While everybody’s been over in the Fayetteville and Barnett running up acreage costs, Chesapeake’s been quietly testing rock and rolling up land in northern Louisiana on top of the Haynesville shale. And they think they’ve got a winner. The nation’s No. 3 gas driller believes this play is bigger than all its others. “The Haynesville shale has the chance to be the most significant play in the history of the company,” says CEO Aubrey McClendon. “This play could be worth 20 Tcfe in potential gas reserves.” Chesapeake would have kept the play close to the vest until they had leased up most of the top of Louisiana likely, but Petrohawk outed them in a recent analyst call. So they made a splash instead. Currently they have 200,000 net acres wrapped up across the play and want 500,000. Currently they are reporting a minimum of 7.5 Tcfe in anticipated reserves based on acreage presently held. To date they’ve drilled four vertical wells testing the play and another three horizontal, “and now we have a very significant play on our hands,” lauds McClendon. “We believe these three horizontal wells are much better than any three horizontal wells drilled in any play to date.” Must be gold in them thar shales. That’s some mighty big words from a mighty big gas man. In comparison, Chesapeake holds 260K net acres in the Barnett with 8 Tcfe proved and unproved, and 600K net acres in the Fayetteville with 10 Tcfe proved and unproved. “Haynesville could be bigger than either,” he says. “I think we know a big play when we see it.” Aubrey’s still tight on the specifics, not wanting to give out too much detail too soon, considering the land rush is now on. The CEO is quick to tout his beefed-up engineering team, an E&P R&D experiment created two years ago in which Chesapeake created a Reservoir Technology Center of 25 scientific technicians to evaluate new shale plays to create opportunity internally. Says McClendon, “We wanted to originate new shale plays, not just react to plays discovered by others. Competitors must wait on core evaluation results from commercial labs which can’t provide as timely or as accurate of information.” Seems it worked. He says multiple other drillers penetrated in this area and “one competitor even took core samples and failed to appreciate what we saw.” McClendon says the team also saved the company $100 million by not going into shale plays such as the Floyd shale in Alabama and the Pennsylvanian shale in the Palo Duro Basin of Texas. Seems they know a dud when they see it as well. And activity is brisk on Chesapeake’s Haynesville acreage. Four rigs are running now with 10 scheduled by year-end. But the Haynesville is not where the news ends for Chesapeake. Aubrey’s hot shot scientific team has ID’d two new plays in the Granite Wash across the Texas Panhandle and Oklahoma with 75,000 net acres leased and more to go. Collectively these acres represent another 10 Tcfe to the company and more than 20 Tcfe when the leasing is done. The company is digging into the Marcellus shale as well with 1.1 million net acres and another 500,000 net in the Lower Huron shale. After drilling 26 horizontal wells to date in these plays, Chesapeake is ready to “push the accelerator” with plans to drill 165 Marcellus and Lower Huron shale wells in 2008 and 2009. He expects better than 10 Tcfe. Not wanting to miss out on the huge returns brought on by oil commodity prices, the natural gas giant is getting oily with five new unconventional oil projects spread across four undisclosed states. The projects range from 100,000 to 1 million acres. And fearing losing high-dollar held-by-production acreage in its core Barnett and Fayetteville shale areas, Chesapeake is cranking up the drill rigs to punch more holes faster. The Barnett will add five rigs to 45 by year-end, and the Fayetteville will see 12 more rigs running, up to 25 by early next year. Altogether, for leasehold expenditures and drilling, Chesapeake will spend an extra $275 million and $675 million respectively in 2008 and 2009. So where does the cash come from? McClendon plans to access the capital markets to pay all this capex. He thinks it’s a great investment. With all this new drilling on new acreage, Chesapeake will add an additional 800 MMcfe/d in '08 and '09. That's the equivalent of building a gas business the size of Apache, Oxy or El Paso -- through the drillbit, he points out. With all this heretofore unknown gas coming to market, jokes McClendon, “I don’t think we’re going to need a lot of (imported) LNG down the road. We need to build liquification plants rather than regas plants.” Haynesville is rising, and Chesapeake's boat with it. Steve Toon, Editor, A&D Watch, Contributing Editor, Oil and Gas Investor, stoon@hartenergy.com