Chesapeake Cuts Natural-Gas Output as Prices Hit 10-Year Low
Chesapeake Energy Corp., the second- largest U.S. natural-gas producer, will cut output, idle drilling rigs and reduce spending in gas fields by 70 percent after prices for the fuel hit a 10-year low.
Gross production at wells it operates will drop by as much as 1 billion cubic feet a day and the Oklahoma City-based company will defer gas-well completions wherever possible, according to a statement today. Chesapeake, which accounts for about 9 percent of U.S. gas output, will cut spending on gas wells to $900 million this year from $3.1 billion in 2011.
Gas futures contracts on the New York Mercantile Exchange have fallen by half in the past year and have declined the most among the Standard & Poor’s GSCI Spot Index of raw materials. Gas hit $2.231 per million British thermal units in electronic trading today in New York, the lowest price since Feb. 15, 2002.
“One company can’t right the entire gas market,” Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets who rates Chesapeake at “sector-perform” and owns no shares. “It’s going to be collective effort by the industry that gets it done.”
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