Chesapeake sees 15 percent drop in third-quarter output as Harvey hurts

(Reuters) - Chesapeake Energy Corp said on Tuesday it expects a 15 percent drop in third-quarter production, partly blaming Hurricane Harvey, which forced the company to stop work in the Eagle Ford shale region of Texas.

FILE PHOTO: Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, on April 17, 2012. REUTERS/Steve Sisney

Hurricane Harvey tore through Corpus Christi in southern Texas late in August, disrupting operations of energy companies in the region as it drenched the area with historic rains that killed more than 60 and displaced about 1 million people.

Chesapeake had warned that Harvey would impact its business and said on Tuesday it expects current-quarter production to be about 542,000 barrels of oil equivalent per day (boepd), lower than the 638,100 boepd it reported a year earlier.

The company’s forecast was below Wall Street’s estimate of about 550,000 boepd, according to investment bank Tudor, Pickering, Holt & Co.

Shares of Chesapeake, which also trimmed its adjusted production forecast for the full year, were down 1.5 percent at $4.30 in morning trading. The S&P energy index was lower due to a drop in crude oil prices.

Chesapeake, which is selling assets worth $2 billion to $3 billion, said sales completed so far and changes to the way it allocated capital also contributed to the drop in production, but did not give further details.

“We look to the Marcellus or Utica as potential asset sale candidates,” Tudor Pickering said, noting Chesapeake has been focusing on producing oil, rather than natural gas, of late.

Natural gas made up about 31 percent of the Oklahoma-based company’s total revenue in the second quarter, while oil accounted for roughly 20 percent.

The company said it expects to bring 120-130 new wells into production in the fourth quarter, mostly in the oil-focused Eagle Ford, and the coal-rich Powder River Basins.

That would help the company hit its target of oil volumes averaging about 100,000 barrels per day in the quarter, Chief Executive Doug Lawler said.

Still, Chesapeake trimmed its adjusted production forecast for the full year.

The company now expects full-year production to range between a drop of 1 percent and an increase of 1 percent, compared with its previous view of flat to 4 percent growth.

Chesapeake maintained its full-year total capital budget of $2.10 billion to $2.50 billion.

Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza