Chesapeake Energy, the largest leaseholder in the Utica Shale play with approximately 1 million net acres, reported Monday that it anticipates doubling its oil and natural-gas production in Ohio and western Pennsylvania by year’s end.
Seeking to reassure wary investors in the wake of former CEO Aubrey McClendon’s departure and deep capital expenditures in recent years, newly appointed acting CEO Steve Dixon delivered an update on the company’s assets Monday.
Dixon delivered a positive outlook for the Utica play, calling its resource base “prolific.”
The company currently is producing 75 million cubic feet equivalent of mixed oil and natural gas per day, a number that Chesapeake believes will more than double to 330 million cubic feet equivalent per day, or 55,000 barrels of oil equivalent, by year’s end.
He offered a caveat, however, saying that number is largely dependent on processing and infrastructure constraints. Chesapeake’s target of 55,000 barrels of oil equivalent per day will rely on the crucial processing facilities and pipelines expected to come online throughout the region in the coming year.
Due to such constraints, the company was forced to “curtail and restrict production on the wells placed into service last year,” Dixon said.
Based on Chesapeake’s Utica data, the company is targeting recoveries of 5 billion to 10 billion cubic feet equivalent per well. Dixon also said that data, combined with product mix, well costs and market prices, signal a targeted rate of return between 30 percent and 80 percent, with an average return of 40 percent, most of which is within the wet-gas window of the play.
In an effort to rein in spending and curb some of the debt it incurred from exploration costs and the sinking price of natural gas, Chesapeake has announced a rash of asset sales, which Dixon said are going smoothly. He added that the company is on track to come in below budget this year.