The company most associated the the dramatic ups & downs of the US Shale Patch is taking a gamble. They plan to sell prize oil assets and increase their American natural gas production.
Chesapeake Energy was a pioneer in the shale revolution, but it went bankrupt during the coronavirus panic crash. Instead of relying on the demand for oil, it said Tuesday that it would exit oil completely and return to its roots of natural gas producers.
The company — which grew from obscurity in the late 1980s to become the best-known player in the fracking revolution that made America the world’s biggest producer of oil and natural gas — said it would offload oil producing assets in south Texas’s Eagle Ford basin, allowing it to focus solely on gas production from Louisiana’s Haynesville basin and the Marcellus in Appalachia.
Chief executive Nick Dell’Osso said the decision was made due to better returns from its gas assets, where it has had more success driving down costs and improving efficiency compared with oil.
He stated that the company was also looking to increase natural gas production due to increased demand for US-liquefied natural gases. This is in response a global scramble to get the commodity, which was fueled by the conflict in Ukraine. Russia’s weaponisation of its exports in the wake of Vladimir Putin’s invasion has created a global shortage and sent prices soaring.
“We stand to help the world through the gas that we deliver as much as anyone else,” said Dell’Osso. “The US is now connected more fully to the rest of the world through LNG exports and that connectivity is going to nearly double over the next five to seven years.”
Chesapeake’s former chief Aubrey McClendon pioneered the widespread use of hydraulic fracturing and horizontal drilling at the turn of the 21st century to become the biggest US gas producer after ExxonMobil.
Chesapeake was worth $35bn at its peak in 2008. McClendon became America’s highest-paid executive. He was killed in a crash with his car in 2016, just one day after he was charged with rigging bids for drilling rights.
This company was the most prominent victim of the 2020 price crash, which dragged dozens of debt-saddled oil-and-gas producers into bankruptcy. It emerged from bankruptcy in February last year vowing — like many other players in the space — to shift from a model of untrammeled growth and drilling to one of capital discipline and higher shareholder returns.
Since its bankruptcy, the company has steadily increased its gas portfolio. To strengthen its position in Haynesville, it bought Vine Energy, a gas producer, for $2.2bn in August. It is located close to US Gulf Coast gas-export facilities.
And in January, it bought Chief Oil & Gas, a gas operator in north-eastern Pennsylvania’s section of the prolific Marcellus shale field. It recently sold its Wyoming oil business to Continental Resources, a company owned by Harold Hamm, a billionaire in the shale industry.
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