Chesapeake Energy Corp. announced plans to cut its operated dry gas drilling rig count to 24 rigs, a decline of 50 rigs from its 2011 average operated dry gas rig count, citing "the lowest natural gas prices in the past 10 years." The drilling reductions will be made in US unconventional gas plays.
The company intends to redirect capital savings to its liquids-rich plays. Under the plan announced Jan. 23, Chesapeake will reduce its gross operated gas production by up to 1 bcfd. The company said it is deferring new dry gas well completions and pipeline connections where possible.
Separately, Simmons & Co. International forecasts that gas supply will exceed demand by 1.2 bcfd this year, leading to full storage in October and curtailments being required to balance the market. Working gas storage capacity in the US is estimated to be 4,150 bcf. At yearend 2011, gas in storage was 3,472 bcf (OGJ Online, Jan. 23, 2012).
Chesapeake's undeveloped net leasehold expenditures in 2012 are projected at $1.4 billion, down from $3.4 billion in 2011 and $5.8 billion in 2010.
The Oklahoma City independent plans to reduce its operated dry gas drilling activity by 50% from current levels by the second quarter.
Chesapeake anticipates its lowest level of dry gas drilling capital expenditures since 2005. Specifically, during the second quarter, Chesapeake plans to have reduced its drilling activity in both the Haynesville and Barnett shales to 6 operated rigs each and to 12 operated rigs in the dry gas area of the Marcellus shale in northeastern Pennsylvania.
As a result of lower drilling and completion activity and production curtailments in the Haynesville and Barnett shales, Chesapeake said its combined gross-operated gas production in these plays will decline.
Chesapeake will reallocate savings from reduced dry gas drilling, well completion, and pipeline connection activities to its liquids-rich plays, including the Eagle Ford, Utica, Mississippi Lime, Granite Wash, Cleveland, Tonkawa, Niobrara, Bone Spring, Avalon, Wolfcamp, and Wolfberry.
The company estimates 85% of its 2012 total net operated drilling capital expenditures will be invested in its liquids plays.
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