Chesapeake Energy Corp., Oklahoma City, produced a net profit of $883 million in third-quarter 2022, reversing a year-earlier loss, as revenues more than tripled to nearly $3.2 billion thanks to gas margins per 1,000 cubic feet equivalent more than doubling from the same time in 2021. President and chief executive officer Nick Dell’Osso said his team is planning for 2023 output to be in line with this year’s.
The company’s EBITDAX more than doubled year over year to $1.26 billion from $519 million while adjusted gross margin tripled to more than $2.5 billion. On a conference call with analysts late last week, Dell’Osso said his team had made “significant strides” to grow its midstream capacity in the Haynesville basin and has been able to capitalize on its Marcellus acquisition of Chief E&D Holdings early this year (OGJ Online, Feb. 7, 2022).
For the fourth quarter, Dell’Osso and his team are forecasting oil and gas production of about 3.7 bcfd and 52,000 b/d, respectively, which would be in line with or slightly above third-quarter levels. The company will continue to run five rigs and drill about 25 wells in the Marcellus but plans to adds a rig in the Haynesville to get to seven there, where it plans to drill 14-20 wells during this year's fourth quarter. Capital spending is expected to be $445-475 million, down from $619 million in the 3 months ended Sept. 30.
Looking to 2023, Dell’Osso said the Chesapeake team is working on the assumption of a "softer gas market here, at least for a year" as more natural gas comes to market before additional export capacity is finished. However, he said prices should stay in a range where Chesapeake will still put up strong margins.
“We are positioning for what we do think is an opportunity to grow over the next few years. But in the near term, we really don't see any need for growth,” Dell’Osso said, detailing that volumes will fall slightly early in the year and then steadily grow from there. “We think this is all very well timed with where we think the longer-term supply-demand dynamics will head and we're pretty pleased with the setup.”
Chesapeake expects inflation for their work in the Haynesville to reach 15% or more while topping out in the mid-single digits in the Marcellus. Chief financial officer Josh Viets said diesel shortages are increasing operating costs and high demand for rigs and pumping services “may enable those providers to continue to push on pricing.” He said Chesapeake has tried to stave off some inflationary pressures by locking in more prices in the second half of this year.
Shares of Chesapeake (Ticker: CHK) rose slightly Nov. 8 to $104.75. Over the past 6 months, they have risen more than 20%, growing the company’s market capitalization to about $14 billion.