UPDATE 2-Shale wells productive, Chesapeake CEO says

Mon Jun 27, 2011 12:39pm EDT

Related Topics

* Wells seen producing up to 50 yrs -CEO

* CEO terms New York Times Sunday article 'misleading'

* Chesapeake shares down slightly (Adds analyst comment, stock price)

HOUSTON, June 27 (Reuters) - Results from the bulk of Chesapeake Energy Corp's (CHK.N) shale wells have steadily improved, the company's chief executive said in response to a New York Times article aimed at casting doubt about shale gas productivity.

"By analyzing actual Chesapeake well performance, we know that the initial productivity associated with a majority of our shale gas wells have been steadily improving over the years in all of our gas shale plays, both in initial production rates and the expected ultimate recoveries of natural gas," Chesapeake CEO Aubrey McClendon said in an email to employees sent on Sunday.

Massive shale formations across North America are said to hold enough natural gas to last 100 years. The formations were once too costly to produce, but technology like horizontal drilling has enabled profitable exploration in many basins.

Chesapeake is the second-largest U.S. producer of natural gas behind Exxon Mobil Corp. (XOM.N)

Most of Chesapeake's wells are expected to be productive for 30 to 50 years or even longer, McClendon wrote, and characterized the article as "misleading."

On Sunday, The New York Times reported an investigation of emails and documents showed industry insiders have doubts as to whether the companies including Chesapeake will be able to deliver on their promises about shale wells to investors. [ID:nN1E75P06Y].

In a statement on Monday, McClendon said he stands behind all statements made to shareholders.

Wall Street analysts also took issue with the story. Houston-based energy investment bank Tudor Pickering Holt & Co called the story "drivel" in its morning note to clients.

"Production doesn't lie ... natural gas production from the Barnett (Shale) is now higher at about 5.6 billion cubic feet per day than it was in 2008" despite a much lower rig count, the firm said.

Shares of Chesapeake were down 11 cents at $27.90 on the New York Stock Exchange on Monday afternoon. (Reporting by Anna Driver. Editing by Robert MacMillan and Matthew Lewis)