Chesapeake CEO expects to decide Eagle Ford disposition in second-half 2022

The president and chief executive officer of Chesapeake Energy Corp., Oklahoma City, said May 5 his team will have a better idea later this year about how to move forward with its assets in the Eagle Ford basin, where it recommenced operations a few months ago after pausing them during the COVID-19 pandemic.

Nick Dell’Osso made his comments during a conference call discussing Chesapeake’s first-quarter earnings and a day after investment firm Kimmeridge Energy Management Co. said it had acquired about 2 million Chesapeake shares and has started talks about some of the company’s strategic priorities. Kimmeridge Managing Partner Mark Viviano told Reuters that the firm thinks Chesapeake’s “disparate oil assets” are diluting the value of its gas holdings, suggesting it wants more sales of oil properties such as the Powder River basin divestment Chesapeake undertook early this year with Continental Resources Inc. (OGJ Online, Jan. 25, 2022)

“I don’t think there’s a big gap in how we all see the world,” Dell’Osso said on the call, adding that his team and Kimmeridge have talked a lot about the Eagle Ford, where Chesapeake is producing 52,000 b/d and from which it will generate, after the effect of hedges, $600 million in free cash flow this year.

“We want to have our heads down and execute on that because we think we’re adding some good value here in the near term,” Dell’Osso said. “But ultimately, we’re going to let results of those programs […] inform us on whether we think we can maximize the value of this asset through our development or if we should maximize the value of that asset by selling it to someone else […] We think we’ll have results certainly in the second half of the year to talk about.”

Chesapeake posted a net loss of $810 million in the first 3 months of this year. That figure included a top-line loss of more than $2.1 billion on derivatives; adjusted for that and several other items, earnings before interest, taxes, depreciation, amortization, and exploration were $913 million versus $510 million in early 2021. Production for the quarter averaged 620,000 boe/d, with the company’s gas holdings in the Marcellus and Haynesville basins growing their combined output to 3,077 MMcfd from 1,793 MMcfd in the prior-year period and their average sales price rising to about $4.50 from roughly $2.50/Mcf.

Looking ahead, Dell’Osso and his team expect gas production to average 3,700-3,800 MMcfd this quarter and 3,600-3,700 MMcfd for the year while oil production, which was 60,000 b/d in the first quarter, will dip to 48,000-50,000 b/d in the second quarter with full year production of 51,000-56,000 b/d. 

Shares of Chesapeake (Ticker: CHK) were down more than 1% to roughly $94 in afternoon trading May 5. Year to date, they are still up more than 40%.