Chesapeake reported a net income of $26 million and an adjusted net income of $80 million, with significant cash flow from operations totaling $552 million for the first quarter of 2024. By the end of the quarter, the company had built up an inventory of 24 drilled but uncompleted (DUCs) wells and 22 deferred TILs.
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Chesapeake Wells Drilled Since 2023
The company announced it will distribute dividends totaling $0.715 per share in June, following a strong performance in adjusted free cash flow. Operational highlights include a production rate of 3.20 bcfe/d and strategic deferrals in well completions due to current market conditions. Chesapeake is also advancing its LNG strategy with new agreements and is actively pursuing its ESG commitments, targeting net zero emissions by 2035.
Drilling & Completions
Chesapeake’s update on drilling activities includes the following details:
- During the first quarter, the company utilized an average of nine drilling rigs.
- They drilled a total of 28 wells and also placed 29 wells on production.
- Chesapeake is managing its operations to build short-cycle, capital-efficient productive capacity. This involves deferring completions and new well turn in lines (TILs), which allows them to quickly activate production when market conditions improve.
- By the end of the quarter, the company had built up an inventory of 24 drilled but uncompleted (DUCs) wells and 22 deferred TILs.
- Chesapeake plans to adjust its drilling operations by dropping one rig in the Marcellus region around mid-year.
- For the full year, the company expects to drill between 95 to 115 wells and plans to place 30 to 40 wells on production, consistent with previous guidance.
This approach reflects Chesapeake’s strategy to respond prudently to current weak market dynamics while maintaining the capability to ramp up quickly when conditions become favorable.
Natural Gas Production
hesapeake’s update highlights its strong focus on natural gas production and related strategic developments:
- Production: Chesapeake’s net production in the first quarter was approximately 3.20 billion cubic feet equivalent per day (bcfe/d), comprised entirely of natural gas. This indicates the company’s significant operational scale in natural gas extraction.
- Market Strategy: The company is actively enhancing its capacity to respond to market demands for natural gas, which is increasingly sought after for its reliability and lower carbon footprint. This strategic focus is part of Chesapeake’s broader aim to expand America’s energy reach, particularly in natural gas markets.
- LNG Initiatives: Chesapeake is advancing its liquefied natural gas (LNG) strategy through new agreements, such as purchasing approximately 0.5 million tonnes per annum (mtpa) of LNG linked to Henry Hub prices, with sales tied to the Japan Korea Marker (JKM). These long-term agreements are part of an effort to strengthen its position in global energy markets by leveraging the growing demand for natural gas.
These points underscore Chesapeake’s commitment to maintaining a strong position in natural gas production and distribution, aligning its operations with global energy trends and market demands.
ESG
The update from Chesapeake specifically mentions its focus on technology in relation to its environmental, social, and governance (ESG) goals:
- Direct Emission Reductions and Technology Investments: Chesapeake is actively working on reducing its direct emissions and has also invested in adjacent technologies and businesses. These efforts are part of their broader strategy to meet their 2035 Scope 1 and Scope 2 net zero commitments.
- ESG Reporting and Recognition: The company has been recognized for its ESG reporting, indicating a commitment to transparency and the utilization of technology to monitor and report its sustainability practices effectively. This includes maintaining standards like MiQ and EO100™, which involve technological measures for certifying responsibly sourced gas.
These points indicate that Chesapeake is leveraging technology primarily in its ESG initiatives, focusing on reducing emissions and enhancing its operational sustainability.
Production
Chesapeake’s update on production focuses on the following key points:
- Production Volume: Chesapeake produced approximately 3.20 billion cubic feet equivalent per day (bcfe/d) during the first quarter of 2024. This production is entirely comprised of natural gas, highlighting the company’s focus on this specific energy resource.
- Operational Efficiency: The company used an average of nine rigs to achieve this production level. Over the quarter, they drilled 28 wells and placed 29 wells on production. This demonstrates Chesapeake’s operational capabilities and efficiency in managing its drilling and production processes.
- Inventory Management: Chesapeake is also strategically managing its inventory by building up drilled but uncompleted (DUCs) wells and deferred turn in lines (TILs). At the end of the quarter, the inventory included 24 DUCs and 22 deferred TILs, which allows the company flexibility to quickly ramp up production when market conditions improve.
- Future Production Plans: For the full year, Chesapeake plans to drill between 95 to 115 wells and expects to place 30 to 40 wells on production, consistent with previous guidance. This indicates a steady approach to maintaining and potentially increasing production levels according to planned schedules and market demand.
These aspects of Chesapeake’s production strategy reflect a careful balance between maintaining robust current production levels and preparing for future market opportunities through strategic inventory and resource management.
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