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Company Believes It May Ultimately Develop as Much as One Trillion
Cubic Feet of Natural Gas Equivalent Reserves from Underneath
18,000-Acre Airport Lease for All-In Finding and Development Cost of
Approximately $2.00 Per mcfe
OKLAHOMA CITY--(BUSINESS WIRE)--Oct. 30, 2007--Chesapeake Energy
Corporation (NYSE:CHK) today announced that it has recently initiated
production of approximately 30 million cubic feet of natural gas
equivalent (mmcfe) from the first 11 wells on its 18,000-acre
Dallas/Fort Worth (DFW) International Airport lease. Acquired
approximately one year ago for $185 million, the airport lease
represents a significant value creation opportunity for Chesapeake,
its minority- and women-owned business enterprise (M/WBE) partners and
DFW International Airport. Based on the results of the company's
proprietary 3-D seismic analysis acquired earlier this year and the
drilling, completion and production results to date, the company plans
to drill approximately 300 - 325 wells on the airport lease.
Assuming an estimated average recovery of approximately 2.5 - 3.0
billion cubic feet of natural gas equivalent (bcfe) gross reserves per
well, the company believes that up to one trillion cubic feet of
natural gas equivalent (tcfe) reserves can be produced from under the
airport at an all-in finding and development cost of approximately
$2.00 per thousand cubic feet of natural gas equivalent (mcfe).
Since commencing 3-D seismic operations in December 2006 and
drilling operations in May 2007, Chesapeake has employed five drilling
rigs on a continuous basis at the airport and anticipates maintaining
that level of activity through 2011, at which time the company should
have completed drilling its planned 300 - 325 wells. To date,
Chesapeake has initiated drilling activities on 33 wells, has started
completion activities on 18 wells and is selling natural gas from 11
wells. Chesapeake hopes to reach a peak production level from the
airport lease of approximately 250 mmcfe per day by year-end 2011 and
expects production to continue for at least the next 50 years.
DFW International Airport Management Comment
Jeffrey P. Fegan, Chief Executive Officer of DFW International
Airport, said, "We have been fortunate to partner with Chesapeake in
this venture and are delighted that together, we have exceeded every
goal and met every deadline. Of course, the ultimate benefactor will
be our passengers, who will see enhanced facilities and amenities as
we use natural gas revenues to upgrade DFW and assure we remain one of
the finest airports in the world. We look forward to continuing a long
and mutually rewarding relationship with Chesapeake."
M/WBE Partner Comment
Adelfa and Bill Callejo, managers of M/WBE investor Callejo
Energy, LLC, commented, "We have looked forward to this day for a long
time. As soon as we heard that Chesapeake was bidding on the airport
lease, we wanted to be a part of it. The DFW International Airport has
long been considered the largest economic engine in the Metroplex and
we now know that the Barnett Shale will be an important new economic
driver at the airport. We have greatly appreciated being a partner
with Chesapeake and are delighted that preliminary results are so
positive."
Al Zapanta, Chairman of M/WBE investor PAZ Energy, said, "We're
excited to hear the great news and continue to have high expectations
for the DFW International Airport lease project with our great friend
and partner, Chesapeake. We especially want to acknowledge
Chesapeake's exceptional work in its drilling and field operations to
reach our milestone of first production well ahead of schedule."
Chesapeake Management Comment
Aubrey K. McClendon, Chesapeake's Chief Executive Officer,
commented, "Today's announcement confirms what we had hoped for all
along - that underlying the DFW International Airport would be a
treasure of natural gas that could be worth billions of dollars if
properly developed by a company with the vision and skills that
Chesapeake brings to the Barnett Shale. I am very proud of the dozens
of Chesapeake employees in the field and in the office who have worked
so hard in the past year to bring this project to fruition. I also
compliment the DFW International Airport management team and our
partners, all of whom have been helpful along the way. We are pleased
to have been able to lead this unique and successful partnership to
where we are today - on the cusp of generating billions of dollars of
value for our shareholders and our partners.
"Further, we are now utilizing 38 drilling rigs to develop our
230,000 net acres of Barnett Shale leasehold, under which we believe
up to seven tcfe of net reserves may exist, approximately 75% of which
has not yet been recognized as proved in the company's reserve report.
At this time, we estimate that we have only developed approximately
25% of our Barnett Shale leasehold in the sweet spot of Tarrant,
northern Johnson and western Dallas counties. The Barnett Shale and
the DFW International Airport lease should continue powering our
company's growth for years to come."
This press release 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
give our current expectations or forecasts of future events. They
include estimates of oil and natural gas reserves, expected oil and
natural gas production and future expenses, projections of future oil
and natural gas prices, planned capital expenditures for drilling,
leasehold acquisitions and seismic data, and plans for future
operations. We caution you not to place undue reliance on our
forward-looking statements, which speak only as of the date of this
press release, and we undertake no obligation to update this
information.
Factors that could cause actual results to differ materially from
expected results are described in "Risks Related to our Business"
under "Risk Factors" in the Offer to Exchange attached as an exhibit
to each of the two Schedules TO we filed with the Securities and
Exchange Commission on August 23, 2007. These risk factors include the
volatility of oil and natural gas prices; the availability of capital
on an economic basis to fund reserve replacement costs; our ability to
replace reserves and sustain production; uncertainties inherent in
estimating quantities of oil and natural gas reserves and projecting
future rates of production and the amount and timing of development
expenditures; drilling and operating risks, including potential
environmental liabilities; and production interruptions that could
adversely affect our cash flow.
Our production forecasts are dependent upon many assumptions,
including estimates of production decline rates from existing wells
and the outcome of future drilling activity. Although we believe the
expectations and forecasts reflected in these and other
forward-looking statements are reasonable, we can give no assurance
they will prove to have been correct. They can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties.
The SEC has generally permitted oil and natural gas companies, in
filings made with the SEC, to disclose only proved reserves that a
company has demonstrated by actual production or conclusive formation
tests to be economically and legally producible under existing
economic and operating conditions. Above we describe volumes of
reserves potentially recoverable through additional drilling or
recovery techniques that the SEC's guidelines may prohibit us from
including in filings with the SEC. These estimates are by their nature
more speculative than estimates of proved reserves and accordingly are
subject to substantially greater risk of actually being realized by
the company. While we believe our calculations of unproved drillsites
and estimation of unproved reserves have been appropriately risked and
are reasonable, such calculations and estimates have not been reviewed
by third party engineers or appraisers.
Chesapeake Energy Corporation is the largest independent producer
and third-largest overall producer of natural gas in the United
States. Headquartered in Oklahoma City, the company's operations are
focused on exploratory and developmental drilling and corporate and
property acquisitions in the Mid-Continent, Fort Worth Barnett Shale,
Fayetteville Shale, Permian Basin, Delaware Basin, South Texas, Texas
Gulf Coast, Ark-La-Tex and Appalachian Basin regions of the United
States. The company's Internet address is www.chkenergy.com.
CONTACT: Chesapeake Energy Corporation, Oklahoma City
Jeffrey L. Mobley, CFA, 405-767-4763
Senior Vice President - Investor Relations and Research
jmobley@chkenergy.com
or
Marc Rowland, 405-879-9232
Executive Vice President and Chief Financial Officer
mrowland@chkenergy.com
SOURCE: Chesapeake Energy Corporation