Chesapeake Energy raised its full-year oil and natural gas production target and said drilling wells is getting cheaper in every field where it operates.
The Oklahoma City producer, one of the top operators in the Barnett Shale, gave the forecast as it reported much improved third-quarter results today.
Chesapeake now expects to pump the equivalent of 700,000 barrels of crude a day this year, based on the midpoint of the range the company reported on its website. That’s 5,000 barrels, or 0.7 percent, higher than the previous target released in August.
The worst oil bear market in more than half a decade hasn’t deterred Chief Executive Officer Doug Lawler from increasing output because the costs to drill new wells are plunging.
Never miss a local story.
In Chesapeake’s two largest production areas — Pennsylvania’s Marcellus Shale and the Eagle Ford formation in Texas — well costs dropped 11 percent and 13 percent, respectively, during the first seven months of this year compared with 2013, the company said in a statement. Those two shale regions accounted for 34 percent of Chesapeake’s third-quarter output.
Chesapeake shares (ticker: CHK) jumped nearly $1.25, or nearly 6 percent, to $22.54 by late morning. Before today, the stock had shed 17 percent of its value this year.
Lawler has been selling or spinning off gas fields, pipelines, office buildings and drilling rigs as part of a strategic shift into more profitable crude-oil production. Chesapeake sold its 20-story office building on the western edge of downtown Fort Worth, which now bears the name of Pier 1 Imports, during the quarter.
Lawler, who succeeded Chesapeake co-founder Aubrey McClendon last year amid an investor revolt, has also been cutting costs and untangling complex financial arrangements favored by his predecessor.
The company said third-quarter net income increased to $662 million, or 26 cents a share, from $202 million, or 24 cents, a year earlier. The per-share result, excluding certain one-time items, was 5 cents more than the 33-cent average of 26 analysts estimates compiled by Bloomberg.
Chesapeake announced a $5.4 billion deal to sell gas and oil fields to Southwestern Energy on Oct. 16. in the largest asset divestment in Chesapeake’s 25-year history. The transaction is expected to close by the end of the year.
About 85 percent of Chesapeake’s output is comprised of natural gas and so-called gas liquids such as propane. Only Exxon Mobil, which owns XTO Energy, produces more gas from U.S. wells. Benchmark U.S. gas futures rose by 11 percent during the quarter to an average of $3.95 per million British thermal units from $3.56 a year earlier, according to data compiled by Bloomberg.