Shale patch pioneer Chesapeake to ditch oil in favour of natural gas

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The firm most related to the dramatic ups and downs of the US shale patch is taking one other gamble, planning to offload prize oil belongings and double down on American natural gas.

Chesapeake Energy, a pioneer of the shale revolution that went bankrupt in the course of the coronavirus pandemic crash, mentioned on Tuesday it deliberate to exit oil altogether and return to its roots as a natural gas producer, as an alternative pinning its future on a wave of demand for US exports of the commodity.

The firm — which grew from obscurity in the late Nineteen Eighties to turn into the best-known participant in the fracking revolution that made America the world’s largest producer of oil and natural gas — mentioned it could offload oil producing belongings in south Texas’s Eagle Ford basin, permitting it to focus solely on gas manufacturing from Louisiana’s Haynesville basin and the Marcellus in Appalachia.

Chief government Nick Dell’Osso mentioned the choice was made due to higher returns from its gas belongings, the place it has had extra success driving down prices and bettering effectivity in contrast with oil.

But he mentioned the corporate additionally wished to double down on natural gas manufacturing amid surging demand for US liquefied natural gas exports, following a world scramble for the commodity fuelled by the battle in Ukraine. Russia’s weaponisation of its exports in the wake of Vladimir Putin’s invasion has created a world scarcity and despatched costs hovering.

“We stand to help the world through the gas that we deliver as much as anyone else,” mentioned Dell’Osso. “The US is now connected more fully to the rest of the world through LNG exports and that connectivity is going to nearly double over the next five to seven years.”

Chesapeake’s former chief Aubrey McClendon pioneered the widespread use of hydraulic fracturing and horizontal drilling on the flip of the twenty first century to turn into the largest US gas producer after ExxonMobil.

At its peak in 2008, Chesapeake was valued at $35bn and McClendon grew to become the best-paid government in the US. He died in a automotive crash in 2016, a day after he was indicted on expenses of rigging bids for drilling rights.

The firm was the highest-profile casualty of the 2020 value crash that plunged dozens of debt-saddled oil and gas producers into chapter 11. It emerged from chapter in February final 12 months vowing — like many different gamers in the house — to shift from a mannequin of untrammeled development and drilling to one of capital self-discipline and better shareholder returns.

The firm has steadily expanded its gas portfolio since its emergence from chapter. It purchased gas producer Vine Energy for $2.2bn final August to bolster its place in the Haynesville, which sits shut to gas-export amenities on the US Gulf Coast.

And in January, it purchased Chief Oil & Gas, a gas operator in north-eastern Pennsylvania’s part of the prolific Marcellus shale discipline. It additionally just lately offloaded its Wyoming oil enterprise to Continental Resources, the corporate managed by shale billionaire Harold Hamm.



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