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Tuesday, 02 December, 2008, 03:30 GMT | more >>

Chesapeake tightens ship as prices slip



By Upstream staff 

Natural gas producer Chesapeake Energy said today it plans to sell some producing assets and decrease production and drilling activity because of lower natural gas prices.

The company has hired Jefferies Randall & Dewey to help it sell a non-operated minority interest in producing assets in Kentucky and West Virginia, the Oklahoma City-based company said, Reuters reported.

These assets represent about 30 million net cubic feet per day, or about 1.5%, of the company’s natural gas production.

Chesapeake expects to receive about $550 million from the asset sale, which is anticipated to close by the end of the year.

It plans to sell four similar packages of mature properties roughly every six months in 2008 and 2009 to raise about $2 billion.

The company also said it would slow its gross daily natural gas production by about 200 million cubic feet (mmcf) through both production cuts and delaying pipeline hook-ups.

Cheasapeake said the cuts would amount to about 125 million net cubic feet per day, or about 6% of the company's current net production, and will be focused in the Fort Worth Barnett Shale, South Texas, Deep Haley and the Anadarko Basin areas where many of the company's most prolific wells are located.

CEO McClendon said low natural gas prices, were "temporary and result from a modest oversupply of natural gas in the US".

Chesapeake said it also will reduce its operated drilling rig count from the current 155-160 to 140-145 by the end of 2007, slashing its previously budgeted capital expenditures by about 10% in both 2008 and 2009, or by a combined $1 billion.

But because Chesapeake's production growth during most of 2007 has exceeded internal projections, the company expects to meet production targets, which projected an 18-22% increase for the full-year 2007 and a 14-18% increase for full-year 2008.

The initial projection for 2009 production growth is 12-16%, it said.


Tuesday, 04 September, 2007, 20:31 GMT  | last updated: Wednesday, 05 September, 2007, 00:15 GMT

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