Chesapeak scales back Utica operations until Gulf Coast pipeline opens

Chesapeke logo
Source: DollarPhotoClub

Oklahoma-based Chesapeake Energy Corp. will curtail much of the production from its Utica Shale play until the pipeline that will deliver the natural gas to the Gulf Coast is completed.

Back in July the company decided to cut back gas production by 100 million cubic feet per day, however on Wednesday company executives announced that they would increase the cutbacks to 275 million cubic feet per day. The production cuts were triggered largely by low commodity prices for natural gas and liquids are expected to last until November, when the Ohio Pipeline Energy Network (OPEN) is scheduled to come on-line.

Texas-based Spectra Energy Corp is the company behind the 76 mile pipeline which will run through Columbiana, Carroll, Jefferson, Belmont and Monroe counties. The $468 million OPEN project will then connect to an existing pipeline to send gas to Louisiana.

Once the new pipeline is completed, it will allow Chesapeake to ship 350 million cubic feet per day to the Gulf Coast where prices are better due to the export of liquefied natural gas. Chesapeake is one of four producers with committed long-term agreements to the pipeline, the others being Consol Energy, Rice Energy and Total Gas & Power North America.

Despite holding back many of its wells and running with just four rigs, Chesapeake’s production grew 13 percent in the second quarter according to Chris Doyle, executive vice president of operations for Chesapeake Energy’s northern division, averaging 124 million barrels of oil equivalent per day.

Chesapeake said it intends to maintain two drilling rigs in the Utica shale, down from four in the second quarter and from eight a year ago.

CEO Doug Lawler said the company is willing to look at asset sales, joint ventures and drilling agreements to improve finances and is seriously looking at refracking wells to boost production and has ‘a ton of options’.

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