Chesapeake to exit Eagle Ford to focus on gas fields

US independent producer Chesapeake Energy plans to sell off its oil-rich assets in south Texas' Eagle Ford shale to focus exclusively on opportunities in the Haynesville and Marcellus shale natural gas fields.

"We are tightening our strategic focus around our best rock, best operations and lowest emissions footprint to generate the most attractive and sustainable capital returns," said Nick Dell'Osso, Chesapeake's chief executive.

The Marcellus, a mammoth gas field in Pennsylvania and the surrounding states, and the Haynesville, a prolific gas field in east Texas and northern Louisiana, have been in the spotlight this year as natural gas prices rocketed in June to 13-year highs above $9/mmBtu, fueled by increases in exports, robust demand in the US power sector and sluggish production growth.

Chesapeake, once the largest producer of US gas by volume, had amassed one of the biggest portfolios of shale oil and gas assets. The company in the last several years has winnowed down those assets, selling off many ahead of a bankruptcy filing in June 2020. It emerged from that bankruptcy in February 2021, holding on to assets in a few core areas.

Output from the Marcellus, the biggest US gas field by volume, has increased modestly in the past year, because of tight pipeline capacity, while Haynesville output has soared as producers ramped up drilling to tap premium markets along the US Gulf coast.

Chesapeake will spend $1.75bn-$1.95bn this year in the Haynesville, an increase of 15pc from its previous guidance, to address rising costs there and to boost its rig count from five in second quarter to seven by year end. It added a sixth rig in the Haynesville last week. The company will idle three rigs in the Eagle Ford, dropping to two rigs there at the end of this year.

The Haynesville and Marcellus continue to outperform the Eagle Ford, leading to the decision that the south Texas field was no longer essential to its business, Chesapeake said.

The company holds leases on 610,000 acres in the Eagle Ford. The divestiture may require several transactions due to the size of the asset and "will not happen overnight," Dell'Osso said. "This will not be a fire sale."

Chesapeake has invested heavily in the Haynesville, spending $2.2bn to acquire producer Vine Energy late last year. It also purchased producer Chief E&D in March for $2.6bn, expanding its footprint in the Marcellus.

Chesapeake's second quarter production was 4.125 Bcf/d (117mn m³/d) of natural gas equivalent, up by 59pc from a year earlier. Those prior-year results exclude output from the acquisitions and include production from divested assets.

By Jason Womack