The Barnett Shale is currently the largest natural gas producing field in the U.S. and is producing approximately 50% of all shale gas in the U.S. In this play, Chesapeake is the second-largest producer, the most active driller and the largest leasehold owner in the Core and Tier 1 sweet spots of Tarrant and Johnson counties. In January 2010, Chesapeake completed its $2.25 billion Barnett Shale joint venture transaction with Total E&P USA, Inc., a wholly-owned subsidiary of Total S.A. (NYSE:TOT, FP:FP) (Total), whereby Total acquired a 25% interest in Chesapeake’s upstream Barnett Shale assets. Total paid Chesapeake approximately $800 million in cash at closing and will pay a further $1.45 billion over time by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45 billion obligation has been funded, which Chesapeake expects to occur by year-end 2012.
During the 2009 fourth quarter, Chesapeake’s average daily net production of approximately 680 mmcfe in the Barnett increased approximately 7% over the 2009 third quarter and increased approximately 19% over the 2008 fourth quarter. Chesapeake is currently producing approximately 515 mmcfe net per day (950 mmcfe gross operated) from the Barnett (net production was reduced by 25% as a result of the joint venture with Total) and anticipates reaching approximately 590 mmcfe net per day (1,120 mmcfe gross operated) by year-end 2010 and approximately 665 mmcfe net per day (1,260 mmcfe gross operated) by year-end 2011.
To further develop its 220,000 net acres of leasehold, Chesapeake anticipates operating an average of approximately 28 rigs in 2010 to drill approximately 300 net wells.
Chesapeake’s leasehold investment in the Barnett has been approximately $4.0 billion, of which $1.1 billion, or 26%, will be recouped through the 25% sale of Chesapeake’s interest in its leasehold to Total. The company’s net investment in its Barnett leasehold is now approximately $13,400 per net acre on average.
Three notable recent wells completed by Chesapeake in the Barnett are as follows:
• The Auld 1H in Ellis County, TX achieved a peak 24-hour rate of 13.0 mmcf per day;
• The Crowley Eagles 4H in Tarrant County, TX achieved a peak 24-hour rate of 10.4 mmcf per day; and
• The Crowley Eagles 1H in Tarrant County, TX achieved a peak 24-hour rate of 9.6 mmcf per day.