Chesapeake Tightens Strategic Focus

Chesapeake Tightens Strategic Focus
'Simply put, we are tightening our strategic focus around our best rock, best operations and lowest emissions footprint'.

Chesapeake announced this week that it is solidifying its strategic focus on its “core” Marcellus and Haynesville positions.

“Our acreage positions in the Marcellus and Haynesville are truly differentiated with industry leading capital efficiency, deep runways of low breakeven inventory, strong operating margins, and advantaged emissions profiles,” Nick Dell’Osso, Chesapeake’s president and CEO, said in the company’s 2Q results statement.

“Simply put, we are tightening our strategic focus around our best rock, best operations and lowest emissions footprint to generate the most attractive and sustainable capital returns in the industry and be the leader in answering the call for delivering the affordable, reliable, lower carbon energy the world needs,” Dell’Osso added.

In its 2Q results, Chesapeake outlined that it is reducing activity in its Eagle Ford position, adding that the business now views the development as “non-core” to its future capital allocation strategy.

“Given we now view our Eagle Ford assets as non-core to our future capital allocation strategy, we are increasing our capital allocation to the Haynesville in the second half of the year and into 2023 to position the asset for returns-driven growth,” Dell’Osso said in the 2Q statement.

To position itself for additional returns-driven growth from the Haynesville, Chesapeake said it is reallocating capital to the development and increasing its capital investment program by 15 percent to $1.75 - 1.95 billion. The move is said to reflect industry-wide inflation as well as the addition of two operated Haynesville rigs, with a sixth rig added in early August and a seventh rig before year-end. The company noted that it intends to reduce planned activities and investments in the Eagle Ford, which includes dropping to three rigs by the end of August and exiting the year with two rigs.

Chesapeake highlighted that its net production in 2Q was approximately 4,125 MMcfe per day. The company said it is currently operating 16 rigs, comprising five in the Marcellus, five in the Eagle Ford and six in the Haynesville.

In 2Q, Chesapeake reported net cash provided by operating activities of $909 million. This figure stood at $853 million in the previous quarter and $394 million in 2Q 2021. The company delivered adjusted EBITDAX of $1.269 billion and $494 million in adjusted free cash flow during 2Q. Adjusted EBITDAX came in at $913 million in 1Q and $429 million in 2Q 2021, while free cash flow came in at $532 million in 1Q and $292 million in 2Q 2021.

Chesapeake’s net income for 2Q totaled $1.237 billion and its adjusted net income came in at $729 million. The company reported a net loss of $764 million and an adjusted net income of $436 million in 1Q and a net loss of $439 million and an adjusted net income of $181 million in 2Q 2021.

On June 28, 2020, Chesapeake voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court. On February 9, 2021, the company successfully concluded its restructuring process and emerged from Chapter 11, satisfying all conditions precedent under its plan of reorganization.​

Headquartered in Oklahoma City, Chesapeake has a goal of achieving net-zero direct greenhouse gas emissions by 2035.

To contact the author, email andreas.exarheas@rigzone.com



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