Utica Shale

Chesapeake Energy Updates Utica Shale Operations

Chesapeake Energy (CHK) disclosed an operational update on its activity in Ohio where the company has a large development program targeting the Utica Shale.  The company is operating 12 rigs here and estimates that it will have 16 rigs by the end of 2012 on its 1.3 million net acres.  

Chesapeake Energy has drilled a total of 87 wells to date into the Utica Shale and has 28 wells waiting on completion or on pipeline.  The company signed a joint venture with Total (NYSE:TOT) to help with development here and has $1.35 billion left on the original drilling carry.  Chesapeake Energy expects the remainder of the funds to be used by the end of 2014.

Chesapeake Energy And EnerVest, Ltd. Close On Utica Shale Joint Venture With Total S.A.

Chesapeake Energy (CHK) and EnerVest, Ltd. entered into an agreement with Total (TOT) to jointly develop acreage in Ohio that is prospective for the Utica Shale.

The joint venture agreement covers 619,000 acres in ten counties in Eastern Ohio, with 542,000 net acres contributed by Chesapeake Energy and 77,000 net acres from EnerVest, Ltd.

Total is paying $2.32 billion for a 25% share of this position, with Chesapeake Energy receiving $2.03 billion and EnerVest, Ltd. getting $290 million. Total is paying approximately $700 million up front in cash to the two companies and the balance of $1.62 billion in the form of a drilling carry.

Chesapeake Energy will be the operator of the joint venture acreage and conduct all drilling and completion activities.

Chesapeake Energy Reports Two Utica Shale Joint Ventures

Chesapeake Energy (CHK) announced two joint venture transactions involving the company’s properties in Ohio that are prospective for the Utica Shale.  The company expects to receive $3.4 billion in proceeds from the deals.

Transaction One

Chesapeake Energy reported selling a 25% interest in 650,000 net acres of leasehold in the wet gas area of the Utica Shale.  The company owns 570,000 net acres and EnerVest owns the other 80,000 net acres.  

Chesapeake Energy will receive $2.14 billion, with $640 million in cash and $1.5 billion as a drilling carry.  The company expects to utilize this drilling carry by the end of 2014. EnerVest will receive $300 million from the deal.

This joint venture deal is with an unidentified international major oil company and values the acreage at $15,000 per acre.  Chesapeake Energy will be the operator of the joint venture.

Transaction Two

Chesapeake Energy has created a new entity called CHK Utica, L.L.C and issued $500 million of perpetual preferred stock in this entity to EIG Global Energy Partners. Chesapeake Energy is planning to sell an additional $750 million of these shares to other investors.

CHK Utica, L.L.C is a subsidiary of the company and owns 700,000 net acres of Utica Shale leasehold in Eastern Ohio.  The perpetual preferred stock comes with a 7% distribution, paid out every quarter.  Other details on the preferred stock:

• Issuer retains an option to repurchase the shares prior to 10/31/2018 at a valuation equal to the greatest of a 10% IRR or a 1.4 return on investment.
• Holders of the shares also receive a 3% overriding royalty interest in the first 1,500 net Utica Shale wells drilled by CHK Utica, L.L.C.