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Wednesday, June 4, 2014

Another Analyst Looks at Questions Surrounding Chesapeake's Commitment to Utica Shale

Is Chesapeake taking a risky
roll of the dice in the Utica shale?
From The Motley Fool:
A change of heart in the Utica 
While the industry had extremely high hopes for the Utica initially, with former Chesapeake CEO and founder Aubrey McClendon calling it "the biggest thing to hit Ohio since the plow," the bullish sentiment has died down considerably after some operators' test wells suggested the play contains more dry gas and fewer liquids than initially believed. 
Companies including BP (NYSE: BP  ) , Hess (NYSE: HES  ) , and Halcon Resources(NYSE: HK  ) have added to the negative sentiment in recent months. BP said last month that it is scrapping plans to develop its nearly 100,000 acres of Utica shale leasehold following poor appraisal results from test wells. The British oil giant took a $521 million write-off associated with its Utica holdings for the first quarter of 2014. 
Hess, meanwhile, struck an agreement to sell 74,000 mainly dry gas Utica acres to American Energy Partners LP, which, ironically, is led by none other than Aubrey McClendon, for $924 million back in January. Hess has been busy divesting non-core assets in order to reduce its debt, repurchase its stock, and focus on its most promising opportunity in North Dakota's Bakken shale. 
Halcon Resources, which commands 139,000 acres in the Utica, also doesn't seem too optimistic about the Utica. The company recently said it would suspend its drilling program in the play this year, citing worse-than-expected test results in the northern portion of the Utica and more attractive opportunities in North Dakota's Bakken shale and Texas' El Halcon basin.
But unlike BP, Hess, and other operators that have exited the Utica, Chesapeake enjoys numerous advantages in the play, including an industry-leading cost structure, extensive technical expertise, and improving infrastructure that should allow the company to significantly ramp up production and also generate much stronger returns.
Read the entire article by clicking right here.

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