Chesapeake Energy 2011 Annual Report Download - page 20

17 | Operating Areas
Note: Figures do not add to company totals.
*
Compared to last year
**
% of company total
2011 Natural Gas Production:
555 bcf, 32%*, 55%**
2011 Liquids Production:
1,100 mbbls, 38%*, 3%**
12/31/11 Proved Reserves:
8,040 bcfe, 18%*, 43%**
12/31/11 Net Leasehold Acres:
990,000, -6%*, 6%**
2011 Natural Gas Production:
260 bcf, -30%, 26%
2011 Liquids Production:
20,900 mbbls, 51%, 66%
12/31/11 Proved Reserves:
5,420 bcfe, -25%, 29%
12/31/11 Net Leasehold Acres:
5,240,000, 17%, 34%
Colony Granite WashTexas Panhandle
Granite Wash
Mississippi Lime
Cleveland and Tonkawa
Haynesville Shale
Barnett Shale
Bossier Shale
SOUTHERN DIVISION
Our Southern Division includes the Haynesville and Bossier shale plays in north-
western Louisiana and East Texas and the Barnett Shale play in the Fort Worth
Basin of north-central Texas. During 2011, we invested approximately $2.7 billion
to drill 1,104 gross (550 net) wells, net of $417 million in drilling and completion
cost carries paid by our Barnett Shale joint venture partner, Total E&P USA, Inc.,
a wholly owned subsidiary of Total S.A. (NYSE:TOT, FP:FP). The Southern Divi-
sion was the company’s largest contributor to natural gas production, led by the
substantial growth from the Haynesville/Bossier shales where our gross operated
production surpassed 2.0 bcf per day in late 2011, the first operator in U.S. history
to reach that level of production from one field.
In early 2012, given that our leasehold acreage in the division is now almost
completely held by production (HBP) and in response to the lowest natural gas
prices in the past 10 years, we announced plans to dramatically reduce our oper-
ated dry gas drilling activity and capital expenditures in the Southern Division.
We plan to reduce our drilling activity in both the Haynesville/Bossier and Barnett
shales to six operated rigs each during the 2012 second quarter. In 2012, we antici-
pate spending approximately $700 million, or 10% of our total budget, for explora-
tion and development activities in the Southern Division.
NORTHERN DIVISION
Our Northern Division includes the Granite Wash, Cleveland, Tonkawa and Mississi-
ppi Lime liquids-rich plays located in the Anadarko Basin in western Oklahoma and
the Texas Panhandle. Prior to April 2011, the Fayetteville Shale was also included in
the Northern Division. In March 2011, we sold all of our Fayetteville Shale assets to
BHP Billiton Petroleum, a wholly owned subsidiary of BHP Billiton Limited (NYSE:
BHP; ASX:BHP) for approximately $4.65 billion in cash. The transaction included net
production of approximately 415 million cubic feet of natural gas equivalent per day
and midstream assets with approximately 420 miles of pipeline.
During 2011, we invested approximately $1.8 billion to drill 1,076 gross (342 net)
wells in this division. The main focus of our leasehold acquisition in the division in
2011 has been in the Mississippi Lime carbonate play, as we almost doubled our
acreage position in the play and increased our operated rig count to 22 rigs and
plan to maintain that level throughout 2012. The increase in liquids production for
the division was primarily driven by the Mississippi Lime play, as well as the Cleve-
land and Tonkawa tight sand plays in which we increased our operated rig count
to 20 rigs between the two plays and plan to maintain that level throughout 2012.
We plan to execute three asset monetizations in the Northern Division in 2012,
which include VPP 10 in the Texas Panhandle Granite Wash, a financial transaction
in our Cleveland and Tonkawa plays and an expected joint venture partnership in
our Mississippi Lime play. For 2012, we anticipate spending approximately $2.6
billion, or 36% of our total budget, for exploration and development activities in
the Northern Division, with a continuing focus on the Granite Wash, where rates of
return are the highest in our company, and an increasing focus on the Cleveland,
Tonkawa and Mississippi Lime unconventional liquids-rich plays.