Chesapeake Cuts Back On Shale Gas Drilling  

Reuters reports that natural gas prices have fallen in the US to the point where shale gas producers like Chesapeake Energy are now cutting back on production, as the gas price is below the cost of production - Chesapeake cuts drilling plan on natgas price drop. You can probably expect gas prices to rise again in the not too distant future, given the fairly sharp depletion profile of shale gas plays when new drilling ceases.

Chesapeake Energy Corp has cut capital expenditure for drilling by 17 percent through 2010 due to a plunge in natural gas prices and concerns about a U.S. market surplus, the company said on Monday.

The company also said a 50 percent drop in natural gas prices since June 30 had helped improve its energy price hedging position by $6 billion, and its shares rose 1 percent.

Chesapeake, which said it became the top U.S. natural gas producer last quarter, is also cutting its forecast of growth in gas production to 18 percent from 21 percent for this year and 16 percent from 19 percent for both 2009 and 2010.

It will temporarily cut production by a net 100 million cubic feet per day in the Mid-Continent, where wellhead prices of $3 to $5 per thousand cubic feet were "substantially below" break-even. That is 4 percent of its total capacity.

"We will monitor market conditions and bring curtailed natural gas production volumes back on stream as prices improve," Chief Executive Aubrey McClendon said.

The number of its operated drilling rigs will fall to about 140 rigs by the end of this year from 157 now, and that will stay steady for the next two years, the company said.