Chesapeake cutting back on gas drilling

Chesapeake Energy, which says it has led the industry in natural gas production growth over the past decade, is responding to extremely low prices by severely cutting back on dry natural gas drilling. By the second quarter of this year, the company plans to have about 24 rigs drilling for dry gas—including only six in Louisiana’s Haynesville Shale—compared to the 47 currently in use and an average of 75 during 2011. The company predicts that total production in the Haynesville and Barnett shale plays will decline this year, likely leading to flat or lower total natural gas production in the United States. Chesapeake plans to shift its focus away from the “dry” gas found in plays such as the Haynesville to liquids-rich plays that command a higher rate of return. Chesapeake CEO Aubrey McClendon says he hopes “today’s announcement helps disprove the view held by some industry observers that producers fail to act rationally in times of unusually low natural gas prices.” The Haynesville Shale has created significant wealth in north Louisiana’s economy; and the cheap, stable supply of natural gas has been a boon to Louisiana’s industries, particularly chemical manufacturing. But spot prices for dry gas have fallen below $3 per million Btu, hurting producers. Read a recent Business Report story about how natural gas is boosting Louisiana’s industries here; and another about the potential for natural gas exports, which could open much-needed new markets for domestic producers, here.