Thursday, April 7, 2011

Chesapeake’s “25/25” plan for 2011-2012; Plan to increase hydrocarbon production by 25% and to reduce long-term debt by 25% over 2010


Chesapeake, currently the number two producer of natural gas in the US and number one natural gas driller with respect to activity also has made a major change to its business strategy. The company is planning a two-year (2011-12) hydrocarbon growth rate of 25%, net of asset sales (reduced from prior target of 30 - 40%). The company is planning to increase liquids production by ~190% and natural gas production by ~6%. Expected hydrocarbon production in 2011 is ~3.065 bcfepd and 2012 is ~3.560 bcfepd.

Chesapeake deals in 2011 as part of implementing “25/25” plan:

Chesapeake and CNOOC formed a JV for the Niobrara Oil Shale, whereby CNOOC owned 33.3% undivided interest in Chesapeake’s 800,000 net oil and natural gas leasehold acres in the Denver-Julesburg (DJ) and Powder River Basins in northeast Colorado and southeast Wyoming.
Source: Derrick Petroleum E&P Transactions Database

Chesapeake sold all its interests in Fayetteville Shale, Central Arkansas to BHP, including $500 million for midstream interests for $4.75 billion.

Announced details of near-term asset monetization plans which might exceed pre-tax proceeds target of $5.0 billion

- Plan to monetize 25.8% equity investment in Frac Tech Holdings LLC
- Plan to monetize 20.0% equity investment in Chaparral Energy, Inc.
- Plan to use sale proceeds to retire $2.0 - $3.0 billion of senior notes and to also reduce bank credit facility borrowings


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