Chesapeake’s Utica Shale position spans more than 1.25 million acres in Ohio and published well results indicate the company has stumbled upon an impressive shale formation. In the oil and wet gas portions of the play in Carroll and Harrison counties, the company reported initial production rates of 1,500 to over 3,000 barrels of oil equivalent per day. Even in the dry gas zone in Beaver County, the company reported an impressive rate of more than 6 mmcfd.

Chesapeake is quoted below as saying “the company’s leasehold covers approximately 40% of the potentially drillable acres in the core of the “. I’m interested to understand if they believe they own 40% of the core or if they believe 40% of their acreage is in the core. That’s the difference in having 500,000 acres in the core and 1.25 million. A lot of wells can be drilled on 750,000 acres.

The company has five rigs drilling and plans to ramp up to as many as 40 rigs by 2014. Targeted well costs are $5-6 million, but that also means current well costs are higher.

Chesapeake has drilled 12 horizontal wells in the discovery phase of its Utica Shale and has achieved strong initial production success in the wet gas and dry gas phases of the play from this initial drilling. The company is early in the process of evaluating the oil phase of the play…

• The Buell 10-11-5 8H in Harrison County, Ohio was drilled to a lateral length of 6,418 feet and achieved a peak rate of 9.5 million cubic feet (mmcf) per day of natural gas and 1,425 barrels (bbls) per day of natural gas liquids and oil (liquids), or 3,010 barrels of oil equivalent (boe) per day;
• The Mangun 22-15-5 8H in Carroll County, Ohio was drilled to a lateral length of 6,231 feet and achieved a peak rate of 3.1 mmcf per day of natural gas and 1,015 bbls per day of liquids, or 1,530 boe per day;
• The Neider 10-14-5 3H in Carroll County, Ohio was drilled to a lateral length of 4,152 feet and achieved a peak rate of 3.8 mmcf per day of natural gas and 980 bbls per day of liquids, or 1,615 boe per day; and
• The Thompson 3H in Beaver County, Pennsylvania was drilled to a lateral length of 4,322 feet and achieved a peak rate of 6.4 mmcf per day of dry natural gas.

Chesapeake has built a commanding presence with 1.25 million net acres of leasehold acquired to date, with our current primary leasing efforts focused in the wet gas phase. We estimate the company’s leasehold covers approximately 40% of the potentially drillable acres in the core. The company is targeting a development program with average drilling and completion costs of approximately $5.0 – $6.0 million per well. Chesapeake is currently drilling with five operated rigs in the Utica Shale  and plans to increase its operated rigs up to 10 rigs by year-end 2011, up to 20 rigs by year-end 2012 and up to 40 rigs by year-end 2014.