Chesapeake Energy says natural gas prices have fallen so much that it has lowered estimates on how much it could economically get out of the ground.
Well Chesapeake started the second quarter with 18.8 trillion cubic feet of reserves.
Most of the cuts come from the removal of proved, undeveloped reserves in the companys Barnett and Haynesville Shale plays, Chesapeake says.
These are two of the biggest “dry” gas fields, meaning that there’s very little in the way of higher value liquids like propane or crude oil that gets produced along with the gas.
This is not to mention the recent high level changes that come as current Chief Executive Officer and chairman Aubrey McClendon did not fully disclose loans from corporate lenders.
Our Senior Correspondent, Karim Rahemtulla, is issuing a new recommendation that allows investors to cash in even if natural gas prices drop.
Now we’m still trying to figure out the 31 page report that Chesapeake released after the bell today, and as we read it the company has taken a charge to income of only $241 million for these writedowns.
That’s just $52 million per trillion cubic feet, or just 5 cents per thousand cubic feet (mcf).
Alas there wasn’t a new one released this afternoon, so we’ll have to wait for the 10 k to see just how many billions in asset value was obliterated with these reserves.
Chesapeake’s current drilling campaign has been finding and completing oil and gas at a cost of $1.14 per mcf (thousand cubic feet).
That equates to $1.14 billion in drilling costs to find 1 trillion cubic feet of gas.
Chesapeake Energy Corporation (CHK) has one of the best asset bases in the industry with high potential projects in the Barnett Shale, Marcellus Shale and the Eagle Ford Shale.
Temeka Berry is a business journalist based in Shanghai, China. Temeka has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Temeka spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.