As always,
Chesapeake Energy (NYSE: CHK) has given us
plenty to chew on this earnings season.
In the third quarter, the natural gas hulk turned in
sequential production growth of 2%, after adjusting for
curtailments, divestitures, and other transactions. That's a
moderation from last quarter, when the E&P really wasn't
holding back. Not all curtailments were voluntary,
either. Pipeline repairs held back Fayetteville shale
volumes.
Production in this Arkansas gas field was still up 13%
sequentially, mind you. Growth just wasn't as heady as it was
over in the Haynesville, where average production rocketed
67% higher sequentially, to 229 million cubic feet per day.
Daily volumes are projected to double off of that level by
the end of 2010.
In total, Chesapeake produced more than 228 billion cubic
feet equivalent of natural gas during the quarter. Meanwhile,
the firm tacked on nearly a trillion cubic feet in organic
reserve additions, marking the best period for such growth in
the company's history. Chesapeake and other shale players
like
Range Resources (NYSE: RRC) and
Southwestern Energy (NYSE: SWN) certainly
aren't having trouble finding gas these days.
Thanks to hedging, Chesapeake achieved some very classy
cash flow margins this quarter. I've often held up
Ultra Petroleum (NYSE: UPL) as the paragon of
profitable production, but Chesapeake actually surpassed that
outfit with a 76% margin this period. Fat hedges helped make
this happen, taking the firm's realized gas price in the
quarter from $2.84/mcf to $6.04/mcf.
During the conference call, management made plenty of
interesting points. Here are five that stood out to me:
StatoilHydro (NYSE: STO) should find
something "actionable" next year.
The company is evaluating an oil play in the Rockies.
Does this mean Chesapeake is poised to join
EOG Resources (NYSE: EOG) and
XTO Energy (NYSE: XTO) in the Bakken?
The firm is looking to high-grade its Haynesville
position by selling off some acreage, particularly in East
Texas.
Just to make it an even half-dozen, I'll also note that
Chesapeake is still talking to potential partners in a
Barnett shale joint venture, and looking to close a deal
sometime soon. Stay tuned.
Related Foolishness:
investor day.
With shale plays exploding, no wonder this land
driller's
pondering a pickup.
Range Resources is looking
magnificent in the Marcellus.
This article was originally published as
Chesapeake Has Gas Coming Out of Its Earson
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