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Chesapeake’s 2004 acquisitions tally over $2 billion; buys BRG
Ray Tyson
Fast-growing Chesapeake Energy, which piled up more than $2 billion worth of property acquisitions during 2004, has had to change its annual reserve and production estimates about as often as a chameleon changes its colors.
In fact, Chesapeake’s thirst for properties has transformed the exploration and production company into the sixth largest independent producer of natural gas in the United States.
For good measure, the Oklahoma-based company ended the year with an announced $325-million cash acquisition of BRG Petroleum, founded and chaired by James Burkhart, a member of Texas A&M’s famed “Junction Boys” football team coached by legendary college coach Paul “Bear” Bryant in the 1950s.
“BRG will add to our very strong presence in the Mid-continent, especially in the Sahara region of Northwest Oklahoma,” Aubrey McClendon, Chesapeake’s chief executive officer, said Dec. 27.
Since establishing its Sahara position via the acquisitions of DLB Oil & Gas and Hugoton Energy in 1998, Chesapeake now controls more than 500,000 acres in the region. To date, the company has drilled more than 600 wells in the area and said it expects to drill another 2,500 wells during the next five to 10 years.
“We believe Sahara is one of the great gas resource plays in the United States and … one of the least recognized by industry,” McClendon said. Company had other recent acquisitions The BRG transaction came on the heels of several other Chesapeake deals announced or closed in 2004. They include: $277 million for Hallwood Energy properties in the prolific Barnett Shale field of East Texas; $590 million for South Texas and Mid-continent properties from three private companies; $425 million for Greystone Petroleum that included Greystone’s position in the giant Sligo field in Louisiana; and $420 million for Mid-continent, Permian Basin, South Texas and onshore Gulf Cost properties from Concho Resources.
From the $325-million BRG acquisition, Chesapeake expects to gain an estimated 223 billion cubic feet of proved natural gas equivalent reserves and 277 billion cubic feet of probable and possible reserves, plus about 30 million cubic feet of daily gas equivalent production from 477 existing wells.
BRG properties will increase Chesapeake’s overall proved oil and natural gas reserves to an estimated 4.8 trillion cubic feet of gas equivalent, Chesapeake said. The acquisition also is expected to boost Chesapeake’s daily production forecast by 2.8 percent for 2005 and 4.3 percent for 2006.
Chesapeake said it plans to invest an additional $492 million to fully develop all of BRG’s reserves, which consist largely of natural gas. Through the use of two drilling rigs in 2005 and four rigs in 2006, the company said it expects to push production to 40 million cubic feet per day in 2005 and to 70 million cubic feet per day in 2006.
In addition to the Sahara region of Northwest Oklahoma, BRG drilling locations are concentrated in the East Texas Cotton Valley gas play in Nacogdoches County, Texas. Overall, Chesapeake said it has identified 213 proved undeveloped and 420 probable and possible drilling locations on BRG leasehold.
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