chesapeake energy shale operations overview. 2 chesapeake energy overview founded in 1989...
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Chesapeake Energy Overview
Founded in 1989Headquartered in Oklahoma City, OK
Offices regionally located in Charleston, WV, Jane Lew, WV, Mt. Morris, PA, Canonsburg, PA, Harrisburg, PA, and Towanda, PA
Exclusive U.S. onshore focusOne of the nation’s largest natural gas producers
1Q ‘10 natural gas production of 2.328bcf/d
Nation’s most active explorer 1993-2010Nation’s most active horizontal driller 1993-2010Exceptional drilling success rate – 98%
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Chesapeake Energy Overview
Most active driller in U.S. 1993-2010133 operated rigs currently
―26 rigs currently drilling in the Marcellus Shale area
CHK responsible for 1 of 8 new gas wells being drilled in U.S.
Consistent production growth20th consecutive year of sequential production growth
Unparalleled inventory of U.S. onshore leasehold and 3-D seismic
Lower risk of suboptimal return on capitalHigher production rates
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Chesapeake Energy Overview
Only producer with #1 or #2 position in “Big-4” U.S. shale plays
#1 in Marcellus Shale; 1,550,000 net acres#1 in Haynesville Shale; 530,000 net acres#2 in Fayetteville Shale; 465,000 net acres#2 in Barnett Shale; 220,000 net acres
Advantageous joint venture arrangementsStatoilHydro, Total, BP, Plains Exploration and Production Company
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Characteristics of Shale Formations
Found in organic-rich sedimentary rocks (shales) that were originally deposited as muds within tidal flats and deep water basins
Shale formations can be found 1 mile or more underground
Dense rock with low permeability
Typically requires a combination of horizontal drilling and hydraulic fracturing for the natural resources to be recovered in economic quantities
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The Production Process
Five basic steps:
1. Site selection and well pad preparation2. Drilling the well3. Completing the well4. Marketing the resources5. Reclaiming the site
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Site Selection
A number of factors are considered in selecting a drilling site:
Favorable geologyTopographyAccess RoadsRoutes for pipelines and utilitiesProximity to schools or residential areasEnvironmental factors such as wetlands and sensitive wildlife habitatAvailable water source(s)
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Well Pad Preparation
Well pads can be located in rural or urban areasPad preparation requires approximately 4-6 weeksTypical horizontal well pad requires 3-5 acres to construct
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Advanced Drilling Technologies Reduce Surface Footprint
Vertical drilling patterns required:
Up to 16 well pads needed to recover the natural resources from 640 acresMultiple roads with pipelines and utilities required to access the wellsTotal surface disturbance was ~45 acres
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Extraordinary Technology Advances Extract Natural Gas More Effectively
Horizontal drilling substantially reduces surface footprint
6-8 horizontal wells anticipated drilled from each 3-5 acre padOnly one road with pipeline and utilities to well padApproximately 85% less surface disturbance than from with vertical wells
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Drilling the Well Using Today’s New Technology
Wells are drilled and constructed to recover the natural resources while protecting the environment and providing for the safety of workers and area residents
Drilling is a 24/7 operationReduces rig time on location
The drilling phase is a temporary operation, typically lasting 3-4 weeks per wellboreChesapeake Energy utilizes a “closed-loop” drilling system
All drilling materials are containedNo materials collected in earthen pits
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Drilling the Well-Groundwater Protection
4 or more layers of protection are installed in the well to isolate the well from the surrounding strata and protect groundwater supplies and the environment
Multiple layers of steel casing and cement are utilizedCasing set in place below freshwater aquifer zone
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Using Horizontal Wells
Computer-driven, state-of-the-art technology allows for horizontal drilling
Horizontal drilling allows for access to a greater volume of the shale resource reservoir
Access to a greater volume of the reservoir makes shale resource development economical
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Well Completion
After the drilling rig is removed, hydraulic fracturing (“fracing”) beginsFracing is a process to stimulate natural resource production from the hard shaleImpoundments, if necessary, hold freshwater onlyWater is mixed with proppant (such as sand) and pumped into the shalereservoir under pressure• 99.5% of fracturing fluid is made up of
water and sand
Generally takes several days per wellbore
For more information on hydraulic fracturing, please visit AskChesapeake.com
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Aqua Renew Program
ProcessCurrently recycling/reusing nearly 100% of water used during the production process
BenefitsReduces or eliminates need for water to be sent offsite for disposalReduces required water supplies Reduces truck traffic, lowers impact on roads, noise, and airReduces the cost of operations
For more information on the Aqua Renew program please visit AskChesapeake.com
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Marketing /Reclaiming the Site
Gas and liquids are separated by the “separator”
Pipeline carries natural resources to market
Produced water is retained on location
in tanks until removed via truck
Site is reclaimed and landscaped
Site is reduced to approximately 1 acre
Small access road will be retained
Company returns regularly
Maintain equipment/monitor production rate
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Who Shares In The Revenue?
Mineral OwnersBonuses and royalties
Local WorkersWages and benefits
Local BusinessSubcontractors and service companies
Counties, Cities, School DistrictsAd valorem and other taxes
Other StakeholdersCharitable organizationsChesapeake shareholders
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Why Lease With Chesapeake Energy?
Most experience shale operator in the U.S.21-year track record of production increasesBest management practices utilized throughout drilling and completion processFinancial strength through joint ventures in multiple operating areas
Total, StatoilHydro, BP, Plains Exploration and Production Company
Advanced technological capabilities translate into higher production rates and reserve recoveries
Unparalleled inventory of onshore U.S. 3-D seismic dataIn-house geology core lab
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Questions?
For more information:
Mike D. [email protected]
Information provided is subject to change based on multiple factors.