After getting dreary bids for its Utica businesses, Chesapeake Energy Corporation (NYSE:CHK) may now be considering Powder River Basin position as a JV candidate. If the company opts for the same, it will be termed as a good measure for several reasons. In fact, the news of a Powder River Basin agreement could send CHK shares flying as short positions tries to find the exit.
Located in Montana and Wyoming, the Powder River Basin is recognized for its large coal deposits that assisted power America in the 20th Century. Considering the 21st Century, the Powder River basin will increasingly become famous for its vast oil reserves. Virtually all of the oil and gas drilling operations in the basin occurs in Wyoming, the region where Chesapeake Energy has created its 365,000 net acre position.
After the announcement that Chesapeake Energy failed to acquire an attractive bid for its Utica assets, there is a probability that management may consider PRB as a JV candidate. There is a reason why potential suitors would look for getting into bed with this beleaguered oil and gas producer.
Management has regularly hyped up Chesapeake’s two billion BOE net-recoverable resource prospect in the play, resulting from the Powder River Basin’s stacked payout. The list includes the Parkman, Niobrara, Turner and Sussex formations, with the Sussex being company’s main focus.
It should be noted that Devon Energy Corporation (NYSE:DVN) has successfully tapped into the Parkman play in Campbell County, located above Converse County where Chesapeake’s focus is. The company plans to drill one exploratory well in the Teapot as well as Parkman formations during 3Q and 4Q of this fiscal, respectively. If the results are robust, Chesapeake may expand its focus from Sussex at this point. The assets targeting the region yield a high crude mix.