Exhibit
99.1
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N
e w s R e l e a s e
Chesapeake
Energy Corporation
P.
O. Box 18496
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FOR
IMMEDIATE RELEASE
MARCH
24 ,
2008
CONTACTS:
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JEFFREY
L. MOBLEY, CFA
SENIOR
VICE PRESIDENT –
INVESTOR
RELATIONS AND RESEARCH
(405)
767-4763
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MARC
ROWLAND
EXECUTIVE
VICE PRESIDENT
AND
CHIEF FINANCIAL OFFICER
(405)
879-9232
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CHESAPEAKE
ANNOUNCES HAYNESVILLE SHALE DISCOVERY AND SEVEN OTHER NEW UNCONVENTIONAL
DISCOVERIES AND PROJECTS; INCREASES
CAPITAL EXPENDITURES TO ACCELERATE
DEVELOPMENT
OKLAHOMA
CITY, OKLAHOMA, MARCH 24, 2008 – Chesapeake Energy Corporation (NYSE:CHK) today
announced a new natural gas discovery in the Haynesville Shale in
Louisiana. In addition, the company announced two other new
unconventional natural gas discoveries and five new unconventional oil
projects. The company believes these discoveries and projects are
significant and has decided to increase its capital expenditure budget for
2008
and 2009 in order to increase drilling and leasing activity on these new
plays
as well as its three most important existing unconventional shale plays:
the
Barnett Shale, the Fayetteville Shale and the Marcellus and Lower Huron Shales
in Appalachia.
Chesapeake
Provides Information on the Haynesville Shale
Discovery
and
Seven Other New Discoveries and
Projects
As
a
result of recent drilling results, Chesapeake is announcing eight new
unconventional natural gas discoveries and unconventional oil projects described
below.
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·
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Haynesville
Shale: Based
on its geoscientific, petrophysical and engineering research during
the
past two years and the results of three horizontal and four vertical
wells
it has drilled, Chesapeake believes the Haynesville Shale play
could
potentially have a larger impact on the company than any other
play in
which it has participated to date. Chesapeake is currently
utilizing four rigs to drill Haynesville Shale wells and plans
to increase
its drilling activity level to approximately 10 rigs by year-end
2008 and
potentially more in 2009. The company currently owns or has
commitments for more than 200,000 net acres of leasehold in the
Haynesville Shale and has a leasehold acquisition effort underway
with the
goal of owning up to 500,000 net acres in the
play.
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Colony
Granite Wash (Anadarko Basin of western
Oklahoma): Chesapeake is also announcing the discovery
of the Colony Granite Wash play in Washita and Custer Counties,
Oklahoma. Developed internally two years ago, the Colony
Granite Wash play is now producing 40 million cubic feet of natural
gas
equivalent (mmcfe) per day net to the company from 12 net horizontal
wells. Chesapeake is currently utilizing four rigs to further
develop its leasehold of approximately 60,000 net acres in the
Colony
Granite Wash play that the company believes will accommodate the
drilling
of approximately 250 additional net horizontal wells over
time.
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Mountain
Front Granite Wash (Anadarko Basin of southwestern Oklahoma and
Texas
Panhandle): During the past few months, Chesapeake has
drilled three horizontal Granite Wash wells along the 150 mile
Mountain
Front area of the Anadarko Basin. The company believes its
current leasehold of approximately 75,000 net acres will accommodate
the
drilling of approximately 400 additional net horizontal wells over
time.
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Five
New Unconventional Oil Projects: Chesapeake is also
announcing today that it has identified five new unconventional
oil
projects, four of which have been developed on a proprietary
basis. The projects range in size from approximately 100,000 to
1,000,000 acres and are located in four different states in the
U.S. Chesapeake has commenced oil production in two of the
projects and initial drilling in the other projects is scheduled
during
the next 12
months.
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Chesapeake
Increases Drilling and Leasehold Acquisition
Activities
in
the Fort Worth Barnett Shale, Fayetteville
Shale,
Marcellus
Shale and Lower Huron Shale Plays
In
addition to the increased drilling and leasing activity on the new discoveries
and projects described above, Chesapeake plans to increase drilling and leasing
activities in several of its existing shale plays discussed
below.
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Fort
Worth Barnett Shale (Greater Fort Worth
Area): Chesapeake is continuing its drilling and leasing
program in the Barnett Shale, particularly in the Core and Tier
1 sweet
spot of Tarrant, Johnson and western Dallas counties. The
company’s net natural gas production in the Barnett Shale is now
approximately 450 mmcfe per day. Chesapeake plans to increase
its Barnett Shale drilling activity by five rigs, from 40 to 45
rigs by
year-end
2008.
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Fayetteville
Shale (Arkansas): In the Fayetteville Shale,
Chesapeake’s net natural gas production is now approximately 130 mmcfe per
day. The company plans to increase its Fayetteville Shale
drilling activity from 12 rigs currently to approximately 25 rigs
by early
2009 in response to the company’s recent 10% increase in expected
estimated ultimate per well recoveries for horizontal Fayetteville
Shale
wells.
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Marcellus
and Lower Huron Shales (Kentucky, West Virginia, Pennsylvania and
New
York): Chesapeake owns a leasehold position of 1.6
million net acres in the Marcellus and Lower Huron Shale
plays. The company has drilled 26 vertical and horizontal
Marcellus and Lower Huron Shale wells to date and plans to drill
approximately 165 vertical and horizontal Marcellus and Lower Huron
Shale
wells in 2008 and
2009.
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Company
Raises Capital Spending Plans for Increased
Drilling
Activity
and Leasehold Expenditures
To
capitalize on the new discoveries, projects and existing plays described
above,
Chesapeake is increasing its capital expenditure plans for 2008 and
2009. In light of higher per well reserve recovery expectations and
decreasing per well costs in key shale plays, the company plans to increase
its
drilling activity levels in each of 2008 and 2009. Specifically,
Chesapeake plans to increase its current drilling activity levels in the
Fort
Worth Barnett Shale, Fayetteville Shale and Haynesville Shale plays by 24
operated rigs by year-end 2008.
As
a
result of the Haynesville Shale discovery and other new discoveries and
projects, the company also plans to increase its leasehold expenditures to
more
fully capture the value of the plays and projects recently identified by
Chesapeake. Chesapeake currently plans to spend an additional $275
million and $675 million for drilling and leasehold in 2008 and 2009,
respectively, as compared to its previously announced spending
plans.
Chesapeake
Raises 2008 and 2009 Production Forecasts
and
Increases
Natural Gas Hedging Positions
Due
to
higher recovery expectations in various plays and increased drilling activity
levels, the company has raised its 2008 and 2009 production forecasts by
30 and
100 mmcfe per day, respectively. Accordingly, Chesapeake now expects
its average daily production rate to increase in 2008 by approximately 21%
over
its 2007 average rate to 2,370 mmcfe per day and in 2009 by approximately
16% to
2,740 mmcfe per day. These are increases of 5% and 33%, respectively,
over 2008 and 2009 production growth levels of 20% and 12% projected by the
company last month.
In
response to the strength of natural gas prices experienced during early March,
the company added to its 2008 and 2009 natural gas hedging position and began
to
hedge a portion of its expected production in
2010.
Chesapeake
currently has hedged, using swaps, approximately 71%, 40% and 12% of its
expected 2008, 2009 and 2010 natural gas production at average NYMEX prices
of
$8.77, $9.13 and $9.34 per mcf, respectively. Additionally, the
company has hedged, using collars, approximately 6% of its expected 2008
and
2009 natural gas production at an average NYMEX floor price of $7.88 per
mcf and
an average NYMEX ceiling price of $9.64 per mcf in 2008 and an average NYMEX
floor price of $8.22 per mcf and an average NYMEX ceiling price of $10.70
per
mcf in 2009. Depending on changes in oil and natural gas futures
markets and management’s view of underlying oil and natural gas supply and
demand trends, Chesapeake may either increase or decrease its hedging positions
at any time in the future without
notice.
Company
Revises Capital Funding Plans Due to New
Discoveries
and
Increased Capital Expenditure Budgets
Chesapeake
believes the combination of developing the new discoveries and projects
announced today, increasing drilling activity levels to accelerate the
development of existing plays, and the higher cost of acquiring leasehold
in
some of the company's most important plays creates the need for an increase
in
the company's capital expenditures.
The
company had planned to fund its 2008 and 2009 capital expenditures through
cash
flow from operations, borrowings under its revolving credit facility, and
from
previously announced producing property monetizations and the sale of a minority
interest in a private partnership for the company’s midstream
assets. These initiatives remain on track for completion in the
second quarter of 2008, although it is possible that current uncertainty
in the
financial markets could impact this timing. Considering that
uncertainty and the increasing number of upside growth opportunities available,
the company now expects to fund some or all of these additional expenditures
through the public capital markets. Although a departure from its
previously announced plans, Chesapeake believes that the potential incremental
financial returns available from its increased capital spending will far
exceed
the expected capital costs.
Management
Comments
Aubrey
K.
McClendon, Chesapeake’s Chief Executive Officer, commented “We are very excited
to announce our Haynesville Shale discovery and our seven other new
unconventional gas discoveries and oil projects. We are proud of our
collection of high-quality, growth-oriented onshore U.S. assets and as
competitive conditions allow, we will provide investors with more information
about our existing, emerging and new
plays.
“We
believe we must invest the necessary capital to more fully capture the upside
of
our new opportunities. We remain focused on per-share value creation
and we believe our shareholders will benefit from our increased investments
in
these new discoveries and projects and in our most important existing
plays.”
Conference
Call Information
A
conference call to discuss this release has been scheduled for Tuesday, March
25, 2008 at 9:00 a.m. EDT. The telephone number to access the
conference call is 913-981-5557
or toll-free 888-677-8775.
The passcode for the call is 2609304. We
encourage those who would like to participate in the call to dial the access
number between 8:50 and 8:55 a.m. EDT. For those unable to
participate in the conference call, a replay will be available for audio
playback from noon EDT on March 25, 2008, and will run through midnight EDT
on
Tuesday, April 8, 2008. The number to access the conference call replay is
719-457-0820
or toll-free 888-203-1112.
The passcode for the replay is 2609304. The
conference call will also be webcast live on the Internet and can be accessed
by
going to Chesapeake’s website at
www.chk.com
and selecting the “News & Events” section. The webcast of
the conference call will be available on our website for one
year.
This
press release includes “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements give our current expectations
or forecasts of future events. They include estimates of oil and natural
gas
reserves, expected oil and natural gas production and future expenses, planned
capital expenditures for drilling, leasehold acquisitions and seismic data,
and
statements concerning anticipated cash flow and liquidity, business strategy
and
other plans and objectives for future operations. We caution you not to place
undue reliance on our forward-looking statements, which speak only as of
the
date of this press release, and we undertake no obligation to update this
information.
Factors
that could cause actual results to differ materially from expected results
are
described in “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the
year ended December 31, 2007, filed with the U.S. Securities and Exchange
Commission on February 29, 2008. These risk factors include the
volatility of oil and natural gas prices; the limitations our level of
indebtedness may have on our financial flexibility; our ability to compete
effectively against strong independent oil and natural gas companies and
majors;
the availability of capital on an economic basis to fund reserve replacement
costs; our ability to replace reserves and sustain production; uncertainties
inherent in estimating quantities of oil and natural gas reserves and projecting
future rates of production and the amount and timing of development
expenditures; uncertainties in evaluating oil and natural gas reserves of
acquired properties and associated potential liabilities; unsuccessful
exploration and development drilling; declines in the values of our oil and
natural gas properties resulting in ceiling test write-downs; lower prices
realized on oil and natural gas sales and collateral required to secure hedging
liabilities resulting from our commodity price risk management activities;
the
negative impact lower oil and natural gas prices could have on our ability
to
borrow; drilling and operating risks, including potential environmental
liabilities; production interruptions that could adversely affect our cash
flow;
and pending or future litigation.
Our
production forecasts are dependent upon many assumptions, including estimates
of
production decline rates from existing wells and the outcome of future drilling
activity. Although we believe the expectations and forecasts
reflected in these and other forward-looking statements are reasonable, we
can
give no assurance they will prove to have been correct. They can be affected
by
inaccurate assumptions or by known or unknown risks and
uncertainties.
The
SEC has generally permitted oil and natural gas companies, in filings made
with
the SEC, to disclose only proved reserves that a company has demonstrated
by
actual production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. We
describe volumes of reserves potentially recoverable through additional drilling
or recovery techniques that the SEC's guidelines may prohibit us from including
in filings with the SEC. These estimates are by their nature more
speculative than estimates of proved reserves and accordingly are subject
to
substantially greater risk of actually being realized by the company. While
we
believe our calculations of unproved drillsites and estimation of unproved
reserves have been appropriately risked and are reasonable, such calculations
and estimates have not been reviewed by third-party engineers or
appraisers.
Chesapeake
Energy Corporation is the largest independent and third-largest overall producer
of natural gas in the U.S. Headquartered in Oklahoma City, the
company's operations are focused on exploratory and developmental drilling
and
corporate and property acquisitions in the Mid-Continent, Fort Worth Barnett
Shale, Fayetteville Shale, Haynesville Shale, Permian Basin, Delaware Basin,
South Texas, Texas Gulf Coast, Ark-La-Tex and Appalachian Basin regions of
the
United States. The company’s Internet address is www.chk.com.
