Why Chesapeake Energy Corporation (NYSE:CHK) Wants To Boost Production?

The commodities market is weakening, which has forced several oil and gas entities to cut down on their operations. Following a different course, Chesapeake Energy Corporation (NYSE:CHK) reported that it enhanced production forecast of the year against the previous growth projection of 1% to 3% for the year.

The highlights

Chesapeake presented at the recently held Barclays Energy-Power Conference where the management stated that the significant drop in its operational expenses and better drilling outcome from its properties have encouraged them to boost the production guidance. Doug Lawler, the Chief Executive represented the company at the Barclays. He mentioned the various factors linked to the recently concluded gas gathering contracts with Williams Companies. These deals are entered in an attempt to expand the margins and enhance production volumes.

The economic scenario

Chesapeake admits that the industry is going through an extremely challenging phase. It has therefore become an absolute necessity to take substantial measures to deal with plunging oil and gas prices. As a result, the company made changes in its capital expenditure, and lowered it to almost $800 million in the second quarter of 2015 from close to $1.5 billion in the fourth quarter of 2014. These changes were made to support a flat production for this fiscal. However, the oil prices failed to recoup their losses, following which the management further lowered capital budget to about $500 million for the third and fourth quarter of 2015.

The takeaway

Chesapeake Energy Corporation (NYSE:CHK) followed various measures to become capital discipline and it brought results in favor of the company. As a result of capital discipline, the company reduced its capital expenditure and increased the production guidance for the year. The company’s initiatives are concentrated at boosting its earnings by minimizing lease operating and gathering expenses in the coming period. In fact, it reduced these expenses by as much as 9% in the past two years.

Scott Coper

Scott Coper

Coper graduated from the University of Chicagi with majors in political science and journalism.