Oklahoma-based Chesapeake Energy Corp. really likes Ohio’s Utica shale.
That message was repeated several times by vice president Chris Doyle at the company’s Analyst Day 2014 on Friday in Oklahoma City.
Analysts may have had a difficult time gauging the Utica shale because of the lack of data and production delays, and Chesapeake has said little about the shale in eastern Ohio, he said.
But Chesapeake is very pleased by what it is seeing, Doyle said in a teleconference.
He called the Utica shale “the newest world-class asset in the portfolio of Chesapeake.”
“We are big in the Utica shale,” he said. “We like the Utica shale.”
It is considered a core asset and a valuable area for Chesapeake, he said.
The company has drilled 485 Utica wells, of which 274 are producing. It has an additional 5,500 drilling sites.
Chesapeake’s typical Utica shale well is producing a first-month average of 1,360 barrels of oil equivalents per day.
The company in that quarter produced 50,000 barrels of oil equivalents per day. That number has grown to 75,000 barrels today and will likely top 100,000 barrels by year-end 2014, Doyle said.
Chesapeake “never said we had the highest IPs [Initial Production numbers]” from the Utica shale, he said. “It’s not about IPs. It’s about value,” he said.
The still-developing Utica shale in Ohio and the Marcellus shale in Pennsylvania together accounted for 39 percent of Chesapeake’s production in the first quarter 2014, he said.
The company has more than 1 million leased acres in all parts of the Utica shale, he said.
The typical Utica well cost has dropped from $7.7 million in 2012 to $6.7 million in 2013 with a year-end 2014 target of $5.7 million. The time required to drill such wells has declined from 24 days in 2012 to 20 days in 2013 to 15 days by year-end 2014.
The company is also drilling longer laterals: the average length is 6,000 feet.
The company is intent on working in Tuscarawas, Stark and Carroll counties to develop the first successful wells in the Utica shale’s oil window, Doyle said.
It is getting initial production of 500 barrels per day of oil from a few wells in that area using an old completion method and 1,000 barrels per day using a newer method, he said.
The company is also very interested in developing wells to the east in what is called the dry-gas window, he said. That effort will include a key well in Wetzel County in northern West Virginia that will be completed later this year, he said.
Of the dry-gas window that extends south from Ohio’s Jefferson County, Doyle said: “We like it.”
Chesapeake has 330,00 acres in that area valued at up to $7 billion, he said.
In a Friday announcement, Chesapeake announced plans to spin off a drilling-rig business by June 30 to help reduce debt.
Chesapeake Oilfield Operating LLC employs 5,200 of Chesapeake’s 10,800 employees and owns 114 rigs. It will be spun off to shareholders in a tax-free maneuver and be renamed Seventy Seven Energy Inc.
Chesapeake, the nation’s No. 2 producer of natural gas, also announced that it intends to sell off 28,000 acres in southwest Pennsylvania and Wyoming as part of several separate asset sales.
The moves and sales announced Friday are expected to raise about $3.1 billion for Chesapeake.
Bob Downing can be reached at 330-996-3745 or email@example.com.