Paring Back in the Oil Patch

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Gas glut? Fine, we'll cut.

As I'd hoped, other natural gas players are following Chesapeake Energy's (NYSE: CHK) cautionary cut and dialing back their own drilling.

On Wednesday, Petrohawk Energy (NYSE: HK) slashed its 2009 budget by 33%. Now it's targeting production growth of only 25%-35% year over year ... the poor dears.

Just like Chesapeake, Petrohawk is prioritizing its tastiest targets -- the hot, hot Haynesville and the fabulous Fayetteville shale plays. The latter region is getting a brand new pipeline, courtesy of Kinder Morgan Energy Partners (NYSE: KMP) and Energy Transfer Partners (NYSE: ETP), so I wouldn't be surprised to see Petrohawk grab a ticket on that train during open-season bidding.

In equally big news, Petrohawk managed to land a $1.1 billion credit line, up from $800 million, in a week when most bankers wouldn't lend to their grandmothers.

The following day, SandRidge Energy (NYSE: SD) announced an even bigger cut in capital expenditures. The company, whose leader so impressed me with this massive purchase, is planning on spending only half as much in 2009 as originally guided. I told you this development plan was aggressive, and the company appears to be chastened by recent developments.

SandRidge is simultaneously looking to unload some properties in the Cotton Valley/Haynesville plays of East Texas and northern Louisiana. After this year's buying binge, I would hope that XTO Energy (NYSE: XTO) has lost its appetite for acquisitions, and would tip EnCana (NYSE: ECA) as a more likely buyer.

Going forward, I'd expect to see more of the same from additional players -- a combination of spending reductions and asset sales. With some well-cashed-up competitors out there, energy deals are far from doomed.