Not long after becoming the nation's No. 1 producer, the natural-gas guru is tightening the reins in response to the recent commodity price rout.
As usual, there is a huge amount of information packed into Monday's press release, but I will try to hit upon most of the key developments, and draw out some implications for both Chesapeake and the rest of the industry.
Front and center is the drawdown in drilling -- $3.2 billion worth through 2010. That's a significant amount, but it's important to recognize that fully 40% of that figure stems from the "capex carry" associated with two major joint ventures -- one executed, and one pending.
One deal with BP
The other 60% of Chesapeake's projected drawdown cut comes out of internally funded drilling. The curtailment doesn't look nearly as drastic when you consider that Chesapeake is mainly dropping more marginal targets in favor of sweet-spot stuff like the Haynesville. Greater productivity of the latter wells can go a long way toward minimizing the production drop-off.
Chesapeake's move here -- beyond the positive impact it will have on the company's own balance sheet -- may be just as important for the message that it sends to both peer companies and the broader market. For peers like Anadarko Petroleum
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