Chesapeake Energy Corp. on Thursday reported second-quarter earnings of $467 million, or 68 cents a share, up from $235 million, or 37 cents a share, in the same period of 2010.
Chesapeake's quarterly production was up 9 percent to an average of 3.049 billion cubic feet of natural gas equivalent per day, despite the sale of its holdings in Arkansas' Fayetteville Shale to BHP Billiton in March and another volumetric production payment transaction in May.
That production consisted of 2.575 billion cubic feet of natural gas and 79,033 barrels of oil and natural gas liquids. Chesapeake's liquids production was up 62 percent before adjustments for asset sales, a result of the company's increased focus on oil.
Chesapeake's proved reserves decreased by 4 percent to 16.5 trillion cubic feet of natural gas equivalent in the first half of 2011.
Chesapeake continued the industry's most active drilling program through the first six months of the year, drilling 759 wells and participating in an additional 708 wells. The company's drilling success rate was 98 percent for Chesapeake-operated wells and 99 percent for non
Chesapeake's drilling and completion costs in the first half of 2011 totaled $3.427 billion, with about $1.129 billion coming from its joint venture partners.
The company has added another $500 million to its capital expenditure budget for 2011 and 2012 due to significant oil-field service inflation and a more accelerated drilling program in the Utica Shale play. That pushes the budget to a range of about $6 billion to $6.5 billion each year.
Chesapeake will be able to offset some of the service industry inflation with its own vertical integration strategy, with subsidiaries that own drilling rigs, pressure pumping equipment, rental tools, trucking equipment and other oil-field services. The company estimates those businesses will provide services worth about $600 million to Chesapeake in 2012.
new oil play
Chesapeake Energy Corp. pulled back the curtain Thursday on a major new liquids-rich discovery in eastern Ohio.
Drilling in Ohio's Utica Shale over the past two years has revealed a play that Chesapeake estimates could be worth up to $20 billion to the com
Chesapeake has amassed an industry-leading 1.25 million net acres in the Utica Shale.
The company has drilled six horizontal and nine vertical wells in the play, but its data set includes about 2,000 well logs and 3,200 feet of proprietary core samples.
Chesapeake's analysis indicates the play is similar to the Eagle Ford Shale in south Texas, with better economic potential.
Chesapeake has five rigs active in the Utica Shale as it evaluates and develops its leasehold. The company plans to increase its rig count to eight by year's end.
Company officials believe the play will support a drilling effort of at least 40 rigs by the end of 2014.