By Taru Jain
Aug 6 (Reuters) – Chesapeake Energy Corp on Tuesday forecast double-digit growth for oil production in 2020 after reporting better-than-expected quarterly output, as it shifts focus to crude amid weak natural gas prices.
Shares of the company, traditionally seen as a natural gas producer, rose 6% before the opening bell.
Chesapeake has been moving money from the gas-rich Marcellus Shale and Mid-Continent areas to the oil-heavy Powder River Basin, as an oversupply has pushed gas prices down by 67% in the last five years.
“As we formulate our initial 2020 plans, we expect to allocate more capital to oil growth areas, with less capital going toward our gas assets,” the company said.
As a result, with an approximately flat capital program to 2019, we project our 2020 oil volumes will show double-digit percentage growth over 2019, while our gas volumes will show a double-digit percentage decline.”
Chesapeake also raised the bottom end of its full-year oil production range by 250,000 barrels to between 43 million barrels of oil to 44.5 million barrels of oil, and natural gas production guidance by 15 billion cubic feet (bcf) to between 725 bcf and 750 bcf.
The company’s second-quarter production fell 6.4% to average 496,000 barrels of oil equivalent per day (boepd), but beat analysts’ average estimate of 494,640 boepd.
Chesapeake spent about $559 million, 5.5% higher than a year earlier as it increased its well completion activity.
“We expect the combination of upside financials and a 2% oil beat at 7% lower capex to carry the day, particularly with CHK bumping its full-year oil guide at the same capex,” analysts at J.P. Morgan said in a note.
Adjusted net loss attributable to Chesapeake widened to $158 million in the quarter ended June 30 from $118 million a year earlier.
On a per share basis, it reported a loss of 10 cents, while analysts had anticipated a loss of 6 cents, according to IBES data from Refinitiv.
Revenue rose 4.2% to $2.39 billion. (Reporting by Taru Jain in Bangalore; Writing by Arathy S Nair; Editing by Maju Samuel)