Chesapeake Doesn’t Expect More Utica-Sized U.S. Discoveries
Chesapeake Energy Corp. (CHK) said the oil and natural-gas industry isn’t likely to find another U.S. bonanza like the Eagle Ford and Utica shale formations.
Next year likely will bring a close to a period of big acreage purchases by Chesapeake and other companies, Chief Executive Officer Aubrey McClendon told reporters Nov. 30. He said more formations may be found under existing acreage.
McClendon’s comments at a Jefferies & Co. energy conference in Houston this week contrasted with views expressed by other executives at the gathering.
Chuck Meloy, a senior vice president for worldwide operations at Anadarko Petroleum Corp. (APC), told a Jefferies audience yesterday he expects surprises in the amount of oil and gas resources in coming years. He cited recent onshore discoveries and finds off the coast of Africa.
“There’s some very clever minds trying to unlock the keys and the bounty of this Earth to deliver those hydrocarbons,” he said. “I think we’ll still see positive surprises, particularly in the shales and particularly in deep water.”
“I would take a little bit different view than in perhaps what Aubrey articulated,” EOG Resources Inc. (EOG) CEO Mark Papa said on a Jefferies panel. “I don’t believe all the plays, even in onshore North America -- the horizontal resource plays -- have been found.”
Still Exploring
The U.S. has many previously uneconomic, non-shale plays to which producers can apply technologies that have helped make shale finds productive, James Wicklund, portfolio manager at Carlson Capital, in Dallas, said yesterday in a telephone interview.
“Might those all be Haynesville or Barnett or Marcellus shales? Maybe not,” Wicklund said. “Would these be discoveries? Sure, I’d call them discoveries. We’re still doing exploration.”
U.S. oil and gas producers use horizontal drilling and hydraulic fracturing to tap so-called unconventional projects. Horizontal wells help producers reach more of a resource than a traditional vertical well.
Oil production in the Eagle Ford during the first eight months of this year has more than doubled to 8 million barrels of oil from 3.76 million barrels produced in all of 2010, according to the Railroad Commission of Texas. The Eagle Ford shale is about 50 miles (80 kilometers) wide and 400 miles long in south Texas, the commission said.
EOG, an early participant in the Eagle Ford, said it has potential reserves of 900 million barrels of oil equivalent from the project, with hopes of increasing that.
Chesapeake’s Focus
The Utica formation in Ohio is similar to the Eagle Ford and likely has superior economics, Chesapeake said in a November investor slide presentation. The company estimated it has 1.36 million net acres in the Utica.
The days of discovering million-acre plays are drawing to a close, McClendon said. That leaves Chesapeake to develop what it has and to seek the best returns for shareholders, he said.
“I just think the industry has already evaluated all the sedimentary basins in the U.S. and have pretty much been able to eliminate any possibility that another Utica is lurking out there,” McClendon said.
David Ginther, a senior vice president at Overland Park, Kansas-based asset manager Waddell & Reed Financial Inc., said there are many oil discoveries to uncover in the U.S.
“I don’t know if plenty is the right word,” Ginther said in an interview at the Jefferies conference yesterday. “There’s a lot of good opportunities out there. I don’t think the window’s closing.”
To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
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