In a key development, Kenneth Buell, surface owner for Chesapeake’s Buell 8H well, Harrison County, Ohio, files to join Jewett Sportsmen and Farmer’s Club, Inc. v. Chesapeake Exploration, LLC. The implications are potentially significant, though hard to predict given the fluid nature of both Chesapeake’s standing with stockholders and industry interest in the liquid-rich Utica Shale.
A few facts are undisputed, however. First, in discussing the Buell 8H during the Q1 2012 earnings call, CEO Aubrey McClendon said “it’s a very important well” and “our best shale well ever”. The Buell 8H was the first well drilled by Chesapeake in the Utica Shale of eastern Ohio – and the best to date, by far.
Second, Buell’s motion points out that Chesapeake does not own horizontal drilling rights under his land, according to the construction given to identical deed language in the underlying litigation.
In his accompanying Motion for Permanent Injunction, Buell asks that the Buell 8H be shut-in by court order. Again, this result is virtually guaranteed by the court’s decision to enter a permanent injunction in the underlying litigation.
Beyond embarrassment and possible damage to the now-famous well (including to Chesapeake’s ability to calculate the decline curve), the case risks exposing Total’s lack of ownership in the first well Chesapeake purportedly transferred under their 2011 Utica Shale Joint Venture. At $2.3 Billion, the deal valued Chesapeake’s Utica acreage at around $15,000 per acre. And no, I don’t believe that included a discount for lack of horizontal drilling rights…
Be sure to see the Motion for Permanent Injunction we’ve posted and check the site for ongoing updates.
-Biggest Fairy Tale
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