Chesapeake Stockpiles DUCs as Doubts Creep in Over Southwestern Deal

Hart Energy05-02

Like its peers, Chesapeake Energy is maneuvering through a weak natural gas market by curtailing production until supply and demand balances out. The E&P is also navigating an intensified Federal ...

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Offtake agreements were signed with Delfin LNG","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","SG9999002232.USD":"Allianz Global High Payout USD","CHKEW":"Chesapeake Energy Corp","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","LU1267930813.SGD":"FRANKLIN TEMPLETON SHARIAH GLOBAL EQUITY \"AS\" (SGD) ACC","SG9999002224.SGD":"Allianz Global High Payout SGD","SG9999014559.SGD":"United Income Focus Trust Dis SGD","LU1150488218.USD":"First Eagle Amundi Income Builder AU2-MD USD","FTC":"First Trust Large Cap Growth Opp","LU1489326972.SGD":"First Eagle Amundi International AHS-MD SGD-H","IE0031619046.USD":"LEGG MASON ROYCE US SMALL CAP OPPORTUNITY \"A\" (USD) INC","LU0795875086.SGD":"JPMorgan Investment Funds - Global Income A (div) SGD","LU1066051498.USD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM2\" (USD) INC","LU0466842654.USD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"A\" (USD) ACC","SG9999014567.USD":"UOB UNITED INCOME FOCUS TRUST FUND (USD) ACC","LU1066053197.SGD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM3\" (SGDHDG) INC","BK4550":"红杉资本持仓","LU2087621335.USD":"ALLSPRING GLOBAL FACTOR ENHANCED EQUITY \"A\" (USD) ACC","CHKEZ":"Chesapeake Energy Corp","LU0266512127.USD":"摩根大通环球自然资源 A(acc)","LU1150488135.SGD":"First Eagle Amundi Income Builder AHS-MD SGD-H","SG9999015358.SGD":"United Income Focus Trust Dis SGD-H","LU0300736492.USD":"FRANKLIN NATURAL RESOURCES \"A\" (USD) INC","SG9999015341.SGD":"United Income Focus Trust Acc SGD-H","LU0985489474.SGD":"First Eagle Amundi International AHS-C SGD-H","LU0300736062.USD":"FRANKLIN NATURAL RESOURCES \"A\" (USD) ACC","LU2602419157.SGD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"AC\" (SGD) ACC","IE00B66KJ199.SGD":"LEGG MASON ROYCE US SMALL CAP OPPORTUNITY  \" A\" (SGD) ACC","LU0878866978.SGD":"First Eagle Amundi International AHS-QD SGD-H","LU0122376428.USD":"贝莱德世界能源基金A2","LU2133065610.SGD":"JPMorgan Investment Funds - Global Dividend A (mth) SGD","XOM":"埃克森美孚","CHK":"切萨皮克能源","IE00B19Z4B17.USD":"LEGG MASON ROYCE US SMALL CAP OPPORTUNITY \"A\" (USD) ACC","LU1732799900.SGD":"JPMorgan Investment Funds - Global Income A (irc) SGD-H","LU0433182093.SGD":"First Eagle Amundi International AS-C SGD","LU0889566641.SGD":"FTSF - Templeton Shariah Global Equity A Acc SGD","SWN":"美国西南能源","BK4213":"石油与天然气的勘探与生产","LU0068578508.USD":"First Eagle Amundi International Cl AU-C USD","LU1839511570.USD":"WELLS FARGO GLOBAL FACTOR ENHANCED EQUITY \"I\" (USD) ACC","LU0912757837.SGD":"JPMorgan Investment Funds - Global Income A (mth) SGD-H","BK4516":"特朗普概念","LU0792757196.USD":"TEMPLETON SHARIAH GLOBAL EQUITY FUND \"A\" (USD) ACC","BK4585":"ETF&股票定投概念","BK4592":"伊斯兰概念","LU0098860793.USD":"FRANKLIN INCOME \"A\" INC","LU1732800096.USD":"摩根大通环球收益基金A (irc)","BK4570":"地缘局势概念股","CHKEL":"Chesapeake Energy Corp WTS 2026/02/09 35.708C","LU1162221912.USD":"FRANKLIN INCOME \"A\" (USD) ACC","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4534":"瑞士信贷持仓"},"translate_title":"切萨皮克储备DUCs作为怀疑蔓延超过西南交易","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FTC":1,"SWN":1,"CHK":1,"CHKEZ":0.9,"CHKEW":0.9,"CHKEL":0.9,"XOM":0.89},"content_text":"Like its peers, Chesapeake Energy is maneuvering through a weak natural gas market by curtailing production until supply and demand balances out.\nThe E&P is also navigating an intensified Federal Trade Commission (FTC) review that has introduced doubts into whether Chesapeake’s $7.4 billion merger with Southwestern Energy will close or belly flop. \n“There is also rising concern among investors that the FTC will prevent the merger from consummating which creates an overhang,” said Gabriele Sorbara, managing director at Siebert Williams Shank & Co. in a May 1 commentary. “We maintain our Hold rating on the merger uncertainties and less attractive pro forma valuation relative to peers.” \nAs federal scrutiny of the deal continues, Chesapeake is building for the future: a stockpile of DUCs that it can quickly turn to sales when prices recover.\n“No shifts on the overall activity plan with management reiterating status quo is to build DUCs through 2024 in what we continue to see as prudent decision making that will position CHK [Chesapeake Energy] well for a recovery into 2025,” analyst Matt Portillo with Tudor, Pickering, Holt & Co. wrote in a May 1 commentary.\nChesapeake added 24 DUCs in the first quarter. At the end of the quarter, the company had 50 DUCs—twice the normal average, according to its earnings report.\nNatural gas prices are hitting record lows due to associated gas from oil production, high storage inventory and warm winter weather. Producers are having to slash production to keep up.\nFor the Oklahoma City-based E&P, the plan is to continue what it had already announced at the end of 2023—deferring completions and new well turn in lines in favor of building short-cycle production capacity to be activated in the future.\nChesapeake deferred 22 turn-in-line wells in the quarter and curtailed 200 MMcf/d of its base production. The company plans to curtail approximately 400 MMcf/d in the second quarter, according to its quarterly earnings release.\nVolumes will flow back in subsequent quarters in the second half of 2024 following the second quarter’s curtailments, COO Josh Viets said.\n“The market is pretty clearly oversupplied and we don't want to bring on wells in an environment where the initial production of these wells, the significant part of the return, comes to market in an oversupplied market and receives a lower than breakeven price,” said Nick Dell’Osso, president and CEO.\n\nRELATED\nEIA: Permian, Bakken Associated Gas Growth Pressures NatGas Producers\nCNX, Appalachia Peers Defer Completions as NatGas Prices Languish\n\nWhile the natural gas market is less than favorable at the moment, Chesapeake anticipates natural gas demand to grow significantly from LNG exports, power generation and industrial activity, Dell’Osso said during the first-quarter earnings call.\nIn February, the company signed LNG sale and purchase agreements for approximately 0.5 million tonnes per annum (mtpa). Offtake agreements were signed with Delfin LNG, Gunvor and Vitol.\nChesapeake’s current plan—with its low-cost structure and deep inventory—will allow the company to quickly meet a rebound in demand growth, Dell’Osso said.\nMerger doubts\nDell’Osso said he still anticipates closing a merger with Southwestern in the second-half 2024.\n“We did feel like the merger with Southwestern allowed us to advance on those fronts and have real synergies, real industrial logic that helps to improve our ability to meet those goals over time,” Dell’Osso said.\nBut the merger itself has introduced uncertainty since Southwestern is no longer providing guidance, muddying the pro forma outlook should the companies successfully combine, Sorbara said.\nThe FTC has already delayed the merger.\nIn early April, the FTC requested more information on the pending merger between the top natural gas producers in the Appalachia and Haynesville, that if combined, would create the largest natural gas producer in the country with over 5,000 pro forma gross locations across the two basins.\nChesapeake and Southwestern are among several companies facing FTC review. Second requests were also filed for the mergers of Chevron Corp.  and Hess Corp. On May 2, the FTC took a heavy handed approach Exxon Mobil’s acquisition of Pioneer Natural Resources, forcing the companies to abandon plans to add Pioneer Chairman Scott Sheffield join Exxon’s board. Most recently, on April 30, Diamondback Energy’s $26 billion merger with Endeavor Energy Resources was delayed by an FTC request for more information.\nIn response to an analyst question about the pending merger with Southwestern, Dell’Osso said Chesapeake is eager to work with the FTC to answer the commission’s questions.\n“We feel good about the underlying merits of the transaction and look forward to getting through this process and getting it closed, but really hard to predict exactly how long that will take,” he said.\n\n\n\n(Source: Chesapeake Energy)\n\n\nEarnings, results\nChesapeake did not repurchase any shares in the first quarter due to the pending merger.  \nNet production in the first quarter was at a low end of expectations at approximately 3.20 Bcfe per day (100% natural gas), with an average of nine rigs to drill 28 wells and place 29 wells on production.\nAdjusted EBITDAX was $508 million and free cash flow was $131 million.\nThe company will return approximately $0.72 per common share for base and variable dividends to shareholders of record as of May 16.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2432937967"}