Chesapeake Energy Corporation has agreed to acquire approximately 8,600 net undeveloped leasehold acres in the heart of the Barnett Shale play in Tarrant and Johnson Counties, Texas, from Paloma Barnett, LLC. In addition, Chesapeake announced that it has entered into a Land Services Agreement (LSA) whereby Paloma has agreed to work on an exclusive basis in certain areas of Tarrant County, Texas to acquire leases on Chesapeake's behalf. This arrangement will complement similar LSAs Chesapeake has in place with Dale Property Services, LLC, Four Sevens Oil Co., Ltd. and Western Production Company covering different portions of Tarrant County. Chesapeake now has approximately 255,000 net acres of leasehold in the Barnett Shale play, including 215,000 net acres in the Core and Tier 1 area of Tarrant, Johnson and western Dallas counties, and the company's drilling inventory in the play has expanded to over 2,800 net locations.
Including these LSAs and its own landmen and lease brokers, Chesapeake now has more than 1,000 landmen and lease brokers dedicated to acquiring additional undeveloped leasehold in Tarrant, Johnson and western Dallas counties, the industry's largest commitment to acquiring new Barnett leasehold in the most prospective area of the play. Chesapeake believes its leasehold acquisition capabilities in the Barnett should enable it to continue acquiring approximately 40,000 net leasehold acres per year in what are the most prolific counties in the Barnett Shale play. This anticipated yearly addition to the company's leasehold inventory should provide an additional 500-600 drilling locations per year, largely offsetting the number of wells Chesapeake plans to drill in the Barnett during the next few years.
Chesapeake is currently using 38-40 operated rigs to further develop its 255,000 net acres of leasehold in the Barnett Shale play. At this pace of drilling, Chesapeake expects to be completing, on average, a new Barnett Shale well approximately every 15 hours through at least 2010. The company's gross daily production has recently exceeded 600 million cubic feet of natural gas equivalent (mmcfe) and its net production is approximately 400 mmcfe per day. Chesapeake believes it is now the second-largest producer and most active driller in the Barnett Shale play.
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are excited to announce our new leasehold acquisition and LSA with Paloma and its owners. With our own landmen and lease brokers teamed up with the Paloma, Western, Dale and Four Sevens leasing teams, we will be able to continue acquiring a steady stream of valuable leasehold in Tarrant, Johnson and western Dallas counties that will provide Chesapeake with substantial growth opportunities for years to come.
"In addition, we are pleased to announce that our 2007 gross production exit rate from the Barnett Shale was 600 mmcfe per day (400 mmcfe per day net). This compares very favorably to our 2006 gross production exit rate of 250 mmcfe per day and we now will focus on achieving our 2008 gross production exit rate target of 900 - 1,000 mmcfe per day."
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