Chesapeake Energy is cutting back production of dry gas and instead focusing its drilling efforts in areas of wet gas.
On Jan. 23, the company announced several steps it is taking to increase its emphasis on gas fields that produce liquids such as ethane along with natural gas.
Chesapeake's move is in line with what people in West Virginia's natural gas industry have expected as the price of gas falls and the value of other materials found in shale gas, such as ethane, increases.
Specifically, Chesapeake said it will:
Reduce its operated dry gas drilling activity by 50 percent to approximately 24 rigs by the second quarter of this year from 47 currently in use and by 67 percent from an average of about 75 dry gas rigs used in 2011. Chesapeake will have 12 rigs in the Marcellus shale region of Pennsylvania and six rigs each in the Haynesworth and Barnett shale areas of Texas, Louisiana and Arkansas.
Reduce its operated dry gas drilling capital expenditures to $900 million, a decrease of about 70 percent from similar expenditures of $3.1 billion last year. This will be the company's lowest levels of expenditures in dry gas since 2005.
Curtail its gas production by about 8 percent. If conditions warrant, the company is prepared to double the curtailment. Whenever possible, Chesapeake will defer completions of dry gas wells that have been drilled but not yet completed.
Defer pipeline connections of dry gas wells that have been completed.
Reallocate expenditures from dry gas areas to wet gas areas, specifically Eagle Ford shale, Utica shale, Mississippi Lime, Granite Wash, Cleveland, Tonkawa, Niobarra, Bone Spring, Avalon, Wolfcamp and Wolfberry.
Reduce leasehold expenditures to $1.4 billion in 2012, down from $3.4 billion in 2011 and $5.8 billion in 2010.
"We are very pleased that our strategic decisions over the past four years have created the opportunity and flexibility for Chesapeake to shift its focus from dry gas plays to liquids-rich plays," Chesapeake CEO Aubrey K. McClendon said in a news release. "Our liquids production has increased from an average of approximately 32,000 barrels (bbls) per day in 2009 to current production of almost 110,000 bbls per day. …
"We anticipate that more than 50 (percent) of Chesapeake's 2012 revenue will come from its oil and natural gas liquids production …"
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