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Chesapeake Energy outlines fourth-quarter oil production gain and cost decline

A rig is pictured drilling a well within Chesapeake Energy's Brazos Valley operational area in the Texas Eagle Ford Shale field in April, 2019. [OKLAHOMAN ARCHIVES]
A rig is pictured drilling a well within Chesapeake Energy's Brazos Valley operational area in the Texas Eagle Ford Shale field in April, 2019. [OKLAHOMAN ARCHIVES]

Chesapeake Energy Corp. officials said Wednesday the company nudged oil production higher and held costs in check during the final quarter of the year.

In an update issued before markets opened, Chesapeake estimated its oil production during the period climbed to between 125,000 and 126,000 barrels per day.

That marked a 6% increase, year over year, and officials attributed much of the increase to work carried out to boost average oil production from wells the company drilled in its Brazos Valley area of the Eagle Ford Shale field by about 40%.

In the final quarter of the year, the area’s production grew to about 56,000 barrels of oil equivalent per day, with 40,000 barrels of that being oil.

Chesapeake accomplished those gains, officials said, while slashing average lateral-foot well costs by about 9%, seeing about $54 million in drilling and completions savings, year over year.

The company placed 81 wells on production in 2019 from the play, and estimates that cost savings and operational improvements boosted its cash flow value by about $250 million for the year.

It also provided updates on production gains it accomplished involving other Eagle Ford Shale field wells in south Texas and ongoing operations it has in the Powder River Basin of Wyoming and the Marcellus Shale field in Pennsylvania.

The update estimated Chesapeake’s total fourth-quarter production was between 476,000 to 478,000 oil equivalent barrels per day.

"We delivered strong cash flow during the quarter on lower costs and higher oil volumes,” Doug Lawler, Chesapeake's CEO, stated in the update.

“Natural gas and natural gas liquids volumes were sequentially lower, due to our decisions to direct capital to the highest-margin opportunities in our portfolio, enhancing our profitability.”

The company stated as part of its update that its fourth-quarter capital expenditures were between $480 million and $490 million.

Chesapeake reduced gathering, processing and transportation and general and administrative expenses by about $1.20 per equivalent barrel, or more than $335 million, in 2019 compared to the previous year.

Officials also updated Chesapeake’s ongoing efforts to maintain its liquidity by improving its balance sheet.

Wednesday's update noted how Chesapeake cut about $900 million in debt in December through a series of deals that, among other things, addressed Brazos Valley Longhorn debt it had acquired along with WildHorse Resource Development Corp. in February 2019.

It also worked with investors to retire about $3.22 billion in unsecured debt that was due between 2024 and 2027 using about $2.2 billion in new, senior secured second lien notes the company pledges to retire in 2025, generating a net debt savings for the company of about $1 billion.

As of Dec. 31, the company had about $1.6 billion borrowed under its revolving credit facility, compared to about $1.5 billion on Sept. 30, with about $1.4 billion remaining available.

It stated that about $300 million in debt will mature this year.

Its outstanding debt on Dec. 31 was about $8.9 billion, compared to about $9.7 billion on Sept. 30.

As of Jan. 29, officials stated Chesapeake had downside protection on about 32 million barrels of oil at an average price of $59.90 per barrel, and downside protection on approximately 265 billion cubic feet of natural gas at an average price of $2.76 per thousand cubic feet.

“Our strong results in the fourth quarter have continued into early 2020 and are setting the foundation for the company to reach free cash flow this year,” Lawler stated.

“We remain committed to achieving further meaningful debt reduction through asset sales, capital markets transactions and cost discipline."

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›