Chesapeake Energy ( NASDAQ: CHK ) +2.3% in Wednesday's trading, off from earlier highs, after easily beating Q4 adjusted earnings estimates and confirming it will sell part of its Eagle Ford oil assets to Inoes Energy for $1.4B.
During Chesapeake's ( CHK ) post-earnings conference call, the company said it is slowing its expansion in the Haynesville shale region in response to the YTD 50%-plus plunge in benchmark U.S. natural gas prices.
Chesapeake ( CHK ) said it will drop two rigs in the Haynesville shale this year, and one rig in Marcellus shale; it is currently operating 14 rigs including five in the Marcellus, seven in the Haynesville, and two in the Eagle Ford.
"We certainly see that it's prudent to pull back capital, and we think we're seeing others do the same," CEO Nick Dell'Osso said on the call, as reported by Reuters. "We're making money on the capital that we are investing but the margins are not nearly on a full cycle basis what they were historically."
Chesapeake's ( CHK ) Q4 report "had a lot of moving pieces, but we expect a positive reaction from shares given the prudent decision to immediately slow activity to generate FCF in a weaker macro environment," J.P. Morgan analyst Zach Parham said, according to Bloomberg.
Chesapeake Energy ( CHK ) shares have lost 8% so far this year but gained 29% during the past 12 months .
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Chesapeake Energy to reduce drilling rigs due to weak natural gas prices