360° Coverage : A Look At Chesapeake's Operations In The Marcellus Shale

2 Updates

A Look At Chesapeake's Operations In The Marcellus Shale

Apr 4 2014, 12:52pm CDT | by

The Marcellus shale is the largest natural gas producing region in the United States, accounting for close to one-fifth of the country’s total gas production. The shale is also emerging as one of...

Filed under: news


28 weeks ago

A Look At Chesapeake's Operations In The Marcellus Shale

Apr 4 2014, 12:52pm CDT | by

The Marcellus shale is the largest natural gas producing region in the United States, accounting for close to one-fifth of the country’s total gas production. The shale is also emerging as one of the most economical gas plays, given the high production rates of wells in addition to improving drilling efficiencies being brought about by the adoption of technologies such as pad drilling. In this note, we take a look at Chesapeake Energy’s operations in the Marcellus shale as well as some of the broader trends driving production growth in the region.

Trefis has a $26 price estimate for Chesapeake Energy, which is almost in line with the current market price.

See our complete analysis for Chesapeake Energy here

Why Marcellus Is The Largest Shale Gas Play In North America

The Marcellus shale, which lies beneath the states of Ohio, West Virginia, Pennsylvania and New York, is estimated to hold about 141 trillion cubic feet of technically recoverable natural gas reserves, according to data from the U.S. Energy Information Administration. The play’s proximity to high-demand markets on the East Coast makes it attractive to gas producers, since it enables lower transportation costs. Production from the Marcellus has been soaring, growing from less than 2 billion cubic feet per day (bcf/d) in 2007 to about 14 bcf/d currently, and production could rise to as much as 20 bcf/d by 2020. The reasons for the growth are manifold.

Firstly, producers have been focusing on the most productive “sweet-spots” of the play, and performance has been solid for the most part. Besides strong initial production rates, operators have been seeing relatively low rates of decline. Additionally, efficiency improvements have also been driving production growth, as operators have been able to drill deeper wells in less time, at a lower cost. Although the number of drilling rigs in the area has remained relatively flat in recent months, production has continued to grow as more operators have been employing technologies such as pad drilling, which helps to drill groups of wells more efficiently while cutting down the average drilling cycle time. Thirdly, infrastructure upgrades, such as new pipelines and compression stations have improved takeaway capacity from gas fields in West Virginia and Pennsylvania portions of the shale, aiding production growth. More pipelines expansion projects are currently underway, and could potentially add at least 3.5 billion cubic feet per day (Bcf/d) of additional takeaway capacity to New York, New Jersey and the Mid-Atlantic markets. ((Marcellus natural gas pipeline projects to primarily benefit New York and New Jersey, U.S. EIA, October 2013))

High Rates of Return For Chesapeake

The Marcellus is Chesapeake’s single largest hydrocarbon play, contributing around 147,000 barrels of oil equivalent per day (mboe/d) of the company’s total production (oil and gas) during Q4 2013. In comparison, the Haysville and Eagle ford shales contributed about 90 and 87 mboe/d, respectively. Chesapeake has seen its net production from the play grow from under 200 million cubic feet per day (mmcf/d) in Q1 2011 to around 845 mmcf/d in Q4 2013, which equates to a CAGR of about 56%. The play has been a key driver of the company’s drilling efficiency improvements as well. About 78% of the company’s drilling operations were carried out using multi-well pad drilling in 2013 and the company expects this number to rise to around 98% this year. The Marcellus is one of the company’s most lucrative natural gas plays. For instance, the company is targeting a rate of return of over 110% on its wells, assuming that gas prices are around $4 per mcf, with an initial investment of around $7 million per well. This potentially means that the play could remain viable for Chesapeake, even if gas prices were to fall to near $3 levels. Gas prices are currently ruling at around $4.30 per MMBtu.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.


7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 2 ...
Source: Business Times Singapore   Full article at: Business Times Singapore


7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hits home ...
Source: Business Times Singapore   Full article at: Business Times Singapore


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

Chinese company signs Rio 2016 uniform deal
Rio de Janeiro, Oct 23 (IANS) Chinese sports apparel maker 361 will be the official uniform supplier for the Rio 2016 Olympics, the organizers have said.
Ukraine lacks sufficient gas for winter
Kiev, Oct 23 (IANS) Ukrainian Prime Minister Arseny Yatsenyuk has said his country lacks sufficient natural gas for winter.
Obama 'cautiously optimistic' about Ebola
Washington, Oct 23 (IANS) President Barack Obama Wednesday said he is "cautiously optimistic" about the Ebola situation in the US, as his government announced a new programme that will actively monitor for 21 days every person coming from West African nations hit by the deadly virus.
Khamenei wants less reliance on oil
Tehran, Oct 23 (IANS) Iran's Supreme Leader Ayatollah Ali Khamenei called on the country's officials Wednesday to formulate plans to cut Iran's dependence on oil revenues and manage the economy on the basis of the domestic capabilities.

Latest from the Network

European Champions League standings
Paris, Oct 22 (IANS) Following are the European Champions League standings for Groups E to H after Tuesday's matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to Xinhua...
Read more on Sport Balla
Rogerio set to break Giggs world record
Rio de Janeiro, Oct 22 (IANS) Sao Paulo goalkeeper Rogerio Ceni is one victory away from earning his fourth Guinness World Record by eclipsing a mark held by Manchester United legend Ryan Giggs. The 41-year-old will...
Read more on Sport Balla
Ryan Reynolds can't keep his hands off Blake Lively
Ryan Reynolds was ''really sweet'' to Blake Lively at the Angel City Ball. The couple, who got married in September 2012, made their first red carpet appearance together in New York City on Monday night (10.20.14) since...
Read more on Celebrity Balla
Kris Jenner doesn't know who Bruce Jenner is dating
Kris Jenner has ''no idea'' whether Bruce Jenner is dating her best friend. The 58-year-old reality TV star, who split from the Olympic gold medallist last October after 23 years of marriage, claims she doesn't know if...
Read more on Celebrity Balla
When Rihanna dressed like 'Harry Potter'
New York, Oct 22 (IANS) Singer Rihanna was spotted here in a Harry Potter style costume. She wore the wizard-like get-up while heading for a business meal here Monday, reports mirror.co.uk. The 26-year-old combined a...
Read more on Celebrity Balla
Germany raises humanitarian aid to Iraq
Berlin, Oct 22 (IANS) Germany has pledged a further 20 million euros (about 25.5 million dollars) in humanitarian aid to Iraq, the foreign ministry said in a statement Tuesday. The additional funds are immediately...
Read more on Politics Balla
India calls on Israel, Palestine to resume peace process
United Nations, Oct 22 (IANS) India has called upon Israelis and Palestinians to resume the peace process as "dialogue remains the only viable option" to address the issues confronting the region. In a brief statement...
Read more on Politics Balla
Airstrikes help ground forces fight IS: Pentagon
Washington, Oct 22 (IANS) Kurdish forces are in control of the majority of the Syrian city of Kobane despite efforts by the Islamic State (IS) to take the town, a spokesperson for US defence department said Tuesday....
Read more on Politics Balla
Palestine, Israel urged at UN to halt unilateral initiatives
United Nations, Oct 22 (IANS) UN Secretary-General Ban Ki- moon Tuesday called on Palestine and Israel to overcome differences and halt unilateral initiatives that fuel mistrust, so as to pursue long-term stability in...
Read more on Politics Balla
China urges Israel to create conditions for peace
United Nations, Oct 22 (IANS) Chinese government has called on Israel to create necessary conditions for the resumption of peace talks with Palestine. At an open debate of the Security Council on the situation of the...
Read more on Politics Balla