Chesapeake Energy (named after the childhood Chesapeake Bay haunts of a founder) builds oil and natural gas reserves through the acquisition and development of oil and gas assets across the US. In 2011 the company's Southern region (including the Barnett, Bossier, and Haynesville shale plays) accounted for more 46% of company's estimated proved reserves of 18.8 trillion cu. ft. of natural gas equivalent. Chesapeake also has assets in Appalachia, the Mid-Continent, the Permian Basin and the Rockies. In 2011 the company had more than 45,700 producing oil and natural gas wells that produced 3.5 billion cu. ft. of natural gas equivalent per day, the bulk of which was natural gas.
Chesapeake is a leading producer of natural gas, and a top 15 producer of oil and natural gas liquids. The company has vertically integrated many of its operations and owns major marketing, compression, midstream and oilfield services businesses. Through its Nomac Drilling unit, the company saves costs by operating its own equipment. In 2011 the company was operating more than 130 drilling rigs (39 owned and 93 leased.)
The company has natural gas resources in the Haynesville and Bossier Shales in northwestern Louisiana and East Texas; the Marcellus Shale in the northern Appalachian Basin of West Virginia and Pennsylvania; the Barnett Shale in the Fort Worth Basin of north-central Texas; and the Pearsall Shale in South Texas. In addition, it has built leading positions in the liquids-rich resource plays of the Eagle Ford Shale in South Texas; the Utica Shale in Ohio and Pennsylvania; the Granite Wash, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin in western Oklahoma and the Texas Panhandle; the Bone Spring, Avalon, Wolfcamp and Wolfberry plays in the Permian and Delaware Basins in West Texas and southern New Mexico; and the Niobrara Shale in the Powder River Basin in Wyoming.
The company saw its 2011 revenues increase by 24%. It also took advantage of higher-priced crude to increase the production of oil. These efforts, plus continued growth in its natural gas production segment, helped Chesapeake to report a 15% increase in oil and gas production over 2010, allowing it post a robust growth in revenues in 2011.
Higher operating expenses, led by an increase in marketing, gathering, and compression expenses (up 33% over 2010), and natural gas and oil depreciation, depletion, and amortization costs (up 17%) cut into 2011 net income, which decreased by 1.8% compared to 2010.
As part of its strategy to reduce costs by having more ownership of the rigs it uses to drill its wells, in 2011 the company acquired Bronco Drilling (which owns 22 rigs) for $339 million. Chesapeake integrated Bronco's assets into its Nomac Drilling subsidiary.
To get better financial returns, in 2012 the company spun off oilfield service industry affiliate Chesapeake Oilfield Services, Inc. Hurt by continuing low natural gas prices, that year the company sold its midstream assets in 2012 and 2013 for $4.9 billion in three separate deals. As part of this move, in 2012 the company sold its limited partner units and its general partner interests in Chesapeake Midstream Partners to Global Infrastructure Partners for $2 billion. That year the company also sold about $6.9 billion of its Permian basin properties in order to pay down debt. It also sold Total E&P USA a $2.3 million, 25% joint venture stake in its Utica Shale (Ohio) assets.
With natural gas prices remaining low, Chesapeake in 2011 shifted its focus to exploiting gas fields with high liquids content (such as the Eagle Ford in Texas, the Utica Shale, and the Niobara Shale in Wyoming), allowing the company to produce high-priced natural gas liquids (NGLs). Looking to raise cash for future investments, in 2011 Chesapeake sold all of its Fayetteville Shale assets to BHP Billiton unit BHP Billiton Petroleum for about $4.7 billion. It also announced plans to sell its stakes in Frac Tech Holdings and Chaparral Energy.
In 2011 it sold a 33% stake in its shale play in south Texas to CNOOC for $1.1 billion, and agreed to a similar CNOOC deal for Chesapeake's assets in northeast Colorado and Southeast Wyoming.
In 2012 Southeast Asset Management, Inc. held 13.5% of Chesapeake Energy. – less
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