OKLAHOMA CITY (AP) — Chesapeake Energy Corp. CEO Aubrey McClendon expects natural gas rig counts and prices to rebound significantly within the next year.
Natural gas prices will rise to $6 to $7 per 1,000 cubic feet and about 900 rigs will be drilling for the fossil fuel by August 2010, McClendon predicted Tuesday during a conference call with analysts. That would be an increase of more than 200 rigs from current levels.
“There’s a lot to like about 2010,” McClendon said, although he predicted “a lot of wailing and gnashing of teeth in the next 60 days” within the industry concerning storage and pipeline issues.
“But after that, you’ve got an improving economy. It’s all shaping up to be a pretty favorable summer of 2010.”
Natural gas prices have plummeted from a high last summer of $13.69 per 1,000 cubic feet to $3 to $4 per 1,000 cubic feet. Natural gas for August delivery fell 5.4 cents, to $3.98 per 1,000 cubic feet, Tuesday on the New York Mercantile Exchange.
While demand for natural gas has wilted, reserves have increased, with the government reporting Thursday that U.S. stockpiles are 18.8 percent above the five-year average of about 2.545 trillion cubic feet.
Chesapeake Energy reduced its production for a time as prices fell, but the Oklahoma City-based independent energy company last week said it boosted daily production by 4 percent in the second quarter over the first quarter and by 5 percent over the second quarter of 2008.
Chesapeake Energy believes the industry “will be full up on storage by the end of the year,” McClendon said, but company officials see no need now to curtail production. “Pipeline pressures” will result in others in the industry undergoing “involuntary curtailments,” he said.
“There’s no reason for us to curtail since everyone is going to be involuntarily curtailing soon. We didn’t see any reason for us to take it on the chin for the team any more than we did.”
On Monday, Chesapeake Energy reported it posted a profit a year after it recorded a $1.6 billion hedging-related loss. But stripping out one-time costs, Chesapeake Energy said its profit was down from last year with natural gas prices off 70 percent.
Chesapeake Energy said it made $237 million, or 39 cents per share, for the quarter that ended June 30. Discounting one-time costs, the company reported $377 million in profits, or 62 cents per share, down from adjusted profit of $479 million, or 89 cents a share, in the year-ago quarter.
Revenue was $1.7 billion compared with a revenue loss of $455 million a year ago.
Analysts surveyed by Thomson Reuters expected Chesapeake Energy to make 52 cents per share on revenue of $1.9 billion for the most current quarter. Those estimates typically exclude one-time charges.
