Chesapeake Energy Corp. begins 2017 stronger than any time in its history, according to CEO Doug Lawler, having delivered on a strategy to de-lever, de-risk and simplify its balance sheet while improving efficiencies and driving low production costs.

"During 2016, we made significant progress in improving out capital efficiency, decreasing cash costs and future midstream commitments while improving our liquidity and leverage profile, which resulted in much stronger foundation for Chesapeake going forward," Lawler said during a conference call with analysts Thursday.

"We crushed our cash cost in 2016. We reduced our total production expenses by approximately $336 million, or 28% per barrel of oil equivalent of production compared to 2015. We also reduced our total GP&T [gathering, processing and transportation] expenses by approximately $264 million, or 7% per boe of production compared to 2015. These improvements totaled $600 million of annual savings, and we're not done."

Last August, the Oklahoma City-based independent agreed to convey its Barnett Shale stakes to Saddle Barnett Resources LLC, a deal that allowed it to terminate a costly natural gas gathering agreement with Williams Partners LP and boost operating income through 2019. The deal eliminated an annual negative impact of $200-300 million in earnings before interest, tax, depreciation and amortization, Lawler said.

Even as capital expenditures were slashed 53% compared with the previous year, total production in 2016 averaged over 635,000 boe/d, just a 0.3% decline compared with 2015 after adjusting for asset sales.

The recent red ink was slashed as well, with Chesapeake reporting a $741 million (minus 84 cents/share) 4Q2016 loss, compared with a $2.23 billion (minus $3.36) loss in 4Q2015. The company lost $4.88 billion (minus $6.39) in 2016, compared with a loss of $14.86 billion (minus $22.43) in 2015.

In aguidance update last week, Chesapeake said it plans to operate 17 drilling rigs across the U.S. onshore this year, up seven from 2016, as it mounts a return to the Powder River Basin (PRB) and boosts activity in the Midcontinent and Eagle Ford Shale.

Long a natural gas-focused operator, Chesapeake is turning up the volume in the onshore oil plays, forecasting oil output will be 10% higher year/year. Gas volumes should remain relatively flat, adjusted for sales, with volumes returning to growth again from year-end 2017 to year-end 2018, CEO Doug Lawler said.

Chesapeake said total capital expenditures for 2017 have been increased to $1.9-2.5 billion from 2016 spending of $1.65-1.75 billion. Production is expected to average 194-205 million boe, or 532,000-562,000 boe/d, which adjusted for asset sales would be a decline year/year of 3% to growth of 2%. Projected total output includes an estimated 33-35 million boe of crude oil, 18-20 million boe of natural gas liquids and 860-900 Bcf of natural gas.

Plans are to spud 400 gross operated wells from 213 in 2016, while turning 450 to sales from 428.