Chesapeake Energy (CHK) Cuts 2015 Capex by $500M

Chesapeake Energy Corporation (NYSE: CHK) today announced it has reduced its 2015 capital budget (including capitalized interest of $500 million) to $3.5 – $4.0 billion for 2015, which is a $500 million reduction from its previous guidance of $4.0 – $4.5 billion. Chesapeake plans to operate 25 – 35 rigs in 2015, which represents a decrease of approximately 55% from an average of 64 rigs in 2014. The company intends to spud and connect to sales approximately 520 and 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014). As a result, the company is lowering its targeted 2015 production to 231 – 236 million barrels of oil equivalent, or average daily production of 635 – 645 thousand barrels of oil equivalent, which represents 1 – 3% production growth over the prior year after adjusting for 2014 asset sales.

Doug Lawler, Chesapeake’s Chief Executive Officer, said, “We entered 2015 with a strong liquidity position and we intend to manage it prudently. In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity. As a result, we now forecast ending 2015 with approximately $6 billion in combined cash and borrowing capacity under our credit facility. With this budget revision we anticipate being free cash flow neutral by the end of 2015.”

A summary of Chesapeake’s updated guidance for 2015 is provided in the Outlook dated March 23, 2015, which is attached to this release as Schedule “A.”

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