CHESAPEAKE TO CUT NATGAS OUTPUT UNLESS PRICES RISE
NEW YORK |
NEW YORK Nov 3 (Reuters) - Chesapeake Energy (CHK.N) will begin to ramp down natural gas production by mid-2011 in the Haynesville Shale in Louisiana unless prices firm up, said a company executive on Wednesday.
The company is keeping a "relatively level (drilling) program" in the Barnett and Marcellus shales, said Jeff Mobley, vice president of investor relations and research in Oklahoma
City, but will begin to ramp down its Haynesville production
sometime next year unless gas prices rise.
The company estimated daily production in the Haynesville at 560 million cubic feet equivalent in the second quarter of 2010, a 30 percent increase over the first quarter.
It plans to shift more of its spending to drilling for liquids, Mobley added, reflected in its third quarter guidance released late Wednesday afternoon.
By 2011, the company expects gas production to rise to around 1 trillion cubic feet but expects 80 percent of its production growth to come from liquids.
Natural gas has lost 31 percent of its value since the beginning of the year, according to the Reuters-Jefferies CRB index .CRB.
December futures on the New York Mercantile Exchange NGc1 settled 3.4 cents lower on Wednesday at $3.836 per million British thermal unit.
Chesapeake has production commitments to meet with pipeline companies in the Barnett and Marcellus shales, and is drilling to hold onto leases.
Expect to see some further decrease in dry gas activity once those leases are secured, said Biju Perincheril, an analyst with Jefferies & Co. in New York.
"You're seeing this (the move from gas to liquids) at the cusp of that transition," he said. "Going forward you should see a shift in growth coming from oil, but we won't see that
until 2012 and beyond. On a proportional basis you should see
the liquids volumes ramping up."
(Reporting by Jeanine Prezioso; Editing by David Gregorio)
Views: 51
Replies to This Discussion
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Permalink Reply by Spring Branch,mineral owner on -
Devon has been more or less a non-factor in the Haynesville from the get go. They drilled one decent well and then boogered it up! IMHO the bulk of their acreage is NOT in the core.
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Permalink Reply by ALongview on
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I think most of it is Bossier and James Lime acreage in Northern Sabine County but much of it should still be very productive and profitable at some point. They recorded 550+ leases there. In San Augustine(definitely considered the core by many) they have recorded over 1100 leases. They were still signing leases in both counties til the beginning of September and the COO was saying they would keep drilling to hold acreage at about the same time. Nothing changed in their acreage location since then just in their budget decision making and their short term view of gas prices in relation to other areas of operation. I think someone will pick up much of it.
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Permalink Reply by D Ann on
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How does this affect leases for Haynesville Shale? Will they decrease also?
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Permalink Reply by The_Baron on
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In other words:
The HA is not economic at current prices. All current drilling is good for is holding leases.
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