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Chesapeake Energy Corporation Reports Financial And Operational Results For The 2012 Third Quarter

Cleveland and Tonkawa Tight Sand (western Oklahoma, Texas Panhandle) : Chesapeake owns approximately 520,000 net acres of leasehold in the Cleveland play and 285,000 net acres in the Tonkawa play in western Oklahoma and the Texas Panhandle, which it believes is the industry’s largest position in the combined plays. Production from both plays for the 2012 third quarter averaged 24,100 boe per day (31,700 gross operated boe per day), up 75% year over year and 13% sequentially. Approximately 45% of total Cleveland and Tonkawa production during the quarter was oil, 17% was NGL and 38% was natural gas. The company is currently operating 12 rigs in the two plays.

Three notable wells completed by Chesapeake in the Cleveland Sand during the quarter are as follows:

  • The Sloan HMH 1H in Hemphill County, TX achieved a peak rate of approximately 1,345 boe per day, which included 360 bbls of oil, 400 bbls of NGL and 3.5 mmcf of natural gas per day;
  • The Larry Imke 9-19-25 1H in Ellis County, OK achieved a peak rate of approximately 1,035 boe per day, which included 640 bbls of oil, 145 bbls of NGL and 1.5 mmcf of natural gas per day; and
  • The Mathers 131 HMH 1H in Hemphill County, TX achieved a peak rate of approximately 920 boe per day, which included 745 bbls of oil, 75 bbls of NGL and 0.6 mmcf of natural gas per day.

Three notable wells completed by Chesapeake in the Tonkawa Sand during the quarter are as follows:

  • The Fariss 2-16-20 1H in Dewey County, OK achieved a peak rate of approximately 775 boe per day, which included 680 bbls of oil, 30 bbls of NGL and 0.4 mmcf of natural gas per day;
  • The Mike 11-15-22 1H in Roger Mills County, OK achieved a peak rate of approximately 735 boe per day, which included 665 bbls of oil, 20 bbls of NGL and 0.3 mmcf of natural gas per day; and
  • The Shrewder 8-16-22 1H in Ellis County, OK achieved a peak rate of approximately 595 boe per day, which included 480 bbls of oil, 30 bbls of NGL and 0.5 mmcf of natural gas per day.

Granite Wash and Hogshooter Tight Sand (western Oklahoma, Texas Panhandle) : Chesapeake owns approximately 190,000 net acres of leasehold in the Granite Wash play and 30,000 net acres in the Hogshooter play in western Oklahoma and the Texas Panhandle, which it believes is the industry’s largest position in the combined plays. Production for the 2012 third quarter averaged 47,750 boe per day (95,800 gross operated boe per day), up 2% sequentially. Approximately 28% of total Granite Wash and Hogshooter production during the quarter was oil, 22% was NGL and 50% was natural gas. The company is currently operating 10 rigs in the two plays.

Three notable wells completed by Chesapeake in the Granite Wash during the quarter are as follows:

  • The Davis 65 21H in Wheeler County, TX achieved a peak rate of approximately 3,765 boe per day, which included 765 bbls of oil, 1,230 bbls of NGL and 10.6 mmcf of natural gas per day;
  • The Clarence B 21-11-26 1H in Beckham County, OK achieved a peak rate of approximately 2,305 boe per day, which included 750 bbls of oil, 490 bbls of NGL and 6.4 mmcf of natural gas per day; and
  • The Ervin 17-11-17 2H in Washita County, OK achieved a peak rate of approximately 1,790 boe per day, which included 460 bbls of oil, 495 bbls of NGL and 5.0 mmcf of natural gas per day.

Three notable wells completed by Chesapeake in the Hogshooter during the quarter are as follows:

  • The Hannah-Roy Trust 17-11-20 1H in Washita County, OK achieved a peak rate of approximately 2,285 boe per day, which included 1,665 bbls of oil, 215 bbls of NGL and 2.4 mmcf of natural gas per day;
  • The D E Atherton 5057H in Wheeler County, TX achieved a peak rate of approximately 2,280 boe per day, which included 1,710 bbls of oil, 220 bbls of NGL and 2.1 mmcf of natural gas per day; and
  • The Wheeler 10-11-231H in Roger Mills County, OK achieved a peak rate of approximately 1,120 boe per day, which included 1,005 bbls of oil, 45 bbls of NGL and 0.4 mmcf of natural gas per day.

Powder River Basin Niobrara (Wyoming) : Chesapeake owns approximately 340,000 net acres in the Powder River Basin Niobrara play in Wyoming. The company has drilled 55 horizontal wells in the play to date, and results continue to improve steadily with an increasing focus on a recently identified liquids-rich core area that has much higher pressures and hydrocarbons in place than in other portions of the play. Chesapeake believes it has the ability to drill more than 1,000 wells in this core area in the years to come. Chesapeake is currently operating nine rigs in the play and plans to exit 2012 with 10 operated rigs. Production from the Powder River Basin Niobrara play is just beginning to ramp up because of the time and capital needed to build out gas processing and pipeline takeaway infrastructure. The company expects a much larger contribution to production growth from the Niobrara in 2013 and beyond as midstream constraints are reduced.

Three notable recent wells completed by Chesapeake in the Powder River Basin Niobrara during the quarter are as follows:

  • The Wallis 23-33-71 A 3H in Converse County, WY achieved a peak rate of approximately 1,990 boe per day, which included 1,105 bbls of oil, 385 bbls of NGL and 3.0 mmcf of natural gas per day;
  • The York Ranch 26-33-70 A 1H in Converse County, WY achieved a peak rate of approximately 1,750 boe per day, which included 745 bbls of oil, 440 bbls of NGL and 3.4 mmcf of natural gas per day; and
  • The Clausen Ranch 25-34-71 ST A 1H in Converse County, WY achieved a peak rate of approximately 1,720 boe per day, which included 1,075 bbls of oil, 280 bbls of NGL and 2.2 mmcf of natural gas per day.

In February 2011, Chesapeake entered into a joint venture with CNOOC to develop the Niobrara play. As of September 30, 2012, the company’s remaining drilling carry from CNOOC was approximately $480 million. Chesapeake anticipates using 100% of the remaining carry by year-end 2014, and the carry will pay for 67% of Chesapeake’s drilling costs during that time.

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