Chesapeake Energy's natural gas production will decline next year, a first in the company's 23-year history, chief operating officer Steve Dixon told analysts during the producer's Friday morning conference call regarding third-quarter earnings. The company said the previous day it lost about $2 billion in the quarter, largely because of big asset write-downs. Dixon said the company is projecting a 7 percent drop in total gas production in 2013, with the Haynesville Shale expected to decline 9 percent just between the third quarter and fourth quarter of 2012. CEO Aubrey McClendon said Chesapeake's production in the Barnett Shale is already down 11 percent from its peak, and even rising production in the Marcellus Shale won't be able to overcome those declines. The declines are the result of Chesapeake cutting its natural gas drilling fleet from 81 a year earlier to nine currently, including just two in the Barnett. Its drilling budget will see "a very material decrease" next year, Dixon said.
In other remarks, McClendon said the company is "just about there today" as far as drilling enough wells to hold its Barnett Shale leasehold with production. (A lease is said to be "held by production" when it has a well, and that prevents the producer's lease from expiring otherwise.) He said the Barnett shale's profitability, generally speaking, is "a toss-up" when prices are between $5 and $6 per 1,000 cubic feet.
-- Jim Fuquay