Chesapeake Energy Corp. is finding a lot of success experimenting with new drilling and completion (D&C) techniques that may allow it to cut $1 million or more in costs from every new well that it drills, the management team said Wednesday.

CEO Doug Lawler was hesitant to offer too many specifics during a conference call to discuss the first quarter performance. The annual analyst meeting set in a few days should unveil a lot of news, he said. However, he and his team provided some insight into how the company has slimmed down not only operationally, but on the cost side as well (see Shale Daily, May 7).

By using the best available technology and efficiencies learned from all of the tinkering in the onshore, Lawler said the cutting a lot of costs from wells is doable, even with a smaller budget than a year ago.

The reductions are a “program that we are looking at to achieve and accomplish over the course of 2014,” he said. “We essentially have captured a good amount of that, if not all of it, in several areas…We still have more opportunities through efficiency and synergies that we anticipate we can capture.”

Senior Vice President Jason Pigot, who is in charge of the southern region, which includes the Haynesville Shale, told analysts that D&C costs per well have fallen to about $7 million.

“We’ve done a little bit of everything there,” he said of the gassy Haynesville, which is actually proving to be a high margin play. “We’ve been really playing with different completion techniques to get our cost down. So it’s been over reduction and sand or anything like that, that we would accomplish is reducing chemicals that we use, just testing some slick water fractures, etc., so those are really, a lot of the savings is driven by the completion side.”

Chesapeake has seen “almost $2 million come off those costs in a year…As far as productivity again, we clock the performance of these wells on these tests to see if there’s been any negative impact. So far, we haven’t see anything, so time will tell for that, but we are really encouraged by what we’ve seen so far…”

Reducing the costs hasn’t led to a “big” initial production performance change from drilling dry gas wells in the Haynesville nor in the Utica Shale,”because we have a restricted rate every well that we bring on, so they’re performing exactly what we expect from those wells,” said Pigot.

“We monitor pressure and rate to make sure that we are not seeing performance degradations, but again it’s just been a great program, great turnaround for us in a short amount of time” and “putting value to the company…as a whole.”

Capital expenditures this year were reduced to $5.4 billion, about $1.3 billion less than in 2013. At the new level of spending Chesapeake expects to raise its output by 8-12%, mostly with gains in natural gas liquids.

Lawler, 46, a petroleum engineer by trade, was a rising star at Anadarko Petroleum Corp. when he joined Chesapeake last year following Aubrey McClendon’s departure. Lawler brought with him stringent capital discipline and a vision to exploit the best parts of Chesapeake’s sprawling, onshore empire.

Chesapeake at one time had a leasehold in almost every major — and minor — oil and gas basin in the United States. The sales have been frequent, but strategic. Today the company has narrowed its focus to about five basins.

Lawler isn’t about empire building. He’s about getting solid returns for shareholders. In addition to turning from exploration to manufacturing, i.e., pad drilling, the company is working to make better use of its size to ensure it gets the best deal with contractors.

That size and expertise also has fueled speculation that Chesapeake could expand overseas at some point. Lawler hinted that it was a possibility, but noted, “we’ve got a lot of wood to chop” before taking on anything new.

“I think we’ve making a lot of progress on several fronts. The efficiency in our programs, our cash costs, our capital program, the synergies, operationally that we are capturing…I cannot be more excited about the progress that we are making.”

However, “as the world and countries around the world look for opportunities to develop their own unconventional or shale resources. Chesapeake has that expertise and could potentially be part of it. I believe it’s something that we should evaluate. We have not made any commitments to enter into the international arena, but I do believe that in the company’s future that could be a possibility.

“We just have to be very careful that we do not comprise the value creation story from our current assets, and it has to be very prudent value accretive to our shareholders…There’s different risk profile international and the last thing we are going to do is, in any way whatsoever, sacrifice any value for our shareholders in our growth stories…

“There is extremely good growth opportunities in our current assets, and for the size of the company, there’s an optional lever there that can potentially be pulled but it has to make good sense for our shareholders and the company’s growth progress going forward.”

Meanwhile, the Securities and Exchange Commission has completed its two-year informal investigation of Chesapeake and McClendon. The Fort Worth, TX regional office notified the producer on April 8 that it was closing its investigation and would not recommend any enforcement action, Chesapeake said in a regulatory filing on Wednesday. An informal probe was launched in 2012 following reports that McClendon may have hidden personal loans to fund his stakes in Chesapeake wells (see Shale Daily, May 4, 2012).