Chesapeake Energy Corporation has announced that it expects year-end 2006 proved reserves to be approximately 9.0 trillion cubic feet of natural gas equivalent (tcfe), representing a 20% increase over the 7.5 tcfe of proved reserves reported at year-end 2005. In total, Chesapeake replaced 348% of its production in 2006, including 237% from drilling and 111% from acquisitions.
Chesapeake expects that its 2006 drillbit exploration and development costs will be approximately $2.00 per thousand cubic feet of natural gas equivalent (mcfe) while reserve replacement costs through acquisitions of proved reserves will be approximately $1.85 per mcfe. These estimates exclude costs for purchasing undeveloped leasehold, acquiring unproved properties and costs relating primarily to tax basis step-up and asset retirement obligations, as well as downward revisions of proved reserves from lower oil and natural gas prices. By comparison, 2005 drillbit exploration and development costs were $1.77 per mcfe and proved reserve acquisition costs were $1.74 per mcfe. Final proved reserve estimates and costs will be provided in the company's release of financial and operational results on February 22, 2007.
Chesapeake's production for the 2006 fourth quarter was 152.1 bcfe, an increase of 21.7 bcfe, or 17%, over the 130.4 bcfe produced in the 2005 fourth quarter and an increase of 5.2 bcfe, or 4%, over the 146.9 bcfe produced in the 2006 third quarter. The 2006 fourth quarter was Chesapeake's 22nd consecutive quarter of sequential U.S. production growth and 2006 represented Chesapeake's 17th consecutive year of production growth. Over the past 22 quarters, the company's U.S. production has increased 322%, for an average compound quarterly growth rate of 6.8% and an average compound annual growth rate of 29.7%. As previously announced, Chesapeake elected to temporarily curtail approximately 100 million cubic feet per day of net natural gas production during a portion of October 2006 in response to temporarily depressed natural gas prices. The company's production for the full-year 2006 was 578.4 bcfe, an increase of 109.8 bcfe, or 23%, over the 468.6 bcfe produced in 2005.
Aubrey K. McClendon, Chesapeake's Chief Executive Officer commented, "The company achieved strong operational results in 2006 and we are very pleased to report record proved reserves and production for the year. This impressive growth was generated at attractive costs that we believe are among the best in our large-cap peer group. In addition, weather-related volatility during the past few months has provided the opportunity to lock-in substantial future hedging gains and to subsequently reestablish equally attractive hedges.
"Additionally, our efforts to accelerate the conversion of Chesapeake's substantial undeveloped natural gas resource base into proved producing reserves continue to make progress as our operated rig count has now reached 132 rigs, which compares to 76 operated rigs at the beginning of 2006 and a full-year 2006 average of 98 rigs. We look forward to providing additional details on the company's financial and operational performance later this month."
