Haynesville Shale

Chesapeake Energy - Haynesville Shale Decline Curve

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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Chesapeake Energy - Haynesville Shale Operations Update

Chesapeake Energy Corporation (CHK) reported its second quarter earnings and also issued an operations update on its exploration and development activity. Chesapeake Energy Corporation now has 510,000 acres under net lease in the Haynesville Shale.

Chesapeake Energy Corporation reported that its average daily net production from wells in the Haynesville Shale was 135 mmcfe per day during the second quarter. Its current production is even higher at 175 mmcfe per day net to the company. Chesapeake Energy Corporation also estimates that its production will grow strongly over the next few years from wells in the Haynesville Shale:

Year-end 2009 - 275 mmcfe net per day
Year-end 2010 - 450 mmcfe net per day

Chesapeake Energy Corporation also reported the initial production and peak production rates of three horizontal wells drilled in the Haynesville Shale during the second quarter:

CLD 23 H-1 in Caddo Parish, LA - peak rate of 29.1 mmcfe per day and a 30-day average rate of 15.3 mmcfe per day.

Frith 29 H-1 in De Soto Parish, LA - peak rate of 23.7 mmcfe per day and a 30-day average rate of 14.2 mmcfe per day.

Chesapeake Royalty LLC 30 H-1 in De Soto Parish, LA - peak rate of 22.6 mmcfe per day and a 30-day average rate of 15.2 mmcfe per day.

Chesapeake Energy Corporation indicated that the initial production and peak production rates were pipeline constrained, implying that the wells could have produced at higher levels if the infrastructure had been available. ___________________________________________________________________

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Penn Virginia Updates The Haynesville Shale

Penn Virginia Corporation (PVA) issued an operational update on its exploration and production activities in the Haynesville Shale and other areas in its portfolio. Penn Virginia refers to this area as the Lower Bossier Shale in East Texas.

“The recent results from our Lower Bossier Shale wells in East Texas are significantly better than our earlier test wells and we look forward to recommencing drilling in that play,” said James Dearlove, the CEO of Penn Virginia.

During the second quarter, the company drilled two Lower Bossier Shale wells in East Texas. Production from its wells here averaged 16.8 MMcfe per day in the quarter. The company had previously reported the completion results of the Steele #2-H well which had an initial production rate of approximately 11.4 Mmcfe per day. Another recently completed well was the J.M. Furrh #2-H well, which had an initial production rate of approximately 9.6 Mmcfe per day.

Penn Virginia Corporation will hold its second quarter earnings conference call on Thursday, August 6, 2009 at 3:00 p.m eastern standard time. ___________________________________________________________________

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