UPDATE 1-Chesapeake Energy cancels shale Web TV project

(Adds company comment, updates share price)

HOUSTON, Oct 13 (Reuters) - Chesapeake Energy Corp CHK.N, which recently cut its drilling budget by more than $3 billion, has canceled the development of an online television show aimed at educating landowners on urban drilling in north Texas.

“Given today’s economic challenges faced by our country and industry, it is the right decision as we focus our time and resources on exploration and production activities,” spokeswoman Jerri Robbins said in an e-mail on Monday.

The program, called Shale.TV, was part of the natural gas producer’s efforts to raise its profile in the Barnett Shale area, where it holds the rights to drill on thousands of acres in and around Forth Worth.

Among its other public relations efforts, Chesapeake produced a 30-minute video called “Citizens of the Shale” and hired Oscar-winning actor and Texas native Tommy Lee Jones to narrate the campaign.

Shale.TV was scheduled to be launched later this month.

Robbins, who declined to put a price tag on Shale.TV, said most of the company’s other outreach and advertising efforts have wound down, but the company is running television commercials on drilling and production.

Shares of Chesapeake, which had loaded up on debt to fund an aggressive drilling program, were battered last week as investors worried about the effect of tightening credit markets and falling gas prices on the Oklahoma City company.

To shore up investor confidence, Chesapeake said on Friday it would cut another $1.5 billion from its capital budget for the next two years. That announcement came weeks after the company cut its drilling budget through 2010 by $3.2 billion.

Even so, Chesapeake is expected to maintain sufficient liquidity despite negative market sentiment, debt rating agency Standard & Poor’s said on Monday.

Shares of Chesapeake ended up 22 percent at $20.20 on the New York Stock Exchange, in line with a 20 percent gain in American Stock Exchange index of natural gas companies .XNG.

Since the start of the year, the stock has fallen about 50 percent, underperforming a 34 percent decline in the index of it peers. (Reporting by Anna Driver in Houston; Editing by Ted Kerr, Richard Chang)