Chesapeake Energy is slashing natural gas spending and re-directing rigs and capital dollars toward liquid-rich plays like the Eagle Ford and Utica shales. Chesapeake is also planning shut-ins of 0.5 Bcfd and will increase that amount to 1 Bcfd if prices don’t begin to recover.
The company is targeting a natural gas rig count of 24 by the second quarter of 2012. That’s down from an average of almost 75 gas rigs in 2011. There are only ~2,000 rigs active in all of the U.S. onshore market, so a 50 rig change is very significant.
Spending in dry gas plays will decrease from $3.1 billion in 2011 to $900 million in 2012. A more than 70% decrease year over year.
The areas impacted the most will be the Barnett and Haynesville shales, where the number of active drilling units will decrease to 6 in each play. The company will drop to 12 active rigs in the dry gas region of the Marcellus Shale in Northeast Pennsylvania.
Capital that would have been spent in dry gas plays will now be re-deployed in liquids-rich plays that deliver higher valued oil, condensate, and NGLs.
This reallocation will result in increased expenditures in certain of Chesapeake’s liquids-rich plays, including the Eagle Ford Shale, Utica Shale, Mississippi Lime, Granite Wash, Cleveland, Tonkawa, Niobrara, Bone Spring, Avalon, Wolfcamp, and Wolfberry. The company estimates that approximately 85% of its 2012 total net operated drilling capital expenditures will be invested in its liquids-rich plays.