Chesapeake Energy 2009 Annual Report Download - page 20

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Fayetteville Shale The Fayetteville is currently the third most productive shale play
in the U.S. and one of the nation’s 10 largest natural gas fields of any type. Chesapeake owns
the industry’s second-largest acreage position in the core area of the Fayetteville Shale play in
Arkansas, totaling nearly 460,000 net acres. We estimate we could drill up to 5,200 net wells on our
Fayetteville acreage in the years ahead and plan to utilize an average of 10 operated rigs in 2010
to further develop our leasehold. During 2009, $600 million of Chesapeake’s drilling costs in the
Fayetteville were paid for by its joint venture partner, BP America (NYSE:BP). During the fourth quar-
ter 2009, BP paid Chesapeake the remaining balance of its drilling carry obligations and Chesapeake
and BP each then began paying its proportionate working interest costs.
Barnett Shale The Barnett Shale in North Texas is currently the largest natural gas produc-
ing field in the U.S. and is producing approximately half of all shale gas in the U.S. In the Barnett,
Chesapeake is the second-largest producer of natural gas, the most active driller and the largest lease-
hold owner in the Core and Tier 1 sweet spots of Tarrant and Johnson counties. In January 2010, Chesapeake
completed a $2.25 billion Barnett Shale joint venture transaction with 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 bil-
lion 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. We anticipate using an
average of 25 operated rigs in 2010 to further develop our leasehold. On our acreage, we estimate we could drill
up to 2,400 net wells in the years to come.
Granite Wash Chesapeake is the largest leaseholder in the Granite Wash plays with
190,000 net acres. We have generated particularly strong drilling results from our Colony Gran-
ite Wash discovery in Washita and Custer counties, Oklahoma, and from the Texas Panhandle
Granite Wash in Hemphill, Wheeler and Roberts counties, Texas, where rates of return in these
plays are the highest in our company. We estimate we could drill up to 1,200 net wells on our
Granite Wash acreage in the future and plan to utilize an average of 13 operated rigs in 2010 to
further develop our Granite Wash leasehold.
Other Mid-Continent Chesapeake’s Other Mid-Continent area includes operations
in Oklahoma, the Texas Panhandle, southwestern Kansas and western Arkansas. In addition
to various conventional plays in this area, our activities currently focus on the massive Sahara
unconventional natural gas resource project in northwestern Oklahoma, where Chesapeake is by
far the dominant operator with nearly 950,000 net leasehold acres. Sahara is a multi-county play
with excellent low-risk, shallow natural gas production and an emerging horizontally drilled
oil opportunity in the Mississippian formation. In the Anadarko Basin area of the Mid-Con-
tinent, we are developing multiple horizontal unconventional oil plays, with a significant
presence in the emerging Cleveland and Tonkawa tight sand oil plays, in which we are leveraging
what we have learned from our horizontal Granite Wash discoveries.
Appalachian Basin Often referred to as America’s most drilled but least explored
area, Appalachia presents abundant growth opportunities through the introduction of lead-
ing-edge exploration, drilling and production technologies, in which Chesapeake is a recognized
industry leader, into a basin largely ignored by the industry since the 1940s. Our leasehold position,
excluding our Marcellus position, includes 1.2 million net acres in the Lower Huron Shale play and
an additional 1.7 million net acres in other conventional and unconventional plays in the re-
gion. We have developed multiple deep exploration prospects in Appalachia that we plan to
test once natural gas prices recover to higher levels.
2009 Total Production:
240 bcfe, +33%, 26%
12/31/09 Proved Reserves:
3,430 bcfe, +17%, 24%
12/31/09 Net Leasehold Acres:
290,000, -6%, 2%
Note: Figures may not add to company
totals due to rounding in each area.
* Compared to last year
** % of company total
NM Not meaningful
2009 Total Production:
70 bcfe, +40%*, 8%**
12/31/09 Proved Reserves:
1,090 bcfe, +419%*, 8%**
12/31/09 Net Leasehold Acres:
190,000, +217%*, 1%**
2009 Total Production:
235 bcfe, -23%, 26%
12/31/09 Proved Reserves:
3,010 bcfe, -29%, 21%
12/31/09 Net Leasehold Acres:
4,330,000, -9%, 33%
2009 Total Production:
90 bcfe, +64%, 10%
12/31/09 Proved Reserves:
2,170 bcfe, +229%, 15%
12/31/09 Net Leasehold Acres:
460,000, +10%, 4%
2009 Total Production:
30 bcfe, -14%, 3%
12/31/09 Proved Reserves:
1,160 bcfe, -24%, 8%
12/31/09 Net Leasehold Acres:
2,930,000, -7%, 22%
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