Latest News, WV Press Videos

Chesapeake Energy selling W.Va. shale assets

WHEELING, W.Va. — After acquiring 413,000 acres for Marcellus and Utica shale drilling in northern West Virginia over the past few years, Chesapeake Energy officials said Thursday they will sell their 1,500 wells and untapped assets for nearly $5.4 billion.

Those now under contract to receive royalties or lease payments from Oklahoma City-based Chesapeake, including numerous governmental agencies in the Northern Panhandle, should see their agreements transferred to Houston, Texas-based Southwestern Energy Co. before the end of 2014.

“I am very proud of the efforts that our Southern Marcellus team and all of our employees have put into building and developing our assets and creating value for our company. We look forward to deploying the proceeds from this significant transaction in ways that will continue to drive even greater shareholder value,” Chesapeake CEO Doug Lawler said.

“Earlier this year, we committed to unlocking the significant value inherent in this asset, recognizing the disconnect of its perceived value within our portfolio,” he added.

Chesapeake is the only active horizontal shale driller and fracker in Ohio, Brooke and Hancock counties, while the company maintains assets and operations in Marshall, Wetzel, Tyler, Pleasants, Monongalia, Marion, Doddridge, Ritchie, Harrison, Lewis, Upshur, Randolph, Barbour, Taylor and Preston counties. All of these acres, as well as those the company owns in Washington County, Pa., are part of the sale expected to close by the end of the year.

Average daily production from the properties Chesapeake is selling is 56,000 barrels of oil equivalent. This metric is the amount of energy that a barrel of oil would yield, even if the substance is not chemically considered to be oil. Total proved reserves in the zone, according to Chesapeake, are 221 million barrels of oil equivalent.

“Southwestern already has leading positions in two world class projects in our Fayetteville Shale and northeastern Pennsylvania Marcellus assets – and both will continue delivering highly economic production and reserve growth for many years. With this acquisition, we will have secured a complementary third premier acreage position,” Steve Mueller, president and CEO of Southwestern, said. “The early drilling in both the liquids-rich Marcellus and emerging Utica plays has confirmed the resource potential and the economic strength of a long-term development program.”

According to the agreement, Southwestern will operate up to six drilling rigs throughout the acquisition area starting early next year, with plans to increase this to 11 active rigs by 2017. Company officials believe they can drill for “a minimum of 20 years” at this pace.

“Our patience and disciplined approach to investing every dollar we spend has led to this outstanding opportunity,” Mueller added. “We remain committed to providing long-term value to our shareholders and believe that part of that value is maintaining our investment grade profile.”

Chesapeake began drilling in Wetzel County in 2007 before gradually moving north. The company made numerous acquisitions along the way, including some lease agreements that mineral owners signed years earlier for payments of $5 per acre and 12.5 percent of production royalties.

Abstractors and landmen later made their way to Ohio County, ultimately to be followed by drillers, frackers and pipeliners. In late 2009, Wheeling City Council voted to allow Chesapeake to drill under Oglebay and Wheeling parks. Because of this agreement, the Wheeling Park Commission is one of numerous governmental entities now receiving royalties from Chesapeake.

Aubrey McClendon – who has since started a new company, American Energy Partners, which has lease agreements in Ohio – founded Chesapeake in 1989. He resigned from Chesapeake last year amid shareholder questions about loans and personal interests he took in wells drilled in northern West Virginia.

Despite selling its Mountain State holdings, Chesapeake will maintain operations across eastern Ohio.

To read more from The Intelligencer/Wheeling News-Register, subscribe here. 

Comments are closed.

Subscribe to Our Newsletter

Subscribe to Our Newsletter

And get our latest content in your inbox

Invalid email address