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Chesapeake Bags Another Big One

Once again, the old adage about the rich getting richer holds true. On Monday, Chesapeake Energy (NYSE: CHK  ) broke the news that not only will it speed up the pace of drilling on its successful Barnett Shale and Fayetteville Shale gas plays, but it's also made a new gas discovery in Louisiana -- the Haynesville Shale -- that could outstrip the other two.

In fact, in a Tuesday conference call with analysts, company CEO Aubrey McClendon called Monday's press release "the most important operational announcement in Chesapeake's 19-year history." Chesapeake, a Motley Fool Inside Value selection, currently has four rigs working on the play, and it expects that number to increase to 10 by year's end.

Casting a wide net in discussing the discovery, McClendon said that the play could yield between 7.5 trillion and 20 trillion cubic feet equivalent of potential gas reserves. Chesapeake currently controls more than 200,000 net acres in the Haynesville, a figure it aims to increase to 500,000 acres.

But it doesn't end there. The company also has announced the discovery of a pair of additional plays, the Colony Granite Wash and the Mountain Front Granite Wash, both in the Anadarko Basin. Chesapeake ultimately expects to drill a total of about 650 wells in the two plays. Further, McClendon announced the identification of five unconventional oil projects that could yield more than a billion net barrels.

Activity in the new plays, along with plans for increased drilling in the Barnett and Fayetteville shales, has caused the company to increase its capital budget by about $950 million over the next two years. On that basis, and despite admittedly having said the company likely wouldn't access the capital markets, McClendon now expects to raise more capital in those markets. The discoveries and expenditure increases have also resulted in increases to the forecast for production growth, between 20% and 21% for 2008 and 12% to 16% for 2009.  

So an already successful company continues to add more arrows to its quiver. As McClendon pointed out to analysts, if the company's targeted production additions are realized in 2008 and 2009, it'll have added in that two-year period a gas business equivalent in size to those of Apache (NYSE: APA  ) , El Paso (NYSE: EP  ) , or Occidental Petroleum (NYSE: OXY  ) .

Beyond that, and from the perspective of its stockholders, Chesapeake's shares have risen nearly 50% in the past year. My belief is that, if you've missed that move, it's likely there will still be more opportunities ahead.

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