Rising pipeline and gathering system pressures over the next few months "will likely result in involuntary natural gas production curtailments across the industry," Chesapeake Energy Corp. officials said last week.
The Oklahoma City-based producer, which is scheduled to deliver its 2Q2009 earnings report on Monday, voluntarily curtailed some of its prolific onshore gas production in 2Q2009 because of low prices and increasing domestic supplies. No production is now being curtailed, but the company "may do so again later this summer or fall as market conditions dictate," said officials.
On Friday Chevron Corp. said it would have no active onshore gas rigs in the United States in operation by the end of the year (see related story).
Chesapeake's 2Q2009 gas output averaged 2.453 Bcfe/d, up 4% from the 2.328 Bcfe/d produced a year earlier. The company, which is 92% weighted to gas, produced on average 2.245 Bcf/d of gas and 34,637 b/d of oil and natural gas liquids.
"Chesapeake owns an unrivaled U.S. asset base and, through our joint ventures, we have now constructed an unrivaled financing plan for the development of these assets -- a plan that over the next four years should enable us to deliver the lowest finding costs, highest returns on capital and highest growth rates among large-cap E&P [exploration and production] companies in the U.S.," said CEO Aubrey McClendon.
Adjusted quarterly production would have been 16% higher than in the year-ago period, but Chesapeake's 2Q2009 voluntary production curtailments averaged 74 MMcfe/d, three volumetric production payment sales in 2008 averaged 139 MMcfe/d, and the company also sold some Woodford and Fayetteville shale properties whose output would have averaged 81 MMcfe/d.
Even with the production curtailments and asset sales, Chesapeake's output was up 5% sequentially from the first three months of 2009, "led by production growth in the Haynesville, Marcellus, Fayetteville and the Colony Granite Wash plays," said the CEO.
Chesapeake has referred to its Haynesville, Marcellus, Fayetteville and Barnett shales as its "Big Four" shale plays, and this was the first public indication that the Granite Wash, in the Texas Panhandle, has gained in prominence.
"Notably, we were successful in holding our production levels flat in the Barnett Shale and in our non-Big Four shale plays, despite substantially reduced drilling activity levels during the past year," said McClendon.
Chesapeake, he said, is "on track to reach estimated proved reserves of 14 Tcfe by year-end 2009 and 16 Tcfe by year-end 2010. This proved reserve growth of 33% from our year-end 2008 proved reserve levels will reduce our debt per Mcfe of proved reserves by approximately 25% in just two years, resulting in substantial deleveraging. In addition, we remain optimistic that we will also be able to reduce the absolute levels of our debt as we reduce our relative debt levels."
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