CORRECTED - UPDATE 3-Chesapeake Energy cuts output due to weak prices

* Cuts production 7 percent due to low prices

* Grants Plains Exploration option to avoid JV payment

* Chesapeake shares fall more than 8 pct (Corrects natural gas figure in third paragraph)

NEW YORK, March 2 (Reuters) - Independent natural gas and oil producer Chesapeake Energy Corp <CHK.N on Monday cut its output 7 percent because of low energy prices and said it would allow a joint venture partner to skip an $800 million payment.

The move comes after benchmark natural gas futures prices skidded to their lowest mark in more than six years on Friday before rebounding slightly. Since reaching a peak in July, those prices have tumbled about 70 percent.

Chesapeake will trim its Midcontinent natural gas output by 200 million cubic feet per day and oil production by 6,000 barrels per day for at least the month of March.

Energy analysts have said they expect natural gas prices to remain under pressure until the middle of 2009, when a glut of production is expected to decline and producers' cuts to new drilling programs start trim output.

One analyst said the move should benefit Chesaspeake, which has been perhaps the most aggressive company expanding its natural gas production, even as the market weakened.

"They want to grow in an environment when they shouldn't," said Phil Weiss, analyst at Argus Research, adding the company appeared to have "gotten a dose of reality."

Chesapeake said prices for natural gas at major hubs in the Midcontinent will average about $2.70 per thousand cubic feet in March, making most production in the region unprofitable.

Still, with many energy producers cutting spending on new natural gas fields, the market was poised to rebound later this year, the company said.

"We believe low wellhead prices combined with constrained capital availability will likely cause U.S. drilling activity to decline well beyond the 40 percent drop already seen since August 2008," Chief Executive Officer Aubrey McClendon said in a statement.

Chesapeake also may cut by 10 percent its drilling program from about 110 rigs currently operating. The company, which has been under pressure to shore up its balance sheet after spending heavily to buy and develop new properties, had 158 rigs operating in August.

OPTION FOR JV PARTNER

The company also said it would grant Plains Exploration (PXP.N) an option to avoid paying $800 million of the $1.65 billion it must contribute to the companies' joint venture to develop Haynesville Shale properties.

Plains can exercise the option between June 15, 2010, and June 30, 2010, but would be required to give half its assets in the joint venture to Chesapeake. Plains total investment in the leaseholds, production and reserves are likely to be between $3.0 billion and $3.2 billion by that time, Chesapeake said.

Plains was not immediately available to comment.

If Plains exercises that option, Chesapeake could be forced to scale back plans to develop new wells in the Haynesville shale, an "unconventional" natural gas field that is a core area of growth for the company.

Shale fields, such as the Haynesville and Barnett Shale in Texas, have come to play a prominent role in the growth of U.S. natural gas production as the costs to pull the fuel out of the ground have declined in recent years.

Chesapeake's shares sank 8.3 percent to $14.34 on the new York Stock Exchange and Plains shares shed 6.8 percent to $17.83, outpacing the 3.5 percent decline in the S&P Energy index .GSPE. (Reporting by Matt Daily; Editing by Maureen Bavdek, Dave Zimmerman)