Chesapeake Energy CEO Plans More Cuts in Conventional Drilling

NEW ORLEANS (Dow Jones Newswires), March 24, 2009

Chesapeake Energy Corp. Chief Executive Aubrey McClendon said Tuesday that the company will cut its conventional drilling activity over the next two months.

Chesapeake, the largest independent producer of U.S. natural gas by volume, has already cut its conventional drilling 75% over the last six months and would reduce it to 85% in the next 60 days.

"You simply cannot make money in a sub-$7-and-$8 environment," McClendon told attendees at the Howard Weil Energy Conference.

Chesapeake is one of several energy companies that have pulled back on drilling activity to cope with declining commodity prices.

Overall, the U.S. rig count has declined by more than 45% since peaking in September as energy prices have plunged. Natural gas prices have lost about 70% of their value since peaking on July 2 at $13.694 a million British thermal units.

McClendon said that the natural gas industry, particularly privately held natural gas producers, will have difficulty accessing credit markets and that the rig count is unlikely to snap back.

"We would be very surprised to see much of a rig count increase in 2010 and 2011, even with a healthy rebound in natural gas prices," McClendon said.

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