Sunday, October 23, 2011

Overstating Peak Production in Utica Shale?

Chesapeake Energy (CHK-$27.81) is accelerating drilling on liquids-rich plays in an effort to drive margin expansion and profitability, given near-month contract prices for natural gas languish below $4 per thousand cubic feet — lower than aggregate exploration and recovery costs (including G&A) in most regions. The natural gas provider has focused recent spud activity in the Utica Shale, mostly on leased acreage in eastern Ohio.

Read More at 24/7 Wall Street: Can Utica Shale Discovery Transform Chesapeake Energy?

David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

1 comment:

Pacioli said...

Your article is just as misleading as you claim CHK to be.

"McClendon (and by definition, Chesapeake) brags that proved reserves grew by 2.74 tcfe in first-half 2011 to 16.5 tcfe, at an average drilling and completion cost of only $1.29 mcfe. These numbers are misleading..."

How is reserves growth misleading? CHK just reports what the 3rd party engineers provide them.

"To date, however, Eagle Ford remains more hype than hope. Volume from the region totaled a mere 1% of quarterly output of 277.5 bcfe..."

This has nothing at all to do with CHK. The 1% is merely a result of XOM's geographic mix of global reserves.

"Overstating Peak Production Rates?"

This sub-header is extremely misleading, since in the paragraphs following, you do nothing demonstrate that CHK in fact did not "achieved a peak rate of 9.5 million cubic feet per day of natural gas and 3,010 barrels of oil equivalent per day (three times initial assays)". If you are going to assert that they did not, in fact, achieve this, then the burden is on you to provide supporting evidence.