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Chesapeake Cuts ‘17 Guidance on Harvey, But Oil Volumes Rising ‘Substantially’

Citing Hurricane Harvey, completed asset sales and changes in capital allocation, Chesapeake Energy Corp. on Tuesday revised down its full-year 2017 production guidance by roughly 2%.

Even after factoring the effect from the hurricane, which forced producers to shut in some Eagle Ford Shale output in late August and early September, the Oklahoma City-based independent estimated third quarter output would average 542,000 boe/d, higher than 527,600 boe/d in the second quarter. However, oil output is expected to decline sequentially to 86,000 b/d from 88,400 b/d.

Full-year 2017 output is seen falling to average 532,000-545,000 boe/d, versus early August guidance of 541,000-562,000 boe/d. The company previously guided for full-year adjusted 2017 production growth year/year of 0-4%, but it now expects production to range from a decline of 1% to growth of 1%.

“We expect these impacts to be limited to the third quarter, but are revising our guidance for the full year,” CEO Doug Lawler said. “Last week we averaged approximately 555,000 boe/d and 91,000 b/d of oil, and we anticipate our volumes will continue to grow substantially in 4Q2017 as our current production rate has recovered from the delays...

“We plan to place 120-130 new wells into production in 4Q2017, primarily in the Eagle Ford Shale and Powder River Basin,” he said. “Accordingly, we now project that our oil volumes will average approximately 100,000 b/d for the fourth quarter.”

Chesapeake is the latest in a string of E&Ps to detail production impacts from Harvey, which caused devastating flooding when it made landfall along the Texas Gulf Coast late last month.

Lawler, speaking at an industry conference earlier this month, acknowledged that Chesapeake’s Eagle Ford operations were impacted “to a pretty significant extent” by the storm.

On Tuesday, Lawler said debt reduction is still a top priority for Chesapeake, which also operates in the Midcontinent, Haynesville Shale and Appalachian Basin.

“As we enter 2018, we remain focused on reducing our debt and driving toward cash flow neutrality,” Lawler said. “We will continue to take all of the appropriate steps to retain a disciplined pace of activity, while creating the most value from the capital efficiencies we are seeing throughout our operations.”

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