Drilling Down

Chesapeake Reduces Capital Budget, Icahn Buys More

Share on Facebook0Tweet about this on TwitterShare on Google+0Share on LinkedIn0Pin on Pinterest0Email this to someone

OKLAHOMA CITY– Chesapeake Energy Corp. announced Monday that it’s reducing the company’s 2015 capital budget by $500 million, bringing it down to a range of $3.5 million to $4 million.

Chesapeake said it would operate 25–35 rigs in 2015, which represents a decrease of approximately 55% from an average of 64 rigs in 2014. The company intends to spud 520 gross operated wells and connect to sales 650 wells in 2015 (a decrease from 1,175 spud and 1,150 wells connected in 2014). As a result, the company is lowering its targeted 2015 production to 231–236 million barrels of oil equivalent, or average daily production of 635–645 thousand barrels of oil equivalent. That represents 1%–3% production growth over the prior year after adjusting for 2014 asset sales.

Said the company’s CEO, Doug Lawler, in a prepared statement, “We entered 2015 with a strong liquidity position and we intend to manage it prudently. In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity. As a result, we now forecast ending 2015 with approximately $6 billion in combined cash and borrowing capacity under our credit facility. With this budget revision we anticipate being free cash flow neutral by the end of 2015.”

Meanwhile, it was disclosed in an SEC filing Monday that billionaire investor Carl Icahn and his various partnerships now own 11% of the company’s stock. Icahn bought 6.6 million shares March 11.

Southeastern Asset Management Inc. owns the largest stake in Chesapeake, 11.1%, according to published reports.

Chesapeake is the nation’s second largest producer of gas. With the supply glut dragging natural gas prices down 33% in one year, Chesapeake’s stock price has dropped 28% since the end of December.

SOURCES: Chesapeake Energy Corp., Reuters.

Published by The Business Journal, Youngstown, Ohio.