Company To Reduce Natural Gas Production, Sell Properties

Wednesday, September 5th 2007, 10:25 am
By: News On 6

OKLAHOMA CITY (AP) _ Chesapeake Energy Corp. will reduce its natural gas production and drilling because of falling natural gas prices, officials said.

Natural gas prices have dipped below $5 per thousand cubic feet throughout Oklahoma and much of the country as storage levels approach capacity. Prices reached $7.13 per million British thermal units on Aug. 14 when Hurricane Dean threatened platforms and pipelines in the Gulf of Mexico.

``We believe that current low natural gas prices are temporary and result from a modest oversupply of natural gas in the U.S.,'' Aubrey K. McClendon, Chesapeake's chairman and chief executive officer, said Tuesday. ``This oversupply has largely been caused by two consecutive mild winters in the U.S., increases in imports of liquefied natural gas resulting from an exceptionally warm European winter last season and increased production from domestic producers through higher drilling activity levels.''

The reduction, representing about 125 million cubic feet, or 6% of net output, will take place through production curtailments and deferred pipeline hook-ups, the company said.

Also on Tuesday, Chesapeake said it will sell some of its older natural gas producing properties in Kentucky and West Virginia over the next nine quarters for about $3.5 billion.

It will begin with properties representing about 145 billion cubic feet of natural gas equivalent in proved reserves and 30 million cubic feet equivalent net per day of production, officials said. Chesapeake said it expects to receive about $550 million for the property.

The sales are designed to take advantage of current market interest in master limited partnerships that control pipelines, older natural gas fields and other relatively stable assets, McClendon said.

Shares on Tuesday rose 56 cents, or 1.7%, to $32.82.