Friday, May 4, 2012

Chesapeake to Cut More Haynesville Rigs

In its first quarter conference call earlier this week, Chesapeake mentioned that it intends to reduce the number of gas-focused rigs in the U.S. to 12, with only two rigs drilling in the Haynesville Shale. Back in January 2012, the company set the target at 24 gas rigs, six of which would be in the Haynesville.  The continued low price of gas and the combination of a steep reduction in Chesapeake's operating cash flow and an increase in the funding gap for capital spending necessitated cutbacks.  For the time being, it looks like Chesapeake's only activity in the Haynesville Shale will be to hold leases.

This call got lots of press for the mea culpa that began the call, as McClendon said he was "deeply sorry for all of the distractions of the past two weeks." He was referring to embarrassing disclosures about his personal finances, the poor state of corporate governance of Chesapeake and the report that he ran a commodities trading hedge fund on the side from 2004 to 2008. But the famous apology was more of an insincere "I'm sorry you got your feelings hurt" rather than an "I apologize to all shareholders for creating Chesapeake as a vehicle for my self-enrichment and I promise to be just a regular old CEO from this point forward." Don't hold your breath waiting for that one.

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