Chesapeake says natgas market oversupplied, plans to cut output, spending

Southwestern Energy Co

21/02/2024 17:56

Feb 21 (Reuters) - Chesapeake Energy  CHK.O  said it
would cut spending and natural gas output this year as it sees
the market being "oversupplied", causing the company's shares to
rise more than 7% on Wednesday.
    Gas prices fell 30% this year because a mild winter did not
dent storage as much as expected amid lowered heating demand.
The weakness was despite an Arctic freeze in January that
briefly caused gas demand to soar to a record high.  NGA/ 
    On a conference call, Chesapeake said the oversupplied gas
market led the company it to cut one well each at the Marcellus
and Haynesville basins while also reducing capital expenditure
guidance by about 20%.
    "We would assume that demand would come back in some
measured fashion and therefore, we could return production in a
measured fashion," Chief Executive Domenic Dell'Osso said on the
call.
    "We feel comfortable pausing turn-in lines and slowing
completions activity, slowing drilling activity to match that
cadence should be considered as we would also be comfortable
accelerating those cycle times in the future when needed."
    The reduced wells and spending would lead to production
falling to 2.7 billion cubic feet per day (bcfd) in 2024, down
from around 3.5 bcfd in 2023, Chesapeake said.
    However, the company expects better supply-demand
fundamentals in the long term, and sees a "step change in demand
in 2025 as incremental LNG capacity comes online," along with
higher natgas supply domestically.
    Chesapeake in January agreed to buy smaller rival
Southwestern Energy  SWN.N  in an all-stock transaction of $7.4
billion, which was pending approval.
    "We can continue to work on things from an integration
standpoint. If it (the deal) takes longer, we won't let that
distract us in any way. We're well into the work required for a
successful integration," Dell'Osso added.

 (Reporting by Seher Dareen in Bengaluru; Editing by Maju
Samuel)
 ((Seher.Dareen@thomsonreuters.com; If in India call +91 74832
70128;))