Chesapeake Energy, the No. 2 producer in the Barnett Shale, plans to slash its drilling activity in North Texas in half because of the lowest natural gas prices in a decade.
Oklahoma City-based Chesapeake said today that it expects to pare back its drilling operations to six rigs each in the Barnett Shale and the Haynesville Shale of northwest Louisiana and East Texas during the second quarter.Chesapeake recently has been operating about 12 rigs in the Barnett, with most of the drilling in Tarrant County, the leading gas-producer among Texas' 254 counties.The company also said it plans to "immediately curtail" about a half-billion cubic feet of gas production per day, which represents about 8 percent of its current gross operated production of 6.3 billion cubic feet per day.Gas futures contracts on the New York Mercantile Exchange rallied as much as 9.9 percent after the announcement, according to Bloomberg News, after falling as low as $2.23 per million British thermal units.The cutbacks will be in so-called "dry gas" fields such as the Barnett that are most severely impacted by the lowest natural gas prices in a decade caused by a nationwide glut of gas.Chesapeake, like other U.S. energy companies, is shifting its focus to areas where they can recover substantial quantities of oil and natural gas liquids such as propane and butane, which are commanding much more attractive prices than natural gas.Chesapeake said it plans to "wherever possible ... defer completions of dry-gas wells that have been drilled but not yet completed, and also plans to defer pipeline completions of dry-gas wells that have already been completed."Julie Wilson, vice president for urban development for Chesapeake in Fort Worth, said that the company employs more than 1,000 people in North Texas. Cutbacks in drilling and production will have only a minimal impact on employment levels here, she said."It won't be a substantial number ... it would be a very small minority," she said. "Obviously, the folks who travel with the drilling rigs will go where the drilling rigs go."Wilson said she expects a slowdown in drilling and completion of Barnett wells, along with curtailment of some production."It just makes sense to defer that until prices are better for everybody," she said. "That's good for our royalty owners as well."This represents an opportunity for Texas, the nation's leading natural gas producer, to increase demand and clean up its air by "converting more coal-fired plants to natural gas and converting more vehicles to natural gas," Wilson said.Jack Z. Smith, 817-390-7724Twitter: @startelegram
Natural gas price free-fall can't be good for North Texas
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