Chesapeake’s $4-4.5 billion capex down 37% vs. last year

Chesapeake Energy Corp., Oklahoma City, is budgeting total capital expenditures, including capitalized interest, of $4-4.5 billion for 2015.

Using the midpoint of the range, it represents a 26% reduction compared with the company’s 2014 capital expenditures before acquisitions of $5.8 billion, and a 37% reduction from the company’s 2014 total capital expenditures of $6.7 billion.

Chesapeake for 2014 reported net income available to common stockholders of $1.273 billion. The primary component of this increase was unrealized gains on the company’s oil and natural gas commodity derivatives, partially offset by the redemption of all the outstanding preferred shares of a subsidiary.

Adjusting for these items, full-year adjusted net income available to common stockholders was $957 million, compared with adjusted net income available to common stockholders of $965 million in 2013.

Notably during the fourth quarter, the company received $5.1 billion of net proceeds from asset sales, most of which came from the sale of certain assets in the southern Marcellus shale and a portion of eastern Utica shale assets that closed in December (OGJ Online, Oct. 16, 2014).

The company is targeting production of 235–240 million boe in 2015, or average production of 645,000–655,000 boe/d, representing 3–5% production growth after adjusting for 2014 asset sales.

Of the projected production, 39–40 million boe is estimated to be crude oil, 1,035–1,055 bcf as natural gas, and 23–24 million boe as NGLs.

Chesapeake’s production in 2014 averaged 706,300 boe/d, a year-over-year increase of 9%, adjusted for asset sales. Average production consisted of 115,800 b/d of oil, 3 bcfd of natural gas, and 90,500 b/d of natural gas liquids.

Adjusted for asset sales, average daily oil production in 2014 increased 7%, average daily natural gas production increased 6%, and average daily NGL production increased 42%.

Drilling plans

Chesapeake plans to operate 35–45 rigs in 2015—the company’s lowest operated rig activity level since 2004 and a decrease of 38% using the midpoint of the range—from an average of 64 rigs in 2014.

The company intends to spud 790 gross operated wells and connect to sales 800 gross operated wells, a decrease from 1,175 and 1,150 wells, respectively, last year.

A vast majority of the company’s drilling and completions capex will be distributed between the Eagle Ford, Utica, Haynesville, and Niobrara shale plays.

The Eagle Ford will receive 35% of the total for an average of 12-14 operated rigs, each down compared with last year from 40% and 20, respectively.

The Utica will get 25% of the drilling and completions capex for an average of 3-5 operated rigs. Last year, just 10% went to the Utica for 8 operated rigs.

The Haynesville will see 13% for an average of 7-8 operated rigs, respectively up from 8% and about even with 8 during 2014.

In the Powder River basin, the Niobrara and Upper Cretaceous will receive 10% for an average of 3-4 operated rigs, respectively up from 5% and roughly even with 4 during last year.