Chesapeake swears off big spending; shares jump
By Anna Driver
(Reuters) - Chesapeake Energy Corp, bowing to investor pressure, said on Tuesday it plans to stop spending heavily on oil and gas properties next year in a strategic shift from land acquisition to resource development.
That news, plus assurances that the company will close a big deal for 1.5 million acres in West Texas, helped push the company's shares up 9 percent.
Chief Executive Officer Aubrey McClendon has spent heavily to amass more than 15 million acres (6 million hectares) in oil and gas basins around the United States, leaving the company awash in debt and unable to fund its operations without bringing in deep-pocketed partners or selling properties.
Big investors including Carl Icahn and Southeastern Asset Management's Mason Hawkins have pressured McClendon to reduce spending and sell assets to bridge an estimated $10 billion funding gap for this year.
Chesapeake is pledging to lower spending and focus on producing higher-priced oil and natural gas liquids from basins it considers key, while it sheds up to $14 billion in assets this year and up to $5 billion in 2013.
In addition, the Oklahoma City, Oklahoma, company will cut its capital budget by $6 billion next year, McClendon said. Its 2012 capex is estimated at $13 billion.
"We believe Chesapeake's performance can improve even further from this very high level as we progress from operations designed for new asset identification and capture to a more manufacturing-like operations approach," McClendon told analysts and investors on a conference call.
Still, investors will have to wait for change. Chesapeake raised its 2012 budget for drilling and well completion by $500 million and also hiked the amount of money it plans to spend on buying oil and gas properties to $2 billion from $1.6 billion. Continued...