The commodities prices are declining, and this has forced a number of oil and gas firms to reduce their operations. However, Chesapeake Energy Corporation (NYSE:CHK) intends to increase its production in the year by as much as 4% compared to previous growth estimates of 1% to 3% in 2015. The company participated at the Barclays Energy-Power Conference where it expressed that the drastic decline in its operational costs and better drilling results from its properties have prompted them to increase the production estimates.
The expert view
Doug Lawler, the CEO of Chesapeake Energy Corporation (NYSE:CHK), represented the company at the conference. He highlighted the factors related to the recently finalized gas gathering deals with Williams Companies, in the dry gas Utica shale and Haynesville region. The deals are finalized in an attempt to achieve expanded margins and improved volumes.
Change in estimates
Chesapeake acknowledges that the industry is facing a challenging phase, and therefore to deal with lower oil and gas prices, it reduced its capital expenditure. It lowered its capital expenditure to nearly $800 million in 2Q2015 from approximately $1.5 billion in 4Q2014 to sustain a flat production for 2015. But due to the slower-than-anticipated oil price recovery, the management further reduced capital budget to about $500 million for remaining quarters in this fiscal.
Accounting the capital discipline, Chesapeake Energy Corporation (NYSE:CHK) projects its full year production to surpass its previous estimates of 1% to 3% by nearly 5%. This indicates that it is able to produce more resources while maintaining a reduced capital expenditure. One of the main results of the cyclicality in any taken industry is the companies use unique measures to cut their operational costs so as to endure the down cycle. Chesapeake measures are also concentrated at sustaining its profitability by reducing lease operating and gathering expenses by almost 9% yearly over the last few years.