• The Company: Chesapeake Energy, the third-largest natural gas provider in the United States.
• The Filing: Form 8-K filed on July 2, 2008
• The Finding: Plains Exploration and Production is purchasing a 20 percent stake in Chesapeake Energy’s emerging play, Haynesville Shale, for $1.65 billion. Despite its minority stake, Plains also committed to fund 60 percent, up to $1.65 billion, of the joint venture’s future drilling and completion costs. Haynesville is the modern equivalent of a Klondike gold rush, with Plains Exploration paying the equivalent of $30,000 per leasehold, for what could be had for a couple hundred dollars an acre two years ago.

The Upshot: Haynesville is larger in scope than the Barnett Shale play in north Texas, where Chesapeake’s net natural gas production is about 450 million cubic feet per day. The Haynesville Shale is likely to become America’s largest natural gas field and perhaps the fourth largest in the world, Chairman and CEO of Chesapeake Energy, Aubrey McClendon, disclosed last Wednesday in a conference call with its newest partner, Plains Exploration and Production.

The eight wells already drilled by Chesapeake are producing anywhere from 5 million to 15 million cubic feet of natural gas a day on restricted chokes — more than Barnett Shale producing wells.

Several vertical drillings suggest the aggregate 550,000-acre leasehold could hold an eye-popping 20 trillion cubic feet in recoverable reserves — equal to the amount of gas consumed in the United States last year, according to chief executive McClendon.

Haynesville Shale is on the verge of transforming from an emerging play to one of significant commercial development. In February, EnCana Oil & Gas completed its first first horizontal well, with gas flowing at an initial production rate of more than eight million cubic feet per day.

On June 30, rival oil and gas producer Petrohawk Energy said its initial horizontal well in Haynesville Shale in Louisiana started production at an average rate of about 16.8 million cubic feet of natural gas per day, bringing recoverable reserve volume in excess of previous estimates of 5.0 billion cubic feet.

Lost in the mad scramble for leases, however, are the continued uncertainties and capital costs in interpreting engineering data relating to underground accumulations of oil and gas in such unconventional places as hard rock and shale.

For example, the targeted interval in the hydocarbon reservoir being drilled by Petrohawk was at 11,005 feet true vertical depth, and a lateral of 3,880 feet in length–much harder to access than traditional onshore gas in porous, sand geological basins found in Louisiana at shallow depths above 8,500 feet.

Oil & gas shale exploration continues to heat up with their respective commodity prices. West Texas Intermediate Crude Oil and Natural Gas (Henry Hub) for August delivery on the New York Mercantile Exchange settled at $143.57 per barrel and at $13.389 per MMBtu, respectively. Substantially higher prices make drilling for natural gas and oil in unconventional areas more economically viable as investments.

The Question: North Dakota’s Bakken Shale, Texas’ Barnett Shale, Louisiana’s Haynesville, and the Marcellus gas formation in the Appalachian Basin –six-months from now, where will the next land-grab frenzy take place?