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Earnings Calls: 
Chesapeake Energy Earnings Call, Second Quarter 2008
Author: Albena Toncheva
123jump.com
Last Update: 4:38 AM ET August 26 2008

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Excluding one-time items, Chesapeake earned $479 million, or 89 cents a share in the quarter, up 40% from a year ago. Second-quarter revenue from gas sales increased to $2.23 billion from $1.2 billion last year. As of July 31, Chesapeake has hedged 82% of the third-quarter gas production at $8.90 per thousand cubic feet. The company’s proven reserves are estimated to be the equivalent of 12.2 trillion cubic feet of gas, with 1.3 trillion added in the first half of fiscal 2008.


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Steven C. Dixon: We’re on $6.5 to $7 million range on these wells and we feel very confident that we can get that down to $6.5. We’re at 45 to 50 days drilling the wells and that should go down also with experience and time. Although, going from six to eight stages has increased our completion cost a little bit. We hope to be at $6.5 by now and we’re really closer to $7.

Monroe Helm (CM Energy Partners): I would like to convert my car from gasoline to natural gas. What would be the cost of that and should we expect to see Chesapeake natural gas stations here in North Texas that you can advertise with?

Aubrey K. McClendon: The inconvenient truth of Chesapeake natural gas stations is that we would lose our status as an independent producer if we were to begin retail sales of natural gas and that independent producer status has helped us from a taxation perspective so we’re going to have to leave that to people like Boone Pickens Clean Energy Company and others. Really, at the end of the day, every station operator will want natural gas and most of them have natural gas already piped to their station right now.

The cost to convert a car over is basically on a non-assembly line scale is $12 to $15,000 to convert let’s say a pickup or an SUV. You get $5,000 federal tax credit and then $2,500 in Oklahoma and I think you get it in other states as well. Then, of course, you save $2 a gallon. The key though is to get them to come off the assembly line. A third of the cars in Argentina are C&G, a quarter of the cars in Italy are C&G, GM makes something like 10 models of cars around the world that come off factory lines running on C&G. Until three years ago they made pickups in America, so did Ford with C&G. So, this is not tough stuff at the end of the day. There just has to be some refueling infrastructure. We think at the end of the day the best way to address that is going to be through fleets, through urban stations and then to string some along the Interstate at truck stops because the trucking industry will be all over this at the end of the day.
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