* Expects total capital expenditure at $5.2 bln-$5.6 bln
* Forecasts production growth of 8 pct-10 pct, adjusted for
* Estimated per-unit production expenses to drop 10 pct
* Stock slides more than 7 percent
(Adds projected funding gap, details on Haynesville drilling)
By Anna Driver and Swetha Gopinath
Feb 6 Chesapeake Energy Corp on Thursday
cut its capital budget for the year by more than a fifth as
Chief Executive Officer Doug Lawler focuses on drilling in U.S.
shale basins with the highest returns, but the company's oil
production outlook disappointed and the stock fell more than 7
Analysts at energy-focused investment bank Simmons & Co in
Houston said the company's forecast for oil growth of 1 percent
to 5 percent, a figure that does not adjust for 2013 asset
sales, fell short of their expectations for growth of 12
The Oklahoma City-based company said it would spend between
$5.2 billion and $5.6 billion this year, about 20 percent less
than its 2013 capital expenditure estimate of $6.9 billion.
Lawler, who replaced Chesapeake's co-founder and former CEO
Aubrey McClendon in June, has pledged to cut costs and debt
while increasing oil and gas production in the company's most
profitable fields. The company has undergone a restructuring
under Lawler that included the elimination of 10 percent of its
"We are going to be a low-cost producer, and we are going to
be efficient in our investment," Lawler told investors on a
He said the company is still very focused on growing its
liquids output, but will not drill for oil in places where
returns are not good. About 35 percent of Chesapeake's 2014
budget is earmarked for drilling in the Eagle Ford shale field.
Including capitalized interest, Chesapeake still faces a gap
between operating cash flow and capital expenditures of $1
billion this year. Asset sales are planned, but the company
declined to provide any additional details.
Chesapeake was targeting more than $4 billion from asset
sales in 2013. On an absolute basis, Chesapeake is targeting
2014 production growth of 2 percent to 4 percent, it said on
Adjusting for 2013 asset sales, the company said it expected
overall production growth to rise 8 percent to 10 percent this
year. Oil output is forecast to rise 8 percent to 12 percent,
natural gas liquids production to increase 44 percent to 49
percent and natural gas output to climb 4 percent to 6 percent.
MORE RIGS IN THE HAYNESVILLE SHALE
A rise in natural gas and natural gas liquids output from
Chesapeake's operations in the central United States, the Utica
shale in Ohio and Marcellus shale in the U.S. Northeast is also
expected to contribute to production growth in 2014.
Chesapeake also said it has been adding rigs in the
Haynesville Shale in Louisiana, a move that puzzled some
analysts who contend that natural gas prices are not high enough
to drill profitable dry gas wells.
Drilling for dry gas, which does not contain high amounts of
liquids such as propane and butane that can be stripped out and
sold at a premium, has slowed dramatically in formations like
the Haynesville and Barnett Shale in Texas due to low prices.
Still, Chief Financial Officer Domenic Dell'Osso told
investors that the company's Haynesville wells were "highly
"We are pleased to be in a position to return some activity
to the Haynesville in 2014," he said.
As a result of cost-cutting initiatives, Chesapeake expects
production expenses to fall by about 10 percent to $4.25 to
$4.75 per barrel of oil equivalent (boe) in 2014.
The company expects general and administrative expenses to
slide 25 percent this year.
After tumbling 7.4 percent to a session low of $24.27,
Chesapeake's stock trimmed losses to trade down $1.71 at $24.50
in midday trading on the New York Stock Exchange.
(Reporting By Swetha Gopinath in Bangalore; Editing by Maju
Samuel, Saumyadeb Chakrabarty, Marguerita Choy and Jan Paschal)