Chesapeake Energy 1Q16: Loves Marcellus, Loves Utica More

Chesapeake EnergyChesapeake Energy released its first quarter 2016 update yesterday. From the update we learn that the company lost $964 million in 1Q16–but most of it was a paper loss, their assets being written down in value given the low price of oil and gas. Chessy spent $365 million in 1Q16 vs. $1.5 billion in 1Q15. Perhaps most telling is that the company operated just 8 drilling rigs during 1Q16 vs. operating 54 during 1Q15. What about the Utica and Marcellus? During the earnings teleconference call, Chesapeake’s Executive Vice President for Exploration, Frank Patterson, and CEO Doug “the ax” Lawler had high praise for the Marcellus. Both calling it “a core asset” and “an incredibly powerful asset.” Currently the Marcellus produces about 1.8 billion cubic feet per day for Chesapeake. They are curtailing about 350 million cubic feet per day of Marcellus production. However, Chessy loves the Utica more–at least right now. While there are no plans to restart drilling in the Marcellus this year (as it stands right now), there are plans to drill more wells in the Utica. Why? Because the Utica has pipelines that can cart production to the Gulf Coast, via Spectra Energy’s OPEN (Ohio Pipeline Energy Network) pipeline. The Marcellus is currently pipeline challenged, which makes the recent announcements about both Kinder Morgan’s NED project and Williams’ Constitution Pipeline project all the more tragic. Chessy loves the Marcellus–but they’re waiting and watching until more pipeline capacity comes online. Here’s what was said vis-a-vis the Marcellus and Utica on yesterday’s analyst call…

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