Chesapeake Energy, a US-based gas producer, has announced a reduction in its natural gas production and capex for the year, citing an oversupplied market. 

The company plans to decrease its output to approximately 2.7 billion cubic feet per day (bcfd) in 2024, a drop from around 3.6bcfd – nearly 95% natural gas and
5% liquids – in 2023. 

As reported by Reuters, natural gas prices have fallen by 30% this year, influenced by a mild winter that did not significantly impact storage levels, despite a temporary spike in demand during an Arctic freeze in January.  

In response to these market conditions, Chesapeake has decided to cut one drilling well at both the Marcellus and Haynesville basins and to reduce its capex guidance by around 20% to between $1.25bn and $1.35bn. 

On a conference call, following the annual and fourth quarter (Q4) 2023 results, Chesapeake CEO Domenic Dell'Osso said: "We would assume that demand would come back in some measured fashion and therefore we could return production in a measured fashion. 

"We feel comfortable pausing turn-in lines and slowing completions activity; slowing drilling activity to match that cadence should be considered as we would also be comfortable accelerating those cycle times in the future when needed." 

The company remains optimistic about the long-term outlook, expecting a "step change in demand in 2025 as incremental liquefied natural gas [LNG] capacity comes online", which would coincide with an increase in domestic natural gas supply.  

For Q4 2023, Chesapeake reported a net income of $569m, with net production averaging 3.43 billion cubic feet equivalent per day, comprised of roughly 98% natural gas. 

Currently, Chesapeake operates nine drilling rigs – five in the Haynesville basin and four in the Marcellus – and four frac crews, with two in each basin.  

The company's recent activities include an all-stock merger with Southwestern Energy Company valued at $7.4bn, forming an entity with a combined production rate of approximately 7.9bcfd. 

Additionally, Chesapeake has entered into an LNG export deal with Delfin LNG and Gunvor Group.  

Under the sales and purchase agreements, Chesapeake will acquire around 500,000 tonnes per annum of LNG from Delfin LNG to supply to Gunvor.