By October 31, 2016 0 Comments Read More →

Chesapeake comes out of the trough – Wood Mackenzie

Chesapeake

Chesapeake Energy Corporation’s 50 acre campus is seen in Oklahoma City, Oklahoma, on April 17, 2012. REUTERS/Steve Sisney

Chesapeake is also targeting the Powder River Basin again after an unsuccessful divestment attempt

At Chesapeake’s 2016 Analyst Day, it was clear that the company’s new ex-Anadarko management team had significantly changed Chesapeake’s business strategy, and the outlook is promising, according to Wood Mackenzie.

In Wood Mackenzie’s latest report and Crude for Thought podcast, their analysts explore Chesapeake’s future business plan and the company’s prospects for 2017.

Exploration-led growth has always been a central component of Anadarko’s strategy, and it seems that Chesapeake has embraced this idea for its developing business plan.

Instead of fixating on being the biggest producer, most active driller or the most renowned greenfield basin trailblazer, Chesapeake is taking a more holistic view of its assets, focusing on managing acreage across the Powder River and Mid-Continent Basins and the Eagle Ford, Marcellus/Utica, and Haynesville shales, says Wood Mackenzie.

Some assets are set to receive increased capital faster, while “held by production” acreage could be a platform for organic growth.

In Wood Mackenzie’s latest Crude for Thought podcast, host R.T. Dukes and Research Director Robert Clarke discuss the company’s vision for a “new Chesapeake” and how it has overcome recent challenges associated with the prolonged downturn.

Chesapeake discussed a new package of stacked sands in Oklahoma, which it is coining the “Wedge” play.

Select returns from the Wedge rival all other opportunities in front of the company, but Chesapeake, in an uncharacteristic move, may lean on its legacy position and let other operators experiment.

In addition, Wood Mackenzie considers many areas of the “Wedge” play to be fringe, with lower performance levels than other core areas and inconsistent results.

For example, in Woods, Dewey and Alfalfa counties, only around 18 per cent of horizontal wells drilled in the last two years had an oil IP30 greater than 400 b/d with about a dozen performing higher than 600 b/d.

Chesapeake is also targeting the Powder River Basin again after an unsuccessful divestment attempt.

However, with a new set of organic exploration ideals, the company is particularly optimistic on the stacked Turner and Sussex sands. One Sussex test well has produced almost 600 mboe after just 24 months.

Chesapeake also addressed its midstream liabilities, which essentially drove the company’s Barnett Shale sale to Total, as well as its transport commitment to the Tiger pipeline in the Haynesville coming off in 2017.

The company also signalled that Eagle Ford midstream contracts could soon be reworked.

The Eagle Ford currently accounts for 25 per cent of gas gathering, processing and transport costs, but Wood Mackenzie estimates the asset will only contribute roughly 15 per cent of company entitlement production in 2017.

Consequently, the variables the company can control in the Eagle Ford, like costs, are being attacked aggressively.

chesapeake

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