Chesapeake Energy knows the peaks and valleys of the oil and gas business. The exploration and production company (named after the childhood Chesapeake Bay haunts of a founder) builds natural gas reserves through the acquisition and development of oil and gas assets across the US. In 2010 the Mid-continent region accounted for more than a quarter of the company's estimated proved reserves of 17.1 trillion cu. ft. of natural gas equivalent, but Chesapeake also has assets along the Gulf Coast, in Appalachia, and the Ark-La-Tex region. In 2010 the company had more than 22,600 producing oil and natural gas wells that produced 1,035 billion cu. ft. of natural gas equivalent per day, 89% of which was natural gas.
Chesapeake is one of the top drillers of natural gas wells in the US, with drilling projects in Arkansas, Kansas, Louisiana, New Mexico, Oklahoma, and Texas. The company operates about 160 drilling rigs.
A national leader in deep vertical and horizontal drilling, Chesapeake is concentrating on growing its proved reserves through acquisitions. It is also seeking to save costs by owning and operating its own equipment.
In 2010 Chesapeake began shifting its strategy from capturing new drilling inventory to stepping up its program to convert what had been inactive fields into developed producing reserves. Utilizing horizontal drilling technology combined with hydraulic fracturing and 3-D seismic information, the company plans to increase production in wells that had previously thought to be tapped out.
Facing a deepening economic valley as oil prices began to slump, in 2008 the company moved to cut the costs of exploiting its shale assets by selling some of these properties to joint venture partners. In this regard Chesapeake sold 90,000 net acres of natural gas assets in the Arkoma Basin Woodford Shale play for $1.7 billion to BP. It subsequently sold a 25% stake in its Fayetteville Shale assets in Arkansas to BP for $1.9 billion. In 2009 Chesapeake formed a joint venture with Global Infrastructure Partners to operate natural gas midstream assets. And in early 2010 it also sold 25% of Barnett Shale properties to TOTAL, forming a $2.25 billion joint venture with that company. It also agreed to sell a 33% stake in its shale play in south Texas to CNOOC for $1.1 billion.
Chesapeake sold its assets in the Permian Basin of West Texas and southeast New Mexico to Riverstone Holdings in 2010. Riverstone manages a group of energy-focused private equity funds.
These moves plus a rebounding global economy and higher commodity prices helped the company to post robust revenues and net income in 2011.
Looking to raise cash for future investments, in 2011 Chesapeake sold all of its Fayetteville Shale assets to BHP Billiton unit BHP Billiton Petroleum for about $4.7 billion. It also announced plans to sell its stakes in Frac Tech Holdings and Chaparral Energy.
As part of its strategy to reduce costs by having more ownership of the rigs it uses to drill its wells, in 2011 the company acquired Bronco Drilling (which owns 22 rigs) for $315 million. Chesapeake integrated Bronco's assets into its Nomac Drilling subsidiary (95 rigs).
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