10 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...

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15 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.

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Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told to ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

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KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robb ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammu ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mu ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 201 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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