October 26, 2011. 
19. ^ Warner, Dave (May 4, 2011). "Maryland prepares lawsuit over PA gas drilling effect on water". Reuters. http://www.reuters.com/article/2011/05/04/us-energy-pennsylvania-lawsuit-idUSTRE7437OR20110504. Retrieved October 26, 2011. 
20. ^ Hrin ,Eric (May 6, 2011). "Chesapeake informed of Maryland's intent to sue". The Daily Review. http://thedailyreview.com/news/chesapeake-informed-of-maryland-s-intent-to-sue-1.1142711. Retrieved October 26, 2011. 
21. ^ http://www.chk.com/Pages/default.aspx
22. ^ http://www.chk.com/News/Articles/Pages/1590490.aspx
23. ^ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTEzODB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
24. ^ http://www.arkansasonline.com/news/2011/feb/21/chesapeake-sells-fayetteville-shale-assets/
25. ^ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTEzODB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
26. ^ http://www.chk.com/news/articles/Pages/TV_20110801_AKM.aspx
27. ^ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTEzODB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
28. ^ http://www.chk.com/Investors/Documents/Latest_IR_Presentation.pdf

External links

• Chesapeake's official website