Chesapeake Conference Call July 2, 2008 9:00amChairman/CEO Aubrey McClendon (Summarized)•
Win-win partnerships between Chesapeake and PXP - Great news for Chesapeake shareholders• Haynesville 4th largest gas field in the world• Chesapeake has invested $2.5B in Haynesville• Play just underway, data suggest 250TCS• Barnett had 50TCS, which is only 20% of Haynesville –• Our country should realize how blessed we are as a nation, especially during this time of record high gas prices – can be very helpful in converting to hybrids• We are so confident because 3.5 M acres defined as core area• These wells are in a class of their own – calling them “triple X monsters” – likely to get better over time – 8th well, 2 days ago brought on the best so far: 4.5-8.5 BCSE- claimed that the reason for withholding info was to prevent other companies from receiving a blueprint to their technical practices- 4 corners work from all the companies that have outlined the shale from their drilling.- Haynesville Shale will move quickly.- PXP retains the ability to sell their interest in the HS- Do not forsee selling hshale--wanted to buy more- Chesapeake retains first right of refusal- Ches - 4,000 landmen in the HShale - 1,000 in Barnett, scouring the field.- Dollars per acre was set by Ches.....$30,000 per acre....paid that price because Ches is going to agressively work HShale to increase the rate of return, deploying PXP capital smartly was the goal.- Mix of Shale and Sands? Looking for 100% shale...looking for great black shale with the right porosity and organic composition. When you hear the flow rates their will be skepticism but it goes back to the high rates of pressure. The consistency and simplicity is the reason for the dynamic production.- Flow rates - what are the infrastructure restraints? On top of the game large structure that handles other plays so will be moving fast. We are east so we are closer to the markets...so better pricing. Do the math and HShale could do [better? He kinda trailed off here] because we are closer to the eastern markets.- Great opportunity for the US to retrofit gas stations and use natural gas instead of foriegn oil.- Potentially liberating event.- Here in the HShale we may have 10 years of production.- 60 rigs operating by 2010- Play could not be in a better spot.- Regulatory structure that is favorable- Great pipeline structure...past many bottlenecks will help this happen much more quickly. Do have to extend supply lines...this helps drive down costs.- Working through Twin Cities in Shreveport..has put togther an impressive organization..has a network set up..tough sledding to go door to door to buy leases.• PXP partner – deep LA roots helpful as they develop Haynesville in the decades to come – if you snooze, you lose and Ches is not snoozing - Haynesville will develop similarly to Barnett but also differently – it will be easier than Barnett in some ways
