Chesapeake Energy announced yesterday that it will cut its 2015 capital budget by $500 million to $3.5 to $4.0 billion and reduce its average 2015 rig count from 35 to 45 down to 25 to 35. The Haynesville average rig count will drop from seven to eight down to five to six with the expectation that the year end count will be between two and four.
Looking at the chart above from a presentation given today, if the current oil and gas price environment continues, Chesapeake will end the year with between nine and 19 rigs. Take a moment to think about that. CHK's total rig count could be below ten in nine months? This is a level of rationality that we've never seen from Chesapeake. With former CEO Aubrey McClendon, we would have been hearing about complex financial deals to sell VPPs, JVs in the next big play and asset sales to push through these low prices. Now we are hearing about patience and prudent deployment of capital. Come to think about it, "patience" is a word I never would have associated with the old Chesapeake.
Here is their current thinking on the Haynesville:
While the efficiencies above are nice, look what they are seeing in the northern part of the Marcellus:
It's not a big sample, but it gives us a hint as to one reason why, as our old friend Arthur Berman notes, there is an "orgy of over-production is taking place in the Marcellus Shale."