Chesapeake Energy 2011 Annual Report Download - page 7

2011 Annual Report | 5
During that time, we made increasingly bold
investments in leasehold, producing properties and
drilling, ultimately investing approximately $15 bil-
lion in those seven years. Chesapeake’s production
grew rapidly, moving the company from a Top 20
U.S. natural gas producer in 1999 to a Top 10 U.S.
natural gas producer in 2005. After expressing ini-
tial doubts, Chesapeake’s shareholders applauded
our moves, and they were rewarded handsomely
as our stock price increased from less than $1 per
share in 1999 to a high of $40 per share in 2005.
BOLD SHIFT TO SHALE GAS PLAYS
In late 2004, we developed another keen insight
and recognized the discovery and development
of low-cost, low-risk shale gas could change our
industry for decades to come, if not forever. The
commercialization of horizontal drilling in the
Barnett Shale around Fort Worth, Texas, kicked
o a shale gas “Land Rush” by the industry. Ches-
apeake made the bold move to secure the stron-
gest leasehold position in the core of the play in
Tarrant and Johnson counties, despite the chal-
lenges of urban drilling in and around Fort Worth.
In 2005, as the Fayetteville Shale in Arkan-
sas yielded strong early results, we made the
bold move to quickly secure what became the
industry’s second-largest position in the Fay-
etteville. As most observers and shareholders of
Chesapeake know, the company subsequently
discovered the Haynesville and Bossier shales in
Louisiana in 2007, which, in just four years, have
together become the largest gas-producing field
in the U.S. at more than 7.1 billion cubic feet (bcf)
per day as of December 2011.
Also in 2005, we completed the bold acqui-
sition of Columbia Natural Resources, LLC in
Appalachia for $3.0 billion (our largest acquisi-
tion ever), which became the foundation for our
industry-leading position in the Marcellus Shale
play. The Marcellus will likely surpass the Haynes-
ville/Bossier in the next few years to become the
largest natural gas-producing field in the U.S.
From 2005 to 2011, our company’s natural gas
production increased by 1.6 bcf per day, or 140%,
to 2.8 bcf per day, making Chesapeake the sec-
ond-largest producer of U.S. natural gas on a net
basis and the largest producer of U.S. natural gas
on a gross operated basis with an approximate
9% national market share.
BOLD INVESTMENTS IN TECHNOLOGY
As we built the industry’s largest shale gas re-
source base, we transformed Chesapeake from a
fast follower of new plays into the leading inno-
vator and discoverer of new U.S. unconventional
resource plays. We made significant investments
in 3-D seismic, reservoir engineering technology,
petrophysical research, and we greatly increased
the size and expertise of our technical teams to
build the industry’s most sophisticated unconven-
tional resource development organization. Specif-
ically, we grew our geoscience, engineering and
operational professional teams by 165% from 950
professionals in 2005 to more than 2,550 today.
Our teams are aided by the industry’s pre-
mier shale core lab at our proprietary Reservoir
Technology Center (RTC), which has analyzed
more than 50,000 feet of core samples since it
was established in 2007, three times as many as
the next most active company. The RTC helps us
find new plays and perfect existing ones through
the skillful analysis of daily production data from
the more than 20,000 wells we operate, as well as
the daily data gathered from our industry-leading
drilling program, which operates more than twice
as many rigs as the next most active U.S. driller.
Chesapeake’s information flows are second to
none in the industry and represent an important
and unmatched competitive advantage.
As a result of the significant investments in
technology and human resources, Chesapeake
Aubrey K. McClendon
Co-Founder, Chairman and Chief Executive Officer
We transformed
Chesapeake from
a fast follower
of new plays
into the leading
innovator and
discoverer
of new U.S.
unconventional
resource plays.