Chesapeake Energy Corporation has been preliminarily approved as the highest and best bidder by the Dallas/Fort Worth International Airport Board and the cities of Dallas and Fort Worth to lease 18,000 net acres of Barnett Shale leasehold for $181 million in cash and a 25% royalty. Final approval is anticipated from the city councils of both cities by August 16, 2006.
On the acreage that underlies the Dallas/Fort Worth International Airport (DFW), Chesapeake has identified approximately 250 potential drillsites that will be developed from approximately 20 well pad sites on DFW land. Including an estimated $750 million of capital needed to fully develop an estimated 470 billon cubic feet of unproved natural gas reserves, Chesapeake's all-in acquisition cost to develop the DFW leasehold will be an attractive $1.98 per thousand cubic feet of natural gas. Pursuant to the terms of the bid requirements, approximately 20% of the lease will be owned by various Minority and Women Businesses (M/WBE) that will participate with Chesapeake in the development of the lease.
The addition of the DFW leasehold will increase Chesapeake's total leasehold in the Fort Worth Barnett Shale to approximately 180,000 net acres, located primarily in Johnson, Tarrant and Dallas counties. The company has current net production from the Fort Worth Barnett Shale of 130 million cubic feet per day and believes it can drill an additional 2,450 net Barnett Shale wells to potentially develop an estimated 4.4 trillion cubic feet of proved and unproved natural gas reserves. To develop this significant inventory of value, Chesapeake plans to increase its current Fort Worth Barnett Shale drilling rig count from 15 to 30 by the first quarter of 2007. At that higher rig count, Chesapeake believes that it can drill at least 400 gross Barnett Shale wells per year.
Management Comments
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are excited to announce such a unique opportunity to develop this large, contiguous and valuable acreage position underlying one of the nation's busiest airports. We also look forward to building an even larger presence in the Dallas and Fort Worth communities, of which our participation in the Airport's M/WBE program will be an important part. This transaction with the DFW Airport helps ensure that the Barnett Shale will continue to be a key driver in Chesapeake's growth plans for years to come."
