6th annual global hunter 100 conference presentation
Post on 05-Aug-2015
12.272 Views
Preview:
TRANSCRIPT
2 I Global Hunter Conference 6/23/2015
FORWARD-LOOKING STATEMENTS
• This presentation includes "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements are statements other than statements of historical fact that give our current expectations or forecasts of future events. They
include production forecasts, estimates of operating costs, assumptions regarding future natural gas and liquids prices, planned drilling activity, anticipated asset sales
and related adjustments, reductions in leverage, estimates of future capital expenditures, estimates of recoverable resources, projected rates of return and expected
efficiency gains, as well as projected cash flow, inventory levels and capital efficiency, business strategy and other plans and objectives for future operations. Although
we believe the expectations and forecasts reflected in the forward-looking statements are reasonable, we can give no assurance they will prove to have been correct.
They can be affected by inaccurate or changed assumptions or by known or unknown risks and uncertainties.
• Factors that could cause actual results to differ materially from expected results include those described under "Risk Factors” in Item 1A of our annual report on
Form 10-K and any updates to those factors set forth in Chesapeake's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K (available at
http://www.chk.com/investors/sec-filings). These risk factors include: the volatility of oil, natural gas and NGL prices; write-downs of our oil and natural gas carrying
values due to declines in prices; the availability of operating cash flow and other funds to finance reserve replacement costs; our ability to replace reserves and sustain
production; uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of
development expenditures; our ability to generate profits or achieve targeted results in drilling and well operations; leasehold terms expiring before production can be
established; commodity derivative activities resulting in lower prices realized on oil, natural gas and NGL sales; the need to secure derivative liabilities and the inability
of counterparties to satisfy their obligations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; the
limitations our level of indebtedness may have on our financial flexibility; charges incurred in response to market conditions and in connection with actions to reduce
financial leverage and complexity; drilling and operating risks and resulting liabilities; effects of environmental protection laws and regulation on our business;
legislative and regulatory initiatives further regulating hydraulic fracturing; our need to secure adequate supplies of water for our drilling operations and to dispose of or
recycle the water used; federal and state tax proposals affecting our industry; potential OTC derivatives regulation limiting our ability to hedge against commodity price
fluctuations; impacts of potential legislative and regulatory actions addressing climate change; competition in the oil and gas exploration and production industry; a
deterioration in general economic, business or industry conditions; negative public perceptions of our industry; limited control over properties we do not operate;
pipeline and gathering system capacity constraints and transportation interruptions; cyber attacks adversely impacting our operations; and interruption in operations at
our headquarters due to a catastrophic event.
• Disclosures concerning the estimated contribution of derivative contracts to our future results of operations are based upon market information as of a specific date.
These estimates and underlying market prices are subject to significant volatility. Our production forecasts are dependent upon many assumptions, including estimates
of production decline rates from existing wells and the outcome of future drilling activity. Expected asset sales may not be completed in the time frame anticipated or at
all. References to “EUR” (estimated ultimate recovery) and “resources” include estimates of quantities of natural gas, oil and NGL we believe will ultimately be
produced, but that are not yet classified as “proved reserves,” as defined in SEC regulations. Estimates of unproved resources are by their nature more speculative
than estimates of proved reserves and accordingly are subject to substantially greater risk of actually being realized by Chesapeake. We believe our estimates of
unproved resources are reasonable, but our estimates have not been reviewed by independent engineers. Estimates of unproved resources may change significantly
as development provides additional data, and actual quantities that are ultimately recovered may differ substantially from prior estimates.
• We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this presentation, and we undertake no obligation to
update any of the information provided in this presentation, except as required by applicable law.
3 I Global Hunter Conference 6/23/2015
COMMITTED TO CREATING VALUE
High-quality assets
Talented people
Superior capital efficiency
Industry-leading LOE
Strong liquidity
CHK
4 I Global Hunter Conference 6/23/2015
UTICA INDUSTRY-LEADING PERFORMANCE
0
200
400
600
800
1,000
1,200
0
5
10
15
20
25
30
CHK COMP A COMP B COMP C COMP D
Ft / D
ay
Drill
Days
Drill Days
Penetration Rate
Drilling Performance
4,900 ft. 5,150 ft. 6,200 ft. 7,900 ft.
10
17
29
41
2012 2013 2014 2015E
Lateral Length per Well
Stages per Well
Completion Performance
12 stages per day Record reached by all crews; 13 stages max by single crew
Most efficient driller by 40% Based on IHS Supply Analytics November 2014 Report
5 I Global Hunter Conference 6/23/2015
~25% Expected rate of return based on actual results at $3.25 gas / $65 oil
UTICA IMPROVING PERFORMANCE LEADS TO CORE EXPANSION
• Optimized completions
• Enhanced geologic interpretation
˃ Targeting
˃ Fault identification
˃ Pressure mapping
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 100 200 300 400
Gro
ss B
oe/d
Days
Columbiana County Well Results
Early Wells
New Wells
Expected Type Curve
CHK/TOT JV Outline CHK Leasehold Oil Window Wet Gas Window Dry Gas Window
+50% Improvement in new well performance vs. early wells
3 Wells
9 Wells
6 I Global Hunter Conference 6/23/2015
-
100
200
300
400
500
600
700
-
200
400
600
800
1,000
1,200
- 1 2 3
Cum
ula
tive P
roductio
n (
mboe)
Avera
ge b
oe/d
End of Year
POWDER RIVER SUSSEX PERFORMANCE
Sussex Performance
Sussex Drilled Wells Peak 24-Hour Rates
14 days Recent spud to rig release record $3.2mm drilling cost ($1 mm savings)
8,950’ Recent completed lateral length with record stages of 30
800 mboe gross EUR type curve (63% Oil)
950 boe/d first month average
Sussex
Parkman
Teapot
Frontier
Niobrara
CHK Leasehold
Mar 2015 TIL Peak 1,990 boe/d
(68% Oil)
Feb 2014 TIL Peak 1,420 boe/d
(75% Oil)
Jan 2014 TIL Peak 2,900 boe/d
(50% Oil)
Jul 2014 TIL Peak 1,000 boe/d
(88% Oil)
20% – 50% Expected rate of return at $3.25 gas / $65 oil
Type Curve Average Rate
Type Curve Cumulative Production
Current Performance Average Rate
+100%
7 I Global Hunter Conference 6/23/2015
$360
$290
$220 $205
11,000
12,000
13,000
14,000
15,000
0
100
200
300
400
2012 2013 2014 Q1 2015
Drille
d F
t.
Cost / F
t.
Drill Cost per Ft Drilled Footage
NORTHERN MARCELLUS DRILLING PERFORMANCE
• Extensive use of Operations Support
Center to reduce trouble time
• Improvement in all segments leading
to significant cycle-time efficiencies
˃ 54% reduction from 2012 to 1Q’15
˃ 29% reduction from 2014 to 1Q’15
• Rig efficiency increased 150%
• Cost per foot decreased 40%
26 25
17
12
0
250
500
750
1,000
1,250
1,500
0
5
10
15
20
25
30
2012 2013 2014 Q1 2015
Ft.
/ D
ay
Days
Drill Days Ft per Day
<10 days Record drill days achieved on 4 of the last 7 wells
29% Continued improvement in drilling days in 1Q’15
(1)
2012 2013 2014 1Q’15
2012 2013 2014 1Q’15
8 I Global Hunter Conference 6/23/2015
NORTHERN MARCELLUS ENHANCED COMPLETIONS LEADING TO BETTER RESULTS
ROR Comparison vs. Realized Gas Price
10,750’ Record lateral length
50 stages Record per well
0
10
20
30
40
50
60
70
80
90
100
$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50
Rate
of
Retu
rn (
%)
2011 2013 2015E
IP 8 mmcf/d 9 mmcf/d 11 mmcf/d
EUR 9 bcf 10 bcf 12 bcf
Capex / Well $9 mm $8 mm $7 mm
Lateral Length 5,200’ 5,400’ 6,000’
Stages 11 13 24
+20% EUR Improvement
30% ROR price threshold has
been cut in half since 2011
2011
2013
2015
9 I Global Hunter Conference 6/23/2015
EAGLE FORD SPACING TEST RESULTS
• No appreciable production impact from
reduced spacing
• Increased drillable locations by 600 – 700
to ~4,500 total Lower Eagle Ford locations
• Additional down spacing tests planned
9
Four Corners
Oil Area McMullen
Oil Area
Southern
Wet Gas Area
~120 Incremental Wells
~90 Incremental Wells
~500 Incremental Wells
0
20
40
0 30 60
Cu
mu
lati
ve O
il (m
bo
) McMullen Oil Area
500' Spacing
330' Spacing
0
50
100
0 100 200 300 400
Cu
mu
lati
ve O
il (m
bo
)
Four Corners Oil Area 500' Spacing
360' spacing
0
25
50
0 100 200
Cu
mu
lati
ve O
il (m
bo
) Southern Wet Gas Area
660' Spacing
500' Spacing
10 I Global Hunter Conference 6/23/2015
HAYNESVILLE NEW STIMULATION TECHNIQUES DRIVE PERFORMANCE
• Enhanced stimulations have expanded the core of the play
˃ Extending production peaks
˃ Greater than a 25% increase in EUR
˃ Expands developable area by 90,000 net acres to a total of 184,000 net acres
11 I Global Hunter Conference 6/23/2015
MISSISSIPPIAN LIME LEADING THE INDUSTRY
• 45% capital reduction projected from 2012 to 2015
• 2015 development program generates 39% ROR at $2.5 mm(1)
• Capital efficiency improvements and field delineation program continue to
generate incremental core locations
$4.6
$3.5
$3.1
$0.22 $0.18
$0.20 $2.5
2012 2013 2014 2015
Supply
Chain Efficiency
Gains Design
Improvements
Miss Lime CAPEX per Well ($ in mm)
E
(1) Based on $3.25/mcf gas and $65 /bbl oil
12 I Global Hunter Conference 6/23/2015
• High quality legacy position
˃ ~74,000 net acres with stacked pay
˃ ~91% of acreage is held by production
˃ >147 potentially operated sections
• Inventory
˃ Industry activity continues to de-risk locations
˃ >440 locations identified within the Meramec oil fairway (>50% oil)
˃ Expect Meramec testing to begin in Q4 2015
• Upside
˃ Woodford and Hunton
˃ Currently testing Oswego
NORTHERN MID-CONTINENT MERAMEC POTENTIAL
Oil Line
Extents of Meramec Play
Industry Meramec Well
CHK Acreage
1723 BOEPD IP
(85% Oil) 1374 BOEPD IP
(80% Oil)
1309 BOEPD IP
(79% Oil)
Oil
Gas &
Condensate
13 I Global Hunter Conference 6/23/2015
COMMITTED TO CREATING VALUE
High-quality assets
Talented people
Superior capital efficiency
Industry-leading LOE
Strong liquidity
CHK
15 I Global Hunter Conference 6/23/2015
Utica 3 – 5 3 – 5 2 – 3
REDUCED ACTIVITY LEVELS
2015E Avg.Op Rigs
(2/25 Outlook)
Eagle Ford 12 – 14 8 –10 2 – 4
Haynesville 7 – 8 5 – 6 2 – 4
PRB: Niobrara & Upper Cretaceous 3 – 4 2 – 3 1 – 2
Mississippian Lime 7 – 8 5 – 6 2 – 4
Mid-Continent South 1 – 2 1 – 2 0 – 1
Marcellus 1 – 2 1 – 2 0 – 1
Other(1) 1 – 2 0 – 1 –
Total 35 – 45 25 – 35 9 – 19
(1) Other includes Cleveland Tonkawa, Barnett
2015E Avg.Op Rigs
(3/23 Outlook)
YE 2015 Op. Rigs
(3/23 Outlook)
16 I Global Hunter Conference 6/23/2015
-
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300
1Q'15 2Q'15E 3Q'15E 4Q'15E
Fra
c C
rew
s
Well C
ou
nt
Completion Activity
TIL Frac Crews
-
10
20
30
40
50
60
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1Q'15 2Q'15E 3Q'15E 4Q'15E
$ in
billio
ns
D&C Capex and Rig Count
D&C Capex Reduction from Feb'15 Rigs
• = Actual 1Q’15 results
LOWER 2015 CAPEX AND ACTIVITY
Note: Data above based on Outlook issued 5/6/2015
• ~45% reduction in total capex vs. 2014; >30% reduction in D&C capex
• ~$6 billion of budgeted liquidity at YE’15 with a combination of cash on balance
sheet and an undrawn credit facility
17 I Global Hunter Conference 6/23/2015
EAGLE FORD LOW-COST VALUE GENERATION
• 1Q’15 operational updates
˃ 600 – 700 incremental wells added to undrilled inventory following successful down spacing tests
˃ First 5 wells with 10,000’+ laterals drilled in 1Q’15
˃ 7% sequential production increase to 113 mboe/d
˃ Currently at seven rigs, transitioning to 3 by 2Q’15
˃ 105 1Q’15 TILs had average peak rate of 763 boe/d
• Strategic priorities
˃ Take advantage of lower activity levels to optimize field development planning
˃ Front-loaded development planning with focus on prioritizing wells with >10,000’ laterals
˃ Incorporate tighter well spacing into development plan, avoiding lost opportunities
Well Cost ($ in mm)
18 I Global Hunter Conference 6/23/2015
EAGLE FORD DRIVING CAPITAL EFFICIENCY WITH LONGER LATERALS
• Field development planning focused on prioritizing longer lateral wells
• Successfully drilled five wells with laterals >10,000’ in 1Q’15
• One 10,000’ lateral well pays out twice as fast as two 5,000’ lateral wells
33% Decrease in cost per foot
76% Improvement in EUR with 10,000’ laterals
~600 Potential number of locations with lateral lengths > 10,000’
439 588
772
$12.30
$10.71
$9.33
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
-100
100
300
500
700
900
1100
Four Corners5,000'
Four Corners7,500'
Four Corners10,000'
EUR (mboe)
Well Cost / EUR ($/boe)
1,080
840
720
Four Corners5,000'
Four Corners7,500'
Four Corners10,000'
Well Cost / Lateral Foot($ / ft.)
19 I Global Hunter Conference 6/23/2015
MISSISSIPPIAN LIME IMPROVED KNOWLEDGE DRIVES PERFORMANCE
280 295
335
2012 2013 2014
Operated Mississippian Lime EUR (mboe)
0
100
200
300
400
500
2 6 10 14 18 22 26 30 34
Dai
ly P
rod
uct
ion
(b
oe/
d)
Normalized Time (Months)
2012
2013
2014
• Significant well performance
improvement over the last
three years
˃ Completion optimization
˃ Balanced rig program of core and
delineation wells
˃ HBP program substantially
complete
20% Increase in EUR over two years
20 I Global Hunter Conference 6/23/2015
MISSISSIPPIAN LIME CONSISTENTLY OUTPERFORMING EXPECTATIONS
• 1Q’15 operational updates
˃ 11% sequential production increase to 32 mboe/d net
˃ Currently running three rigs & one completion crew
˃ 48 wells brought online in 1Q’15 had average peak rate of 733 mboe/d
˃ Positive new formation tests in the Oswego and Hoxbar
• Strategic priorities
˃ Expand drillable inventory via capital efficiencies and delineation drilling
˃ Test new horizons currently not within the active development programs
˃ Focus on reducing base decline through artificial lift and recompletions
24 26
27 28
32
1Q'14 2Q'14 3Q'14 4Q'14 1Q'15
Net Production (mboe/d)
21 I Global Hunter Conference 6/23/2015
ENHANCING OUR BASE PRODUCTION IMPROVED RECOVERY FROM OUR ASSETS
• Abundant opportunities within Chesapeake
˃ 4,600 under-stimulated legacy wells
• Re-stimulating the Barnett
˃ Early field completions were small
˃ 1,100+ potential re-frac opportunities
• Enhancing the Haynesville
˃ New drills enhance existing producers
˃ Evaluating re-frac options vs. stimulation from development program
22 I Global Hunter Conference 6/23/2015
HAYNESVILLE STRATEGIC DEVELOPMENT DRIVES VALUE CREATION
7,500’ Lateral Test
Enhanced Haynesville completions
Enhanced Bossier completions
• 1Q’15 operational updates
˃ Two 7,500’ lateral tests flowing an average of
17 mmcf/d
˃ Doubled commercial Haynesville area
˃ Commercialization of the Bossier Shale
˃ 4% sequential production increase to 616 mmcf/d
˃ 17 1Q’15 wells had average peak rate of
15.4 mmcf/d
˃ Six rigs currently, dropping to three by YE’15
• Strategic priorities
˃ Transition to 100% implementation of enhanced
stimulation technique
˃ Prioritize Haynesville and Bossier development
with 7,500’ laterals
˃ Testing 10,000’ design in 4Q’15
23 I Global Hunter Conference 6/23/2015
HAYNESVILLE NEW WELL DESIGNS ARE EXPANDING THE PLAY
• Increased lateral lengths and enhanced stimulations have expanded the core of the play
˃ EUR expected to increase 200%
˃ Expected 42% reduction in cost per lateral foot
˃ 50% improvement in capital efficiency expected
• Enhanced stimulation design makes lower quality reservoirs economic and increases our available location count
7
9.3
14
4,500
5,000
7,500
0
2
4
6
8
10
12
14
16
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Traditional Well Modern Well Modern ExtendedLateral
EUR (BCF)
Lateral Length (ft)
1,900
1,500
1,100
10
15
18
5
7
9
11
13
15
17
19
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Traditional Well Modern Well Modern ExtendedLateral
Well Cost / Lateral Ft
IP Rate (MMCFPD)
$8.5 mm $8.3 mm
$7.5 mm
24 I Global Hunter Conference 6/23/2015
HAYNESVILLE BREAKING THROUGH DEVELOPMENT BARRIERS
• 7,500’ lateral test results
˃ Wells located in traditional 6 – 8 bcf
contour interval
˃ Production test exceeds offsets by
more than 8 mmcf/d
$8.2mm Field estimated D&C cost
25 I Global Hunter Conference 6/23/2015
BOSSIER SHALE CREATING VALUE IN ALL PRODUCTIVE FORMATIONS
• Capital efficiencies and enhanced completion techniques open play for development
• Low existing well count allows development with longer laterals
• 200 – 400 incremental development wells
• Competitive with traditional Haynesville
171
285
422
Area 1 Areas 1 & 2 Areas 1 - 3
Cumulative Well Count
4,500 ft7,500 ft10,000 ft
0
2
4
6
8
10
12
14
16
0 30 60 90
Avera
ge D
aily
Pro
duction R
ate
(m
mcf/d)
Days
Enhanced Bossier Completion Tests
Modern Well Rate Traditional Well Rate
BEDSOLE 1-10-13 H-2 ALT
IP: 14.2 MMcf/day
4,700’ Lateral, $7.7MM
CHK MIN 28-10-13 2H ALT
IP: 14.6 MMcf/day
4,450’Lateral, $6.9MM
26 I Global Hunter Conference 6/23/2015
POWDER RIVER NIOBRARA COMPLETION PERFORMANCE
• 20% EUR improvement driven by
enhanced completions
˃ Averaged lateral length of 5,425’ in 2014
(+7% vs. 2013)
˃ Averaged 20 frac stages in 2014
(+33% vs. 2013)
• Testing stacked laterals
0
100
200
300
400
500
600
700
0
200
400
600
800
1,000
1,200
1,400
0 1 2 3
Cum
ula
tive P
roductio
n (
mboe)
Avera
ge b
oe/d
End of Year
2014 Program Daily Avg. Rate
2015 Program Daily Avg. Rate
2014 Program Cumulative Production
2015 Program Cumulative Production
Niobrara Type Curve
8,795’ Record lateral length
42 stages Record per well
1,085 mboe gross EUR type curve
1,270 boe/d first month average
27 I Global Hunter Conference 6/23/2015
NORTHERN MID-CONTINENT OKLAHOMA OIL GROWTH OPPORTUNITIES
• Stacked plays with proven strong
Horizontal results
• ~6,000 potential locations in ~2,000 CHK
controlled sections
• To date CHK has only realized value for
Miss Lime
Formation
Acre
s
Only ~33% (365M acres) of Chesapeake’s
acreage is assigned to Miss Lime
1.1 million Total Net Acres
Formation
28 I Global Hunter Conference 6/23/2015
CAPTURING MORE FOR LESS NORTHERN DIVISION
Marcellus North: 39% Improvement Utica: 53% Improvement
Powder River: 46% Improvement
Note: Capex / EUR is defined as net drilling and completion (D&C) costs per well divided by net estimated ultimate reserves booked per well
29 I Global Hunter Conference 6/23/2015
CAPTURING MORE FOR LESS SOUTHERN DIVISION
Haynesville: 67% Improvement Eagle Ford: 38% Improvement
Mississippian Lime: 47% Improvement
Note: Capex / EUR is defined as net drilling and completion (D&C) costs per well divided by net estimated ultimate reserves booked per well
30 I Global Hunter Conference 6/23/2015
DRILLING AND SERVICES COMMITMENTS
• Commitments roll off through 2015 – CHK has chosen to pay some penalties due to current market conditions and desire to lower overall spending
51
Rigs
45
Rigs
51
Rigs
65
Rigs
71
Rigs
$0
$25
$50
$75
$100
$125
$150
Q1 2015 Q2 2015 Q3 2015 Q4 2015
Tota
l C
om
mitm
ent ($
in m
m)
PTL Commitment Fulfilled
Drill Commitment Fulfilled
Drill Commitment Penalty
1Q’15 2Q’15 3Q’15 4Q’15 E
Note: commitments as of 12/31/2014
E E
31 I Global Hunter Conference 6/23/2015
CORPORATE INFORMATION
PUBLICLY TRADED SECURITIES CUSIP TICKER
3.25% Senior Notes due 2016 #165167CJ4 CHK16
6.25% Senior Notes due 2017 #027393390 N/A
6.50% Senior Notes due 2017 #165167BS5 CHK17
7.25% Senior Notes due 2018 #165167CC9 CHK18A
3mL + 3.25% Senior Notes due 2019 #165167CM7 CHK19
6.625% Senior Notes due 2020 #165167CF2 CHK20A
6.875% Senior Notes due 2020 #165167BU0 CHK20
6.125% Senior Notes Due 2021 #165167CG0 CHK21
5.375% Senior Notes Due 2021 #165167CK21 CHK21A
4.875% Senior Notes Due 2022 #165167CN5 CHK22
5.75% Senior Notes Due 2023 #165167CL9 CHK23
2.75% Contingent Convertible Senior Notes due 2035 #165167BW6 CHK35
2.50% Contingent Convertible Senior Notes due 2037 #165167BZ9/
#165167CA3
CHK37/
CHK37A
2.25% Contingent Convertible Senior Notes due 2038 #165167CB1 CHK38
4.5% Cumulative Convertible Preferred Stock #165167842 CHK PrD
5.0% Cumulative Convertible Preferred Stock (Series 2005B) #165167834/
#165167826 N/A
5.75% Cumulative Convertible Preferred Stock
#U16450204/
#165167776/
#165167768
N/A
5.75% Cumulative Convertible Preferred Stock (Series A)
#U16450113/
#165167784/
#165167750
N/A
Chesapeake Common Stock #165167107 CHK
6100 N. Western Avenue
Oklahoma City, OK 73118
WEBSITE: www.chk.com
CHESAPEAKE HEADQUARTERS
BRAD SYLVESTER, CFA Vice President — Investor Relations and Communications
DOMENIC J. DELL'OSSO, JR. Executive Vice President and Chief Financial Officer
Investor Relations department can be reached by phone at (405) 935-8870 or by email at ir@chk.com
CORPORATE CONTACTS
top related