(Reuters) – Oil and gas producer Chesapeake Energy Corp on Wednesday reported better-than-expected quarterly production and said it expects growth in the second half to get a boost from the less-crowded Powder River Basin in Wyoming.
Chesapeake has been moving money from its Marcellus Shale and Mid-Continent areas to the oil-rich Powder River Basin, which hit a record of 42,000 barrels of oil equivalent per day (boepd) in May.
The company now expects to put on sale output from eight more wells in the basin during the third and fourth quarters.
“Given recent optimism around the PRB (Powder River Basin) and a continued desire to shift towards more oily opportunities, this move is not surprising,” Raymond James analysts wrote in a note.
Oil companies have been looking to buy into the Powder River Basin, where pipelines are not congested and land is cheaper than the Permian Basin of Texas and New Mexico.
“Our mix will continue to shift oil throughout 2019 and 2020 as the Powder River Basin, Brazos Valley (WildHorse acquisition) grow and have a greater contribution to the total,” Chief Financial Officer Domenic Dell’Osso said on a conference call.
Shares of the Oklahoma-based company reversed course after markets, rising as much as 3.6 percent, as the management commentary’s on upbeat output at Powder River Basin helped calm investor worries about higher-than-expected spending.
Chesapeake acquired Texas oil producer WildHorse Resource for nearly $4 billion in February, adding to its outstanding debt which rose to about $9.98 billion at the end of the first quarter.
The company’s capital expenditure for the quarter of $605 million was higher than analysts’ expectation of $583.95 million at a time when oil producers are under pressure from investors to cut spending and return cash to shareholders.
Total average daily production fell 12.6 percent to 484,000 boepd, but beat analysts’ estimate of 466,169 boepd, helped by better-than-expected oil output.
Net loss available to the shareholders widened to $44 million, or 3 cents per share, in the first quarter ended March 31, from $6 million, or 1 cent per share, a year earlier.
On an adjusted basis and under a new accounting method, Chesapeake earned 14 cents per share, in line with analysts’ expectation, according to IBES data from Refinitiv.
Reporting by Shanti S Nair and Debroop Roy in Bengaluru; Editing by Arun Koyyur