October 26, 2011
Discovery drives society. Whatever we humans have achieved is the result of one discovery after other. The same applies to companies. They have to innovate and discover new sources of revenue to survive the cut-throat competition. Second-largest producer of natural gas Chesapeake (NYSE: CHK ) seems to have learned that art well.
Chesapeake reported positive results from its initial horizontal oil drilling results in both the dry gas and wet gas phases of the Utica Shale region. In addition, the company also increased its operational efficiency and achieved new production records. Net production exceeded 3.45 billion cubic feet of natural gas equivalent (bcfe) per day. The company also expects to increase its net liquid production by 50% by the end of 2012. Chesapeake holds a lease of 1.25 million acres in the Utica Shale area, mainly focusing on the wet gas phase.
Now let's develop it
The Ohio Geological Survey predicts that as much as 8.2 billion barrels of oil equivalent (boe) may be present at Ohio's Utica Shale area. The presence of natural gas is expected to be somewhere between 2 trillion cubic feet to a whopping 69 trillion cubic feet.
This huge presence of oil and gas has left big players like ExxonMobil, Hess (NYSE: HES ) , Devon (NYSE: DVN ) , Anadarko (NYSE: APC ) , and Petroleum Development (Nasdaq: PETD ) rushing to lease acreage in the area. Chesapeake leasehold covers approximately 40% of the potentially drillable acres, and given the production efficiency of the firm, Chesapeake is looking good to increase the top line. The success of its drilling activities in the area will not only increase its production but also guarantee additional field life. The firm is expected to increase its net liquid production by 50% by 2012.
Winning is about making the right discovery at the right place at the right time to take advantage of it. Chesapeake's presence in one of the richest oil and natural gas reserves has won half the battle for the company, and its production success solidifies its position. This stock looks promising.