Chesapeake Decreases Exploration and Production Activity in the United States as Natural Gas Prices Fell Below USD2.00 MMBtu

Chesapeake Energy Corp. is palliating its exploration and production operations in the Marcellus and Haynesville shale plays while also aiming to make an exit from the Eagle Ford Shale in 2023 due to natural gas prices that have fallen below USD 2.00/MMBtu at a number of pricing centres across the United States.

The macro problems making an impact on the business are getting tackled proactively, such as year-over-year natural gas price declines while service costs remain high, because of the preparation for initial capital investment for 2023, as per president and CEO Nick Dell'osso.

The wise approach to action would be to exhibit capital restraint and mitigate the activity levels in Marcellus and Haynesville.

Despite the fact that they never wish for low prices, Chesapeake is designed to withstand the current level of volatility.

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Production at the business is expected to decline by 2% this year. In the fourth quarter, Chesapeake generated 4.05 Bcfe/d, 90% of which was natural gas.

The business produced roughly 4.0 Bcfe/d, also 90% weighted to gas, for the entire 2022 year. In the previous year, Chesapeake drilled 217 wells and put 215 of them into production, using an average of 14 platforms. There are presently 14 rigs in operation for the company, including two in the Eagle Ford Shale, five in the Haynesville, and seven in the Marcellus.

In the first quarter and the third quarter, respectively, the business anticipates dropping one Haynesville well. Moreover, it intends to keep one to two frac crews in each asset throughout the year while removing one rig from the Marcellus in the third quarter. A total of 50 to 60 wells are anticipated to be drilled, and 45 to 55 wells are anticipated to start producing in the first quarter.

As per the claims by officials, should market conditions alter significantly, the company is ready to make additional adjustments, either higher or lower. As Gulf Coast export facilities ramp up, they said that the corporation remained "LNG ready." At USD 1.765-USD 1.835 billion, total anticipated capital expenditures would be slightly lower this year.

At the end of 2022, Chesapeake had proved reserves worth 13.1 Tcfe. At 6 Bcf/d of gross operated produced natural gas volumes, the company also obtained independent responsibly sourced gas certification the previous year.

Chesapeake gave USD 2.3 billion in dividends and share repurchases to shareholders in 2022 as a result of its capital management practises.

Compared to USD 1.4 billion (USD 12.90) in 4Q 2021, Chesapeake's net income distended to USD 3.5 billion (USD 26.16/share) in 4Q 2022.

Natural Gas Price Trend

North America

The cost of natural gas just increased in the USA. On the strength of forecasts for better weather and increasing demand, the benchmark futures jumped. With rising natural gas prices in the USA in August, worries about the flow of gas from Russia to Europe, record-high coal costs, and the end of the front-month contract remain.

However, when the period concluded, natural gas prices began to decline due to market fundamentals since the market experienced a loss of energy as U.S. output for the first time reached 100 Bcf/day. In addition, Freeport LNG postponed the plant's restart from mid-October to late November, which further lowered prices for the local market.

Asia Pacific

The price of natural gas in the Asia-Pacific area followed a similar pattern as the rest of the world market as 2022 came to a close. Prices increased as a result of Russia's concern that another supply interruption will worsen the fuel deficit in Asia. There was fierce competition between Europe and Asia for the limited supply of LNG cargo.

After the hydropower interruptions in the Sichuan district, China's difficulty to meet peak power demands increased the cost of production for important downstream derivative operations. Reduced output and a steep drop in import prices both contributed to a sharp drop in the price of natural gas in India. India's gas importers were unable to purchase LNG on the spot market. The majority of supplies are going to Europe, where consumers are willing to pay record-breaking prices before winter in the face of severe supply restrictions from Russia.

Europe

Due to the Nord Stream 2 pipeline supply cut off from Russia's Gazprom to Europe, natural gas prices in Europe are on the rise. As a result, the front gas month charges at the Dutch Title Transfer Facility (TTF), the European standard for trading natural gas, increased.

The downstream derivative market is driven by rising energy and utility prices, which also drive inflation and put pressure on margins and edges for large businesses. The region entered a recession as a result of the recent increase in gas prices, which caused the euro to fall to its lowest point.

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As per Procurement Resource, Due to natural gas prices that have fallen below USD 2.00/MMBtu at a number of pricing centres across the United States, Chesapeake Energy Corp. is scaling back its exploration and production activities in the Marcellus and Haynesville shale plays and intends to finish its exit from the Eagle Ford Shale in 2023.