Chesapeake Reserve Doubted

By MATT WIRZ Updated July 12, 2012, 8:26 p.m. ET

An independent research firm called into question the size of Chesapeake Energy Corp.'s proved reserves of oil and natural gas, an important metric institutional investors use to value energy producers, in a report published this week.

The report, by ITG Investment Research, comes as controversy continues to swirl around Oklahoma City based Chesapeake, the nation's second largest producer of natural gas after Exxon Mobil Corp. The company, which has been battered by decade-low prices for its main product, has been selling assets to stave off liquidity problems. Shareholders have forced the company's board to replace several directors and to appoint an independent chairman to replace co-founder Aubrey McClendon, who remains chief executive.

The report zeroed in on reserves in the Barnett and Haynesville shale formations in Texas and Louisiana, which make up 42% of the gas the company estimates is in fields it owns. ITG calculated reserves for Chesapeake's developed wells in that region at 2.8 trillion cubic feet, 70% of the amount estimated by a third-party engineering firm for Chesapeake's 2011 annual report. That difference accounts for approximately 12% of what Chesapeake estimates is left in all of its existing wells.

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