The Fayetteville Shale is currently the second most productive shale play in the U.S. and one of the nation’s ten largest natural gas fields of any type.  In the Fayetteville, Chesapeake is the second-largest leasehold owner in the Core area of the play with 455,000 net acres.  During the 2009 fourth quarter, Chesapeake’s average daily net production of approximately 310 mmcfe in the Fayetteville increased approximately 25% over the 2009 third quarter and approximately 85% over the 2008 fourth quarter.  Chesapeake is currently producing approximately 340 mmcfe net per day (490 mmcfe gross operated) from the Fayetteville and anticipates maintaining approximately 320 mmcfe net per day (460 mmcfe gross operated) through year-end 2011. 

To further develop its 455,000 net acres of Core Fayetteville leasehold, Chesapeake anticipates operating an average of approximately 12 rigs in 2010 to drill approximately 110 net wells.  During 2009, $601 million of Chesapeake’s drilling costs in the Fayetteville were paid for by its joint venture partner, BP America (NYSE:BP).  During the fourth quarter 2009, BP paid Chesapeake the remaining balance of BP’s drilling carry obligations and Chesapeake and BP each began paying their proportionate working interest costs on drilling.

Chesapeake’s leasehold investment in the Fayetteville to date has been approximately $532 million.  By selling a 25% interest in the company’s leasehold to BP for $883 million, the company has more than recouped its entire leasehold investment in the Fayetteville, resulting in a per net acre cost of less than zero.

Three notable recent wells completed by Chesapeake in the Fayetteville are as follows:

• The Nicholson 7-8 4-10H9 in White County, AR achieved a peak 24-hour rate of 9.2 mmcf per day;
• The Stroud 7-9 1-23H14 in White County, AR achieved a peak 24-hour rate of 7.9 mmcf per day; and
• The Gardner 10-13 2-21H in Van Buren County, AR achieved a peak 24-hour rate of 6.2 mmcf per day.