Barnett Shale

Chesapeake moves 215 jobs out of West Virginia

Chesapeake Energy said Thursday that a reorganization of its Eastern Division headquarters in Charleston, W.V., would either eliminate or relocate to Oklahoma City 215 of 255 jobs there. Charleston will become a regional field office. The move is expected to be complete by June 30. The Charleston office is part of Chesapeake's Marcellus Shale operation in the Appalachians. The company said it will still have more than 400 employees in the state.

Julie Wilson, Chesapeake's top officer in the Barnett Shale, said the company plans to slightly expand local employment here as it completes additional wells in 2009.

Chairman Aubrey McClendon said the cuts "became inevitable when we decided last year not to build our $40 million regional headquarters office complex in Charleston" after the state Supreme Court refused to hear Chesapeake's appeal of a $405 million jury verdict. That award was based on a lawsuit that charged that gas producers, which Chesapeake later acquired, had cheated landowners out of royalties. McClendon said that while the court decision "was not the primary reason for the reorganization, it did play a significant role in our decision."

-- Jim Fuquay

Barnett Shale Rig Reports !

For the complete Barnett Shale junkie, here's an archive of the Star-Telegram's weekly Barnett Shale Rig Reports dating to when we started publishing them in mid-2007. We'll update this archive every week with the new Rig Report.

Click on the links below to see the full reports:

Rig Reports -- 2009

Rig Reports -- 2008

Rig Reports -- 2007

-- Scott Nishimura

Chesapeake should temporarily plug part of east Fort Worth well, examiners say

Chesapeake Energy should temporarily plug part of an East Fort Worth well that comes too close to unleased property, Texas Railroad Commission examiners say. Click here to read staff writer Jim Fuquay's story.

-- Scott Nishimura 

State reps. Charlie Geren, Marc Veasey, want to regulate landmen

Geren and Veasey jointly authored the bill. Click here to read the full story from staff writer Jim Fuquay at star-telegram.com.

-- Scott Nishimura 

Burnam pushes Barnett Shale reform

Democratic State Rep. Lon Burnam held a press conference this morning with local citizen activists to announce the filing of six bills aimed at reforming how natural gas drilling is conducted in Tarrant County.

A write up of the press conference is at our Politex blog.

The six bills were filed last night and are now online:

--HB 1533 requires the Texas Railroad Commission to notify certain elected officials upon receipt of gas drilling permit applications in Tarrant County

--HB 1534 requires natural gas production and pipeline companies to disclose property appraisal, damage estimate, and other relevant appraisals in condemnation procedures.

--HB 1535 lays out a new process for pipeline companies to apply for and receive a permit from the Texas Railroad Commission before condemning property for pipeline construction.

--HB 1536 repeals eminent domain authority for subsidiary pipeline companies in the construction of gathering and transmission lines in Tarrant County

--HB 1537creates a new series of rules including setback requirements for gathering and transmission lines in Tarrant County

-HB 1538 authorizes Tarrant County and municipalities in the county to regulate pipeline safety.

-Aman Batheja

Barnett Shale could peak in 2009, XTO says

XTO executives on Thursday voiced what seems to be a growing consensus that production in the Barnett Shale could peak this year or next if the rig count in the big North Texas gas field continues to decline. Barnett Shale production should continue to grow this year as wells drilled in late 2008 continue to come online, but might top out at about 5 billion cubic feet a day, XTO President Keith Hutton said during a conference call with investment analysts. “You would need to get back to 150 or 160 rigs” very quickly to offset existing wells' natural decline rate and resume growth in production, Hutton said. And since that doesn’t look likely, the field could peak in 2009, he said.

Active drilling rigs in the Barnett stood at 120 as of Feb. 13, down 44 percent from the peak of 214 in October, according to RigData. Producers have pared budgets sharply in response to continued low natural gas prices. Gene Powell, publisher of the Barnett Shale Newsletter, which closely tracks production statistics, said he estimates the field finished 2008 right at 5 billion cubic feet a day. Citing the decline in drilling and the rapid falloff in production from new wells, Powell said it’s possible the field has already peaked at about 5.1 billion cubic feet a day. Hutton told analysts that U.S. natural gas production, which grew strongly the past two years, could plateau by midyear and be down about 10 percent by the end of 2009 if prices and drilling activity remain low.

Hutton made his comments as part of the company's fourth-quarter earnings report. XTO Energy earned $351 million on record revenue of nearly $2 billion, as the Fort Worth-based producer largely avoided the big asset write-downs that have hit several of its peers. Still, profits were down 24 percent from the same period a year ago as prices fell, and the company’s 68 cents a share in earnings after extraordinary items fell short of Wall Street’s average estimate of 78 cents. As a result, XTO’s shares (ticker: XTO) slipped nearly 7 percent to close at $32.02 in active trading. For all of 2008, XTO earned a record $1.9 billion on revenue of nearly $7.7 billion.

-- Jim Fuquay

All big U.S. shale gas fields found, Chesapeake's McClendon says

Chesapeake Energy Chairman Aubrey McClendon said Wednesday that "we think the major shale plays have all been found. We don't believe we're going to see other shale plays like the big four in years to come," referring to the Barnett, Haynesville, Fayetteville and Marcellus shales that have led a resurgence in U.S. natural gas production. McClendon made his comments to financial analysts during the company's conference call to discuss fourth-quarter financial results. McClendon added little to the company's previous statement that it was in talks with several international energy companies to create a joint venture to develop its Barnett Shale properties.

"There's a high degree of international energy company interest in gas shales in the U.S," McClendon said, and he expects Chesapeake to offer an attractive way to get into the market. "We have multiple, ongoing coconversations. We are very excited about the possibilities of what might come out of these discussions," he said. He said he expects any deal reached to mirror earlier joint ventures in the other three shale plays, inwhich Chesapeake has given up a minority stake in its huge leaseholds in exchange for its partner contributing most of the capital to drill and develop the properties. He also said he doesn't expect Chesapeake's efforts to find a partner to be hurt even if other properties come on the market in distress sales forced by continued low gas prices.

-- Jim Fuquay

A half dozen bills and counting

State Sen Wendy Davis has filed her third Barnett Shale bill.

 The latest would require operators to use "green completions" to reduce the amount of air pollution -- mostly methane -- that is released before wells are hooked up to a pipeline. http://www.legis.state.tx.us/tlodocs/81R/billtext/html/SB00902I.htm 

Davis has also filed SB 752, which requires injection well operators who dispose of oil and gas waste to use deep formations.  SB 752 -  Bill Text

And SB 686, which requires the Texas Department to allow gas gathering lines in state highway rights-of-way. SB 686 - Bill Text

Meanwhile, State Rep. Lon Burnam said he plans to introduce three bills dealing with pipeline routes, pipeline safety and the use of eminent domain by pipeline companies.

Read the news release here. Barnett Shale Bills Press Conf Media Advisory

-- Mike Lee

Chesapeake in Barnett joint venture talks

Chesapeake Energy said Tuesday it is in talks with "several large international oil companies" about a joint venture in the Barnett Shale, where the Oklahoma City-based independent is one of the largest producers. Chesapeake has done similar deals in its other big U.S. shale gas fields, in which the company gives up a share of its holdings in exchange for its partner shouldering a large share of the future capital spending. The biggest such venture is a $3.4 billion agreement with StatoilHydro in Appalachia’s Marcellus Shale, and it also has agreements with BP in the Fayetteville Shale in Arkansas and Plains Exploration and Production Co. in the Haynesville Shale in Louisiana.

Chesapeake disclosed the talks as part of its latest earnings announcement, which it issued after the close of trading on U.S. stock markets Tuesday. The company said it lost $866 million in the fourth quarter after taking a $1.7 billion after-tax write-down, or impairment, on the value of its reserves and other assets to reflect lower natural gas prices as of Dec. 31. Not counting the write-down, Chesapeake said it earned $427 million in the quarter, or 73 cents a share, a penny short of Wall Street’s consensus estimate. The company’s shares fell 8 percent Tuesday as petroleum prices continued to weaken, and was down an additional 3 percent in after-hours trading.

-- Jim Fuquay

Chesapeake gets farm-out from partner Parallel Petroleum

Parallel Petroleum, a Midland-based producer with a 35 percent stake in about 34,400 acres in the east Fort Worth area with Chesapeake Energy, has struck a deal that calls for Chesapeake to pick up all Parallel's drilling and development commitments through 2016. Parallel is slashing its spending in 2009 and faced severe penalties if it failed to fund its required share of drilling on the leases, President Larry Oldham said Friday. The deal, called a farm-out, calls for Chesapeake to pay all costs of development each year and to keep all revenues until it gets back 150 percent of its costs. After that, Parallel will receive 17.5 percent of revenues and pay the same share of costs, the company said. See Saturday's Star-Telegram for a complete report.

-- Jim Fuquay