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Chesapeake Energy buys more acreage in Haynesville

Chesapeake Energy Corp. has said it will buy about 13,000 acres of mineral rights in a natural gas formation.
/ Source: The Associated Press

Chesapeake Energy Corp. has said it will buy about 13,000 acres of mineral rights in a natural gas formation.

The $263 million purchase from Memphis, Tenn.-based International Paper Co. is expected to close in late August. John Faraci, International Paper's chairman and chief executive, said proceeds from the sale of the acreage will be used to pay down that company's debt.

Oklahoma City-based Chesapeake, which said Thursday it is now the largest producer of natural gas in the U.S., has made the Haynesville shale, a formation that lies in parts of east Texas and northwest Louisiana, one of its top priorities in recent months.

Chesapeake Chairman and CEO Aubrey McClendon said the company has "just scratched the surface of the potential" of the Haynesville shale.

McClendon said that by the end of this year, Chesapeake anticipates using 12 rigs to develop its 450,000 net acres of leasehold in the play. He said that, on average, the company should be able to complete a new Haynesville well every five days.

Company officials have said that they think the Haynesville shale will become known one day as the largest discovery of natural gas in the U.S.

On Thursday, Chesapeake said it swung to a large second quarter loss from a year ago because of losses on hedges.

After the payment of preferred dividends, Chesapeake reported a net loss available to common shareholders of $1.6 billion, or $3.17 per share, for the quarter ended June 30, compared with profit of $492 million, or $1.01 per share, a year ago.

Natural gas and oil sales nearly doubled to $2.2 billion in the quarter from $1.2 billion a year ago, but because of hedging losses of $3.4 billion, Chesapeake reported a revenue loss of $455 million compared with $2.1 billion a year ago.

The hedging loss occurred because of higher natural gas and oil prices as of June 30 compared with March 31.