Big natural gas driller Chesapeake Energy retreats from the Barnett Shale

On January 24, 2012 — No comments

It was a shock but not a surprise Monday when Chesapeake Energy announced that it will slash its Barnett Shale natural gas drilling in half, won’t complete some already drilled wells, won’t connect some completed wells to pipelines and will sharply curtail production from completed and connected wells.

CEO Aubrey McClendon has been saying for months that the seemingly unstoppable drop in gas prices would force the company to focus its drilling elsewhere. He wasn’t kidding.

Prices simply kept falling in recent months, and there is still no relief in sight for a company that drilled more gas wells in the U.S. than anyone else last year. In futures trading, the contract for February delivery hit a 10-year low last week.

So, what comes next? The bad news is that some industry analysts are saying it’s going to take more than just frugality on Chesapeake’s part to curtail the gas glut that has resulted from a boom in shale drilling. That boom began with the horizontal drilling techniques pioneered in the Barnett Shale about a decade ago.

Not only has horizontal drilling allowed gas to flow from an ever-expanding number of fields across the U.S., but drillers have also sharpened their skills to get more gas from each well and drill more wells from each pad site.

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