Chesapeake Energy 1996 Annual Report Download - page 11

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cientific progress in such areas
as horizontal drilling, 3-D seis-
mic, and deep fracture stimula-
tion have enabled Chesapeake to
identify and develop new oil and
natural gas reserves more profitably
than at any time during the past 20
years. While distinguishing itself in
each of these new technologies,
Chesapeake's leadership in horizon-
tal drilling is particularly distinctive.
Our company is now the second lead-
ing driller of horizontal wells in the
world, drilling 90 such wells in fiscal
1996 and 275 since 1990.
The company's expertise in hori-
zontal drilling provides the potential
for greater reserve recovery per dol-
lar invested at an unusually low level
of risk. This results in a much higher
rate of return on invested capital than
is typically enjoyed by the industry.
The talent of Chesapeake's explo-
ration teams, the company's strong
alliances with the vendors who de-
sign and manufacture horizontal
drilling equipment, and our willing-
ness to experiment with new ideas
have allowed Chesapeake to drill in-
creasingly deeper horizontal wells and
thereby expand the boundaries of our
fields. For example, in just the past
two years, technical improvements in
measurement-while-drilling and log-
CHESAPEAKE ENERGY CORPORATION
Technological leadership
S
COMPETITIVE ADVANTAGE N°. 3
i32 l3 If4 l5
Horizontal Wells Drilled
300
240
00
20
60
ging-while-drilling tools, downhole
motors, and drillbit technology have
enabled Chesapeake to ex-
tend the industry's depth
barrier from 13,000 feet to
almost 17,000 feet. This
provides a much larger fair-
way of potentially produc-
tive acreage for the com-
pany to develop.
The extension of this
depth limit is important because as
horizontal drilling technology im-
proves, the number of prospective
drillsites on Chesapeake's leasehold
inventory can continue to increase.
In the past year alone, the company
added over 400 drillsites to its inven-
tory as a result of deeper drilling suc-
cesses and an aggressive leasehold ac-
quisition program in the Louisiana
Austin Chalk Trend. This area, con-
sidered uneconomical just two years
ago, is today one of the most active
LETTER TO SHAREHOLDERS
exploration areas in the U.S.
Chesapeake also has increased its
expertise by applying another sign ifi-
cant industry advancement, 3-D seis-
mic imaging. Advancements in com-
puter processing capability have en-
abled exploration companies to en-
hance their understanding of deep
geological structures. When applied
in the appropriate geological environ-
ment, this technology results in
higher success rates and more prolific
Chesapeake's focus on exploring for
underdeveloped reservoirs using advanced
technologies provides considerable upside
at relatively iow risk
wells.
During fiscal 1996, Chesapeake
acquired or participated in eight 3-
D seismic projects in four states. As a
result of early drilling success on our
3-D seismic projects in the Knox,
Lovington, and Williston Basin ar-
eas, we have planned an additional
twelve 3-D projects in six states in
fiscal 1997. We believe 3-D seismic
surveys will play an increasingly im-
portant role in our future exploration
projects.