Chesapeake Energy Corporation Announces New Haynesville and Dry Gas Utica Gathering Agreements with the Williams Companies
September 08 2015 - 7:00AM
Business Wire
Chesapeake Energy Corporation (NYSE:CHK) today announced it has
finalized new gas gathering agreements with the Williams Companies
(NYSE:WMB) in its Haynesville Shale operating area located in
northwest Louisiana and its dry gas Utica Shale operating area
located in eastern Ohio. Key attributes include:
- Significant improvement in per unit
gathering rates established in two major growth assets beginning in
2016, leading to enhanced volume growth
- Combination of gathering system
agreements allows Chesapeake to satisfy minimum volume commitment
(MVC) obligations in Haynesville Shale, increasing realized pricing
per mcf of gas
- Aligned strategic interests improve
drilling economics, operational efficiency and midstream asset
utilization
Doug Lawler, Chesapeake’s Chief Executive Officer, commented,
“Chesapeake’s operating efficiencies across the entire portfolio
over the last two years have resulted in lower costs, higher
production rates and higher recovery rates. Our improved
performance in the Haynesville is the primary reason that we were
able to negotiate new gathering rates. These agreements will result
in lower gathering rates and lower differentials, making these
assets even more competitive within our portfolio. In this capital
constrained environment, we will benefit from these higher-return
assets and expect to allocate incremental capital to these areas,
while enabling Williams to more fully utilize its gathering
systems. The commercial solution these new contracts provide will
only enhance what we have already achieved with our operating
performance. This is truly a win-win for both companies, and we
continue to work with Williams to further enhance the value of our
respective assets.”
Chesapeake will move to a fixed-fee agreement in the Haynesville
Shale beginning in January 2016. Gas gathering fees in the
Haynesville will be reduced on a unit basis, and the existing
minimum volume obligations are expected to be met with the
consolidation of two gathering systems and a projected increase in
Haynesville area volumes. Inclusive of previously expected MVC
shortfall payments, the company’s gas production is expected to see
improved gathering rates of approximately $0.20 per mcf in 2016 and
2017 and approximately $0.30 per mcf in 2018 and beyond. As part of
the transaction, and consistent with Chesapeake’s current operating
plans, the company committed to turn 140 equivalent wells online
before the end of 2017. This commitment is projected to result in
significant production growth in the Haynesville Shale asset over
the next two years, thus also increasing Williams’ revenue from the
area.
Chesapeake will also move to a fixed-fee agreement in the dry
gas Utica Shale, beginning in January 2016, and is expected to see
an estimated gathering rate reduction of approximately $0.25 per
mmbtu. As part of the transaction, Chesapeake is dedicating an
additional 50,000 net acres to Williams and will be subject to a
new minimum volume commitment of 250 mmbtu per day beginning in
mid-2017. The company expects to meet this commitment with
approximately one rig per year.
Chesapeake Energy Corporation (NYSE:CHK) is the
second-largest producer of natural gas and the 11th largest
producer of oil and natural gas liquids in the U.S. Headquartered
in Oklahoma City, the company’s operations are focused on
discovering and developing its large and geographically diverse
resource base of unconventional oil and natural gas assets onshore
in the U.S. The company also owns substantial marketing and
compression businesses. Further information is available at
www.chk.com where Chesapeake routinely posts
announcements, updates, events, investor information, presentations
and news releases.
This news release includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are statements other than statements of historical fact.
They include statements that give our current expectations or
forecasts of future events, production, production growth and well
connection forecasts, estimates of operating costs, planned
development drilling and expected drilling cost reductions, capital
expenditures, expected efficiency gains and the effect on the
unrecognized value of our assets, anticipated assets sales and
proceeds to be received therefrom, projected cash flow and
liquidity, business strategy and other opportunities, plans and
objectives for future operations (including joint venture and
participation agreements), and the assumptions on which such
statements are based. Although we believe the expectations and
forecasts reflected in the forward-looking statements are
reasonable, we can give no assurance they will prove to have been
correct. They can be affected by inaccurate or changed assumptions
or by known or unknown risks and uncertainties.
Factors that could cause actual results to differ materially
from expected results include those described under “Risk Factors”
in Item 1A of our annual report on Form 10-K and any updates to
those factors set forth in Chesapeake’s quarterly report on Form
10-Q filed on August 5, 2015, or current reports on Form 8-K
(available at http://www.chk.com/investors/sec-filings). These risk
factors include the volatility of oil, natural gas and NGL prices;
write-downs of our oil and natural gas carrying values due to
declines in prices; the availability of operating cash flow and
other funds to finance reserve replacement costs; our ability to
replace reserves and sustain production; uncertainties inherent in
estimating quantities of oil, natural gas and NGL reserves and
projecting future rates of production and the amount and timing of
development expenditures; our ability to generate profits or
achieve targeted results in drilling and well operations; leasehold
terms expiring before production can be established; commodity
derivative activities resulting in lower prices realized on oil,
natural gas and NGL sales; the need to secure derivative
liabilities and the inability of counterparties to satisfy their
obligations; adverse developments or losses from pending or future
litigation and regulatory proceedings, including royalty claims;
the limitations our level of indebtedness may have on our financial
flexibility; charges incurred in response to market conditions and
in connection with actions to reduce financial leverage and
complexity; drilling and operating risks and resulting liabilities;
effects of environmental protection laws and regulation on our
business; legislative and regulatory initiatives further regulating
hydraulic fracturing; our need to secure adequate supplies of water
for our drilling operations and to dispose of or recycle the water
used; federal and state tax proposals affecting our industry;
potential OTC derivatives regulation limiting our ability to hedge
against commodity price fluctuations; impacts of potential
legislative and regulatory actions addressing climate change;
competition in the oil and gas exploration and production industry;
a deterioration in general economic, business or industry
conditions; negative public perceptions of our industry; limited
control over properties we do not operate; pipeline and gathering
system capacity constraints and transportation interruptions; cyber
attacks adversely impacting our operations; and interruption in
operations at our headquarters due to a catastrophic event.
In addition, disclosures concerning the estimated contribution
of derivative contracts to our future results of operations are
based upon market information as of a specific date. These market
prices are subject to significant volatility. Our production
forecasts are also dependent upon many assumptions, including
estimates of production decline rates from existing wells and the
outcome of future drilling activity. Expected asset sales may not
be completed in the time frame anticipated or at all. We caution
you not to place undue reliance on our forward-looking statements,
which speak only as of the date of this news release, and we
undertake no obligation to update any of the information provided
in this release or the accompanying Outlook, except as required by
applicable law.
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version on businesswire.com: http://www.businesswire.com/news/home/20150908005552/en/
Chesapeake Energy CorporationInvestor Contact:Brad Sylvester,
CFA, 405-935-8859ir@chk.comorMedia Contact:Gordon Pennoyer,
405-935-8878media@chk.com
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