Wednesday, February 22, 2012

Chesapeake Maximizes Curtailment, But Net Production Decrease Small

In its year-end earnings report, Chesapeake Energy reported that it has curtailed production on nearly 1 Bcf/day of dry natural gas production, mainly from the Haynesville and Barnett Shales.  Last month CHK said that it would curtail 0.5 to 1.0 Bcf, so the company hit the high end. The company also previously announced that it will defer as many dry gas completions as possible and reduce its dry gas rig count from an average of 75 in 2011 to 24 in 2012.

Chesapeake emphasized that it "has demonstrated industry leadership" to take one for the greater good of the natural gas industry.  But even with these actions, Chesapeake's daily natural gas production is only expected to drop only 4% from 2011 levels, from 2.75 Bcf/day to 2.65 Bcf/day.  Why?  The company notes that the "sacrifices" it is making are "...partially offset by growth in associated natural gas production in liquids-rich plays."

So, bottom line is that Chesapeake is cutting production in Louisiana and Texas, slashing dry gas rig count by two thirds and deferring completions only to have gas from liquids wells make up the difference so that production is nearly flat year-over-year.

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