Chesapeake Energy Corp. is searching for a liquefied natural gas (LNG) adviser to join its workforce as more North American exploration and production (E&P) companies look to gain exposure to the export boom.
In a job posting on LinkedIn late last month, Chesapeake said it was searching for a person to take the lead on new business opportunities in the LNG sector to help “optimize the company’s revenue.”
Chesapeake markets 4.5 Bcf/d of gas production, more than 2 Bcf/d of which is produced near LNG export terminals on the Gulf Coast. Like other major gas producers in the United States and Canada, Chesapeake is working to capitalize on growing LNG exports as buyers in Europe and Asia compete for limited supplies.
“LNG was easily the most asked topic from analysts to North American E&P companies during 1Q22 conference calls, and quite a few raised their hands to indicate a desire to increase their exposure to international pricing in order to gain price diversification,” said NGI’s Patrick Rau, director of strategy and research.
During its first quarter call in May, CEO Nick Dell’Osso said Chesapeake was having discussions with “counterparties in the LNG export market.” Management indicated it was open to exploring equity stakes in liquefaction projects, supply agreements tied to international benchmarks, or even signing offtake agreements.
Chesapeake’s job posting indicated that it wanted someone who could originate, evaluate and negotiate LNG agreements, including those for liquefaction, shipping and gas sales agreements. Duties would also include evaluating new commercial structures “for LNG to allow for higher margins” and securing business to “expand trading opportunities for LNG,” according to the post.
Chesapeake is one of the largest producers in the gassy Haynesville Shale, which straddles East Texas and North Louisiana. It holds 350,000 net acres in the play. The Oklahoma City-based independent also has 610,000 acres combined in the Eagle Ford Shale, both in South Texas and East Texas.
Russia’s invasion of Ukraine has jeopardized the European supplies that transit Ukraine. The continent is looking to other suppliers to cut its dependence on Russian volumes. Nearly three-quarters of U.S. LNG cargoes were shipped to Europe during the first four months of the year, according to the Energy Information Administration.
The spread between the Gulf Coast and both Europe and Asia, including shipping costs, is near $20/MMBtu through the end of the year, according to NGI data. That could grow as overseas markets bake in a supply cut to account for the explosion that knocked Freeport LNG offline.
Nearly every leading North American natural gas producer talked about that growth and a strategy to leverage it this past earnings season.
The largest Haynesville Shale producer, Southwestern Energy Co., said it is holding discussions with LNG players to explore opportunities. Meanwhile, EQT Corp., the largest gas producer in the United States, has launched an initiative aimed at quadrupling U.S. LNG capacity to 55 Bcf/d by 2050 to help displace coal abroad.
Rau said the chances of many independent producers getting more involved in LNG projects hinge on the health of their balance sheets, particularly when it comes to signing more agreements to supply terminals.
“A number of producers that have expressed interest in increasing their exposure to LNG and international gas prices still have some work to do to become investment grade, including Chesapeake, Range Resources Corp. and Southwestern Energy,” he said. “It’s good they are having conversations now, but I’d have to think any deals they make will be contingent on them being investment grade.”
E&Ps including Arc Resources Ltd., APA Corp., EOG Resources Inc. and Tourmaline Oil Corp., which have signed deals with Cheniere Energy Inc. to supply gas at prices linked to international benchmarks, have investment grade ratings, he said.
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