Marcellus Shale Gas Reserves Estimate Cut 66% (CHK, RRC, ECA, COG)

A report earlier today that Chesapeake Energy Corp. (NYSE: CHK) was reducing its drilling programs due to the low prices for natural gas. Competitors like Range Resources Corp. (NYSE: RRC), Encana Corp. (NYSE: ECA), Cabot Oil & Gas Co. (NYSE: COG) and other gas producers rose on the news.

Now, though the US Energy Information Administration has released its latest Annual Energy Outlook 2012, reducing its unproved technically recoverable resource estimate of reserves in the Marcellus shale gas play from last year’s 410 trillion cubic feet to 141 trillion cubic feet. Last August, the US Geological Survey updated its estimate of Marcellus shale reserves from its 2002 estimate of 2 trillion cubic feet to around 84 trillion cubic feet. The wide discrepancy is due to the newly available data from actual drilling in the Marcellus play.

Two things to remember about energy estimates: first, they are nothing more than educated guesses; and second, don’t bet the ranch on the accuracy of any estimate. And by the way, 141 trillion cubic feet is enough to supply about six years’ worth of total US demand. That’s still a huge resource.