Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chesapeake points to rising costs in fastest-growing U.S. gas field

Published 11/02/2022, 10:51 AM
Updated 11/02/2022, 10:56 AM
© Reuters. FILE PHOTO: Chesapeake Energy logo is seen on smartphone in front of displayed stock graph in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration

© Reuters. FILE PHOTO: Chesapeake Energy logo is seen on smartphone in front of displayed stock graph in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration

By Liz Hampton

(Reuters) - Chesapeake Energy (NYSE:CHK) on Wednesday said inflation in the fastest growing U.S. shale gas region could surpass 15% next year, a sign that soaring costs for energy producers are far from abating.

The Oklahoma City-based company topped Wall Street third-quarter profit estimates this week, bolstered by higher natural gas prices which averaged $6.955 per million British thermal units (mmBtu) - a 43% increase from a year ago.

Like most oil and gas firms, it is grappling with steep cost increases for materials and labor. Mid single-digit cost increases also lay ahead in the Marcellus shale area, the largest U.S. gas field.

Production next year will be flat, said Chief Executive Domenic Dell'Osso, pointing to the lag-effect on production from past cutbacks to drilling. The company will be prepared for a pick-up in demand in 2025 as proposed liquefied natural projects open, he said.

"In the near term, we really don't see any need for growth. And so 2023 is probably setting up to be about flat on a year-over-year basis," Dell'Osso said.

Natural gas was trading under $6 per mmBtu on Wednesday, well off highs of more than $9 per mmBtu during the third quarter. Chesapeake executives on Wednesday said if prices fell to the low to mid-$3 per mmBtu range for a sustained period, they would consider pulling back new activity.

Marketing of its Eagle Ford oil assets in South Texas is ongoing and seeing high interest, executives said. The company plans to pay down debt with some of the proceeds from that sale.

Shares of Chesapeake were up 1.5% on Wednesday to $104.45.

© Reuters. FILE PHOTO: Chesapeake Energy logo is seen on smartphone in front of displayed stock graph in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration

Chesapeake Wednesday also said it plans to exercise an option to take a 35% stake in a Momentum Midstream gas transport project from the Haynesville shale to the U.S. Gulf Coast. The project includes a carbon capture and sequestration component.

Chesapeake has entered into a 700 million cubic feet per day gas gathering and transport agreement to anchor Momentum's infrastructure.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.