Chesapeake Selling 337K Utica Shale Acres, Counties IDed

MDN started seeing references yesterday to a story that Chesapeake Energy has put some of its Ohio Utica Shale acreage on the auction block. First came stories that Chesapeake says the value of each acre it controls in the Utica Shale is worth between $13,000 and $17,000:

Chesapeake Energy believes every acre of its oil and liquids-rich Utica shale play is worth $13,000 to $17,000, amounts that are significantly greater than most drillers are paying mineral owners to lease local land.

In its continuing effort to find new investors to help fund operations, Chesapeake prepares a periodic "Investor Presentation." In the latest document, the company identifies the "oil and wet gas" portion of its Utica shale leaseholdings to be worth $13,000-$17,000 per acre. Chesapeake recently noted that wet gas wells – those producing ethane, butane, propane, pentane and other liquid properties, as well as the dry methane gas – can be worth about three times as much as the wells that yield only the dry methane gas.(1)

Then, brief mentions were made that Chesapeake has officially listed some of its acreage for sale:

Chesapeake Energy Corp is looking to sell about 337,000 acres of its holdings in Ohio, as it works to raise money to meet an expected cash shortfall, according to a prospectus released by one of its advisers.

The holdings on the block include some in the Utica shale. The prospectus was posted on the website of Meagher Energy Advisors, an energy-focused asset acquisition and divestiture boutique firm that has sold assets for Chesapeake in the past.(2)

MDN consulted the Meagher Energy Advisors website and sure enough, Chesapeake has listed 337,481 net acres (510,847 gross acres) in the Ohio Utica Shale for sale. The reason offered? It’s dumping acreage in counties where they don’t own the majority of leases, as they do in other counties. Chesapeake prefers to keep acreage in counties where they have the majority of the acreage. Or think of it this way: They’re getting rid of the weakest links. The unstated reason? They need to sell some prime assets to help them get out of debt and stay afloat.

Below is the full listing from the Meagher website, showing a map of the counties where Chesapeake is looking to dump their holdings. If you’re a landowner signed with Chesapeake in those counties, you may soon find a new driller knocking on the door holding your lease.

Chesapeake Utica-Point Pleasant Trend Acreage

Utica/Point Pleasant Trend Acreage
337,481 Net Acres
80% HBP
Avg. NRI ratio 85%

MAIN TARGET:  UTICA SHALE / POINT PLEASANT FORMATION

• Most acreage lies in the wet gas or oil window
• Utica horizontal activity is expanding into these areas
• Thickness 100 to 300 feet (combined Utica/Pt. Pleasant)
• Depth 2,000 to 7,000 feet; dips generally basinward to the east

RATIONALE FOR SELLING

• The Company has altered its plans to develop all of its highly prospective acreage and instead will focus its development on those counties where its land ownership is more concentrated than the land ownership in the counties being offered for sale.

LAND

• 337,481 net acres / 510,847 gross acres
• Limited to the Cincinnati, Utica, Pt. Pleasant and Trenton intervals
• 270,484 net acres HBP by shallower zones (Queenston & Clinton) or held by storage

TWO OPERATED WELLS

• One Utica stratigraphic test; drilled in 2012; set temporary plug
• One Utica exploratory well; drilled in 2012; frac scheduled in July

FIVE NON-OPERATED WELLS

• Drilled between 1995 and 2005
• Vertical completions in naturally-fractured Utica intervals
• Minimal production volumes(3)

(1) Steubenville (OH) The Herald-Star (Jun 4, 2012) – Utica shale worth $13K-$17K per acre

(2) Reuters (Jun 4, 2012) – Chesapeake looks to sell some Ohio acreage-adviser

(3) Meagher Energy Advisors (accessed Jun 5, 2012) – Chesapeake Utica-Point Pleasant Trend Acreage