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Tuesday, May 3, 2011

Chesapeake: Chesapeake Has 190,000 Net Acres in The Bakken -- North Dakota, USA

Updates

June 28, 2020: Chesapeake files for bankruptcy. Even before the Saudi surge (2020) and Covid-19, Chesapeake was having problems. But the Saudi surge (2020) and Covid-19 was just too much. 

February 12, 2018: Chesapeake exits the Mississippi Lime at $1,000 / acre. Mostly legacy vertical wells; maybe a quarter of the wells are horizontal Miss Lime.  


July 1, 2015: Chesapeake sells assets in western Oklahoma for almost $1 billion

July 1, 2014: Chesapeake's oil services company, Seventy Seven Energy (ticker symbol SSE) begins trading today

February 25, 2013: Chesapeake to sell 50% stake in Oklahoma assets to China's Sinopec.

January 1, 2013: well, that's a wrap. The biggest failure in the recent oil history of North Dakota

October 2, 2012: Reuters' "special report" on CHK and accusations that it "strong arms" mineral rights owners. Going back on leases is one thing but suggesting that CHK went too far trying to hide "front men" involved in leasing is a non-issue. Everyone works to keep the identity of their front men hidden. I also don't have a lot of sympathy for someone who doesn't understand Rule 37 in Texas.

September 12, 2012: CHK loses Texas court case in which it tried to walk away from a lease; $20 million, rounded. Implications for the Bakken.

September 12, 2012: CHK sells Permian assets to CVX, Shell, EnerVest; more
This is the WSJ link and data points:
  • Chevron, Shell, and EnerVest: will buy Permian Basin acreage for $3.3 billion (CVX has at least $20 billion in cash as reported elsewhere) 
  • "The Permian Basin holdings were the most-valuable of several assets...[that were] put up for sale this year to raise cash, avoid a credit-rating downgrade, ... 
  • Global Infrastructure Partners will pay $2.7 billion for most of Chesapeake's pipeline and processing operations 
  • two unnamed companies will buy additional oil-gathering pipelines in the Eagle Ford for $300 million 
  • Chesapeake is also selling Utica shale acreage to an undisclosed buyer for $600 million 
August 13, 2012: CHK has the Niobrara figured out; unfortunately a) CHK has no cash; and, b) it sold its southern Niobrara assets some time ago -- at least that was the plan (see below -- May 24, 2012).
At least one oil and gas company claims to have figured out the tricky Niobrara shale play in the Powder River Basin in Wyoming.

Chesapeake Energy executives told investors Tuesday that results from the basin are picking up.
“In the Powder River Niobrara play, we’ve finally cracked the code with numerous recent wells” into newly identified drilling areas, said Steven Dixon, Chesapeake’s chief operating officer and vice president of operations and geosciences.

If the Wyoming Oil and Gas Conservation Commission’s production and permitting numbers are any indication, the company won’t be alone for long.

Nearly 430 drilling permits — which precede but don’t guarantee actual wells — have been doled out for operators in Campbell and Converse counties already this year, just less than 2011’s total of 485 permits. In 2010, drillers in the two counties requested only 168.
August 7, 2012:  Even with recent asset sale helping 2Q12 revenues, CHK plans additional asset sales.
Chesapeake Energy Corp. said it expects to put more assets up for sale even as the company closes in on sales of its holdings in the oil-rich Permian Basin, the company chief executive said Tuesday.

Chesapeake, the second-largest natural gas producer after Exxon Mobil Corp., sold $7 billion in assets so far in 2012 as it seeks to cut its debt to $9.5 billion by year's end. Chesapeake and its competitors have been hurt by low natural gas prices, which fell to a decade low in April because new drilling technology increased production while a warmer-than-usual winter cut demand for home heating.

Chesapeake is identifying further assets to sell in the next year and a half, planning on up to $5 billion in sales for 2013, Chief Executive Aubrey McClendon said on an earnings conference call.
August 6, 2012: Cash crunch.
McClendon has pledged to raise as much as $20.5 billion by the end of next year to fund drilling and maintain debt covenants. Without the sales, the cash-flow gap will widen to $18.6 billion by the end of 2013 and force Chesapeake to cancel drilling projects and reduce production targets, ...
May 24, 2012: Chesapeake to sell its southern DJ (Niobrara) assets

May 15, 2012: That $3 billion loan? Make it $4 billion.

May 15, 2012: Chesapeake bond investors jarred by harsh terms of loan.
Chesapeake Energy Corp.'s effort to reassure investors worried about its cash shortage backfired with bond investors who were rattled by the harsh terms of the $3 billion short-term loan the company detailed Monday.

The price of the company's junk-rated bonds dropped sharply in heavy trading, as bondholders digested the steep interest rates on the new loan and the large funding gap that forced Chesapeake to agree to it.

But the flexibility doesn't come cheaply. The unsecured loan carries an initial interest rate of 8.5% that increases to 11.5% if it isn't repaid by the end of the year. Chesapeake will use the proceeds to pay down the balance on its credit line; the company said Monday it has drawn down more than $3 billion on the line, which carries a 2.75% interest rate. So the new loan will increase its costs by about $173 million, and far more if the rate rises next year.
May 15, 2012: Chesapeake dismantling their asset base. They may have "best rock" but they are behind the technological learning curve. This is one of the best summaries out there.

May 14, 2012: the sharks are circling; they know Chesapeake is in trouble -- the question is who will be the first to start buying CHK assets; once the buying starts, how high will the auctions go?

April 20, 2012: Motley Fool on Chesapeake CEO borrowing $1.1 billion using wells as collateral.

April 17, 2012: CHK to spin off Chesapeake Oilfield Services in IPO; hopes to raise nearly $1 billion.

April 12, 2012: Analysis by RBN Energy; does not mention CHK by name but certainly sounds like that is exactly whom RBN is writing about.

April 9, 2012: Chesapeake raises $2.6 billion in cash; sells some non-core assets, including Oklahoma acreage to XTO.

April 9, 2012: Chesapeake removed its hedges for 2012 and 2013 at at time when natural gas was around $4, and just before natural gas plummeted to ten-year low, around $2.00. It will be interesting to see how this plays out.

March 21, 2012: Chesapeake issued a permit for a wildcat well in Stark County; this is the first permit for Chesapeake in North Dakota in quite some time. Very, very significant.

February 8, 2012: CHK pulling out of North Dakota and reneging on leases. This company with a market cap of $14 billion has $12 billion in debt, and is focused on a commodity (natural gas) in free fall. As far as I know, leases can be broken, but come with a cost if written into the contract. My hunch there was nothing in the contract to protect the mineral rights owner.

January 3, 2011: Folks were guessing who CHK was going to partner with in the Utica: the news out -- Total (France), for the tune of $2.3 billion. 

December 28, 2011: CHKM now the industry’s largest gathering and processing master limited partnership as measured by throughput volume. Chesapeake Midstream Partners, L.P. (CHKM) today announced it has agreed to acquire Appalachia Midstream Services, L.L.C. (AMS), the wholly owned subsidiary of Chesapeake Midstream Development, L.P. that holds its Marcellus Shale midstream assets, for total consideration of $865 million.

August 1, 2011: CHK confirms "hype" regarding Utica in Ohio. This is a game changer for CHK and perhaps the US.  For much, much more on this story, click here.

June 27, 2011: We're starting to see increased Chesapeake activity in the Williston Basin; see the July, 2011, NDIC hearing dockets.
Chesapeake is getting much more active, asking for about 12 new 1280-acre spacing units. Eight of those new units will be in Stark County (case #15234).

Original Post

Look at slide 13 of this presentation.
CHK reecently established position in the Three Forks/Bakken in the Williston Basin with 190,000 net acres [with plans to reach as much as 300,000 net acres].
That's a fairly significant investment in the Williston Basin Bakken, especially if they get to 300,000.

Some time ago, "anonymous" said Chesapeake was in the Williston Basin, but not necessarily the Bakken. The comment is technically correct, but the tone of the comment suggested Chesapeake was not in the Bakken. See comments at this post.

In today's earnings conference call, CHK expanded on two separate million-plus net acreage plays in the US (outside the Bakken) but limited further discussion regarding the Bakken.
The first of these is the 1.2 million net acres that we have acquired in Utica Shale play of far Western Pennsylvania and eastern Ohio. The second is the 1.1 million net acres that we have acquired in the Mississippian Carbonate play in Northern Oklahoma and Southern Kansas.
Talk about the Bakken was "cut off" during the Q&A:
Brian Singer - Goldman Sachs Group Inc.
Can you provide a little more color on your Williston position and activities there. I may be recollecting incorrectly, but I believe you've mentioned in the past that you're testing more new concepts as opposed to the Three Forks/Bakken, but I think you mentioned the Three Forks/Bakken here. Can you just give us an update on what you're seeing there?
Aubrey McClendon
Yes. We actually haven't started to drill there yet, Brian, so I can't update you but I can just confirm that we have around 200,000 acres in the play and I think we'll end up in the 250,000 to 300,000 range. And probably we'll look for a partner during the course of the year, but that's all that we have mentioned about the Williston at this point.
Brian Singer - Goldman Sachs Group Inc.
Okay. Are these new concepts or is this the same kind of Bakken/Three Forks that others are pursuing?
Aubrey McClendon
We just need to limit it to conversation about the Williston if I can at this point.

First Quarter Natural Gas Royalties Already Exceed All of 2010 in Pennsylvania

I have posted many times that the EPA could shut down the Bakken; links can be found at the EPA tab at the top of the blog.

I honestly don't feel that will happen, but I have also said that I am inappropriately bullish about the Bakken and it would be dangerous to newbies if I did not point out some significant downsides/risks. One spill in the Gulf shut down the Gulf for a year, and the permitorium in the Gulf continues.

The EPA could do the same thing in the Bakken if the Federal government takes regulatory control of hydraulic fracking. 

But this is why I don't think it will happen. Two reasons: the amount of money being poured into western North Dakota (and several other areas around the country) -- oil companies wouldn't be pouring this amount of money into the this if they thought there was a real chance that the EPA would shut them down (or would they?).

The second reason is a much stronger reason. Too many states with huge budget problems are becoming more and more dependent on royalties from oil and gas production.  Here's one example: royalty payments to Pennsylvania in the first three months of this calendar year already exceed total royalty payments for the entire calendar year, 2010.  There may not be enough representation in Congress from the "red" states to stop the EPA but they would team up with the "blue" states with large oil and gas royalties if necessary. Pennsylvania is one of those states.

Shutting down hydraulic fracking would probably push the US into recession, and would significantly increase unemployment.

But when it comes to the EPA, all bets are off. (But again, I don't think it will happen -- I don't think the EPA will shut down hydraulic fracking but I wouldn't bet my life on it, as some say.) Both New York and New Jersey have declared a moratorium on hydraulic fracking.

178! Number of Active Rigs in North Dakota -- A New Record

I was out and about all day so I missed this, but "anonymous" sent me a note telling me "we" hit 178 active rigs in North Dakota today.  "Anonymous" has always been correct on this, so I will ow show 178 as the new record.

Right now, it's back to 177.

This is quite incredible. The number of active rigs shown at the NDIC website yesterday was 173 rigs.  I did not check it this morning before I left for the day.

Road restrictions probably coming to an end, and hopefully that was the last blizzard for the season, and increased activity is expected.

Double-Dip Recession?

Yesterday -- or was it two days ago -- I blogged about how pundits had quit talking about a double-dip recession, suggesting this movie is not yet over.

"Anonymous" assured me that the recession was clearly over, in our "rear view mirror" as she put it.

Well, today, the view in that mirror just got a bit bigger and/or closer.

Stop Reading This Blog! Go Directly to Linked Site!

Everyone needs to visit this post today. Go directly to the link; don't pass go; don't collect $200.

Incredible story; I would love to hear more.

Two favorites lines from the link:
Michael Bromwich, head of the revamped minerals management service in the Dept. of Interior, came to make a lunch speech about how the Obama Administration is really, really, double-pinkie-swear, pro-offshore drilling. He was not well received.

A couple of impressions come to mind. You could take every "green tech" expo and trade show in the country, with all of their solar-powered toasters and wind-driven dairy cow milking machines, and they'd all fit in a tiny corner of the exhibit hall here. If you want to see where the cutting edge of innovation and investment in energy (most of it totally unsubsidized) is taking place it is in oil and gas.

Week 17: April 23 -- April 29, 2011

EPD To Buy Rest of Duncan Energy Partners

Enbridge News: Splits and Dividends for Family of Enbridge Companies

Huge Well: The Hecker; Whiting; Whiting South -- Belfield -- Lewis and Clark Prospect

Fracking Delays in the North Dakota Bakken

Unfracked Well Producing at 10,000 Bbls/Month; Anschutz, Cabernet field; 180,000 Total Bbls in Less Than One Year

Stripper Wells and Tax Breaks in North Dakota 

Gasoline: 50 Cents/Gallon Tax; XOM Profit: 2 Cents/Gallon 

Permitorium Net Widens OnShore 

Confidential List: Definition and When the Clock Starts Ticking

The Federal Reserve Bank of Minneapolis: The Bakken -- Bigger and Better

Huge New Player: Petro Harvester Enters the Bakken; Buys Sagebrush Assets in North Dakota; Founders Were the Denbury Founders 

Credo Petroleum Increasing Its Working Interest in Bakken Wells

Significant Dividend Increases Announced by Companies Working in the Bakken

$150 Million Water Project for Western North Dakota -- Huge Story

Grail Oil Field: A Well With 128,000 Bbls In Less Than Six Months

Birdbear Update -- Bicentennial-Beaver Creek - Roosevelt Corridor -- Whiting South

Ohio and Chesapeake Could be Saviors of the "Rust Belt"

Shell Shelves Alaska Drilling -- Ice-Breaking Vessel Issues per EPA -- EPA Shuts Down Project

Huge Housing Development in Stanley

"Demand Destruction -- A Red Herring Discussion -- Commentary

Minnesota May Have the Fracking Sand the Bakken Needs

Administration's Answer to $5.00 Gasoline: More Wind Turbines

Global Warming? What Global Warming! -- Plenty of Water for Fracking in the Bakken

The April 30 / May 1 blizzard in western North Dakota was one of the worst -- if not the worst -- blizzard in the history of the state for that time of year. No one recalls losing electricity for more than a couple hours in past storms in Williston; this time electricity was "down" for three to five days; it is still being brought back "up."

Global warming advocates said their models predicted more precipitation. I don't think their models predicted the precipitation would be in the form of snow that would remain in place through the summer months where it usually melts in the spring. Sounds like the beginning of another ice age to some folks.
Fifty-seven inches of snow blanketed Ryan Park in the Snowy Range [Wyoming] on April 28 when Pantle and Chad Pickett took core samples of snow drifts, measuring both the depth of the snow and the amount of water frozen within. According to their measurements that morning, the amount of water was three times higher than the 30-year average for Ryan Park, located 55 miles west of Laramie at an elevation of 8,050 feet. Five more inches of snow fell that night.

The engineer's office compares its findings to levels from past years. According to figures released Monday from the manual snow survey, the Upper North Platte Basin is 181 percent of the historical average. Automated measuring sites operated by the Natural Resources Conservation Service, meanwhile, put the number at 172 percent.
Yup, plenty of water available for fracking in the Bakken.

On Track for 1,760 New Permits in North Dakota This Year (2011)

As of yesterday, May 2, 2011, the state of North Dakota had issued 577 new permits for oil wells. This is on track for 1,726 permits this calendar year.

Comparing this to past years:
  • 2006: 422
  • 2007: 497
  • 2008: 953
  • 2009: 626
  • 2010: 1,680
The 1,726 is impressive, but look at that jump from 2009 to 2010.

SeekingAlpha: Update on Bakken Companies With Market Cap $6 - $12 Billion; Net Bakken Acreage

Link here.

It should be noted that the linked writer is talking about the Williston Basin Bakken (western North Dakota and eastern Montana) and not the Alberta Basin Bakken (central/north Montana).

Companies mentioned, and net acres in the Williston Basin Bakken:
  • Baytex, 126,400 net acres
  • Continental Resources, 856,000 net acres
  • Denbury, 275,000 net acres
  • Whiting, 603,702 net acres
  • QEP, 89,000 net acres
  • Newfield, 174,000 net acres
There are two things to note which I need to verify. Last time I updated my net acreage list, Newfield had 271,000 net acres in the Williston Basin Bakken; SeekingAlpha has Newfield at 174,000 net acres which is a significant change. The 174,000 is confirmed at the Newfield site, March, 2011, presentation. I could have made a typographical error (unlikely in a case like this), but if correct, Newfield has sold 100,0000 net acres in the Williston Basin Bakken since the last update (sometime in 2010).

My previous number for Whiting was 580,000 net acres; SeekingAlpha now reports 604,000 net acres for Whiting, a bit of an increase. The 604,000 number is confirmed at the Whiting April, 2011, presentation.