Chesapeake sells drilling rights in Oklahoma but says it will drill in Utica

Oil and gas rigs
Source: DollarPhotoClub

The shares of Chesapeake Energy – a company synonymous with American shale renaissance of the last decade – surged as much as 15 percent as a result of an announcement that the company signed a deal to sell Oklahoma drilling rights to Newfield Exploration Co. for $470 million.

The Newfield agreement, which covers 42,000 acres and 400 wells, is the latest step taken by the beleaguered company which announced that it’s planning to divest as much as $1.7 billion in asset sales by the end of 2016.

Chesapeake has been burdened with a lot of debt that the company finds difficult to finance in the current low-price climate. The company’s CEO Doug Lawler slashed thousands of jobs, sold off gas fields, renegotiated pipeline fees and pledged more than 90% of Chesapeake’s assets as collateral to cope with shrinking cash flow and retain access to its line of credit.

Despite these difficulties, however, Chesapeake made it known that it intends to resume drilling in the Utica shale where it remains No. 1 driller. The company spokesman, Frank Patterson, said that Chesapeake is interested in drilling dry gas wells as thanks to the recently opened pipeline to the Gulf Coast it can get better prices.

“We’re pretty happy with our position [in the Utica Shale],” Patterson said.
Company CEO Doug Lawler called the Utica Shale “an incredibly powerful asset.”

The company’s net loss narrowed to $964 million in the three months ended March 31, from $3.8 billion a year earlier. The year-earlier period included one-time items of $3.8 billion. First-quarter revenue fell 39 percent on the year to $1.9 billion as gas prices tumbled.

Excluding an $853 million impairment charge, the loss in the latest quarter was 10 cents per share, in line with analysts’ average estimate. Revenue slumped 39 percent to $1.95 billion, widely missing analysts’ expectations of $2.55 billion.

On Wednesday, Chesapeake shares rose 15 percent and were up 5.6 percent at $5.97 at 9:51 a.m. in New York.

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