Chesapeake Energy Corporation (CHK) reported its second quarter earnings and also issued an operations update on its exploration and development activity in the Haynesville Shale.
Chesapeake Energy Corporation has been developing the Haynesville Shale for several years, and has enough confidence in the results to date that it has published a updated decline curve based on the aggregate drilling results from 56 its operated horizontal wells drilled from the beginning of 2008.
Chesapeake Energy Corporation now believes that its first year decline rate is slightly higher than before at 85%, compared to 81% in the previous release. The company increased its initial production rate for each well during the first 24 hours from 10 mmcfe to 14.1 mmcfe. The Estimated Ultimate Recovery (EUR) for each well remains the same at 6.5 Bcfe.
Since the natural gas is produced quicker from the well, the rate of return that Chesapeake Energy Corporation realizes is higher, assuming that all other inputs are the same.
The company said that its can achieve a rate of return of 42%, excluding any benefit from its partnership deal in the Haynesville Shale with Plains Exploration & Production Company (PXP) The inputs the company uses are:
Flat NYMEX natural gas prices of $7.00 per mcf
Well cost of $7.5 million
EUR of 6.5 Bcfe
85% first year decline rate
Initial 24 production rate of 14.1 mmcfe ___________________________________________________________________
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