Chesapeake Energy has joined a number of shale producers in cutting their planned capital expenditure and rig count for 2019 amid lower oil prices.
The Oklahoma-based producer, which has operations in Texas, Louisiana, Oklahoma, Pennsylvania and Wyoming, announced on January 9 that it would run roughly 14 rigs this year compared with the 18 it had in 2018.
“We expect our capital efficiency to improve in 2019 as total net capital per rig line is projected to decrease by 15-20% compared to 2018,” commented Chesapeake’s CEO, Doug Lawler. “The improvement in our capital efficiency, along with our focus on our high-margin oil investments, should result in higher operating cash flow and stronger margins in 2019 compared to 2018.”
Lawler refrained from detailing the company’s plans for capex for the time being.
The company reported higher-than-expected total production for the fourth quarter of 2018. Output averaged 462,000-464,000 boepd against analyst forecasts of 477,000 boepd. This is lower year on year than output in the fourth quarter of 2017, when it achieved 593,200 boepd.
The WTI benchmark price fell 25% to a 16-month low of US$50 per barrel in the last few months of 2018, causing some shale drillers to cut their capex for 2019.
Since December, Centennial Resource Development, Parsley Energy, Diamondback Energy and Antero Resources have all scaled back plans for 2019 in response to sliding oil prices.
Chesapeake, which is pivoting from a focus on shale gas to tight oil, said that it planned to run four rigs targeting the Upper Eagle Ford and Austin Chalk formations. Meanwhile, its acquisition of WildHorse Resource Development in the Eagle Ford is expected to close in the first half of 2019. This will add roughly 420,000 high margin net acres (1,700 square km), roughly 80-85% of which is undeveloped, in the Eagle Ford shale and Austin Chalk formations.