Chesapeake to Deliver LNG to Vitol, Misses Estimates for Quarter

The purchase price will be indexed to Japan Korea Marker for 15 years, Chesapeake said in a news release Tuesday. After the execution of the HOA, targeted to begin in 2028, Chesapeake and Vitol will jointly select the most optimal liquefaction facility in the USA to liquefy the gas produced by Chesapeake for delivery to Vitol.

“We are pleased to expand our relationship with Vitol to deliver independently certified reliable, affordable, lower carbon energy to global markets in need”, Chesapeake President and CEO Nick Dell’Osso said. “Today’s announcement marks another important step on our path to ‘Be LNG Ready’, and is further recognition of the premium rock, returns, and runway of our advantaged portfolio and the strength of our financial position. We look forward to entering into additional agreements as export capacity continues to come online”.

“We are excited to build upon our existing relationship with Chesapeake”, Vitol Americas Head Ben Marshall said. “The global energy landscape has changed significantly in the last two years, which has highlighted the importance of U.S. natural gas production and liquefaction in satisfying the world’s energy needs. Global LNG demand is experiencing tremendous growth and Vitol continues to strengthen its position to safely and reliably deliver cost-effective, flexible solutions to our customers around the world”.

Third Quarter Profit Misses Estimates

Meanwhile, Chesapeake reported a net income of $70 million, or $0.49 per diluted share, for the third quarter, compared to $883 million, $6.12 per diluted share, in the prior-year quarter. The company missed the Zacks Consensus Estimate of $0.67 per share.

Chesapeake posted total revenues of $1.51 billion for the quarter, compared to $3.16 billion in the same period in 2022, according to an earnings report Tuesday.

Third-quarter net production was approximately 3,495 million cubic feet of natural gas equivalent per day, which was 97 percent natural gas and 3 percent total liquids. Chesapeake noted that the production was delivered “despite the elective deferral of 60 percent of the planned third quarter Marcellus turn in lines and the extension of elective curtailments”. The company used an average of nine rigs to drill 35 wells, down from 53 in the second quarter, and placed 34 wells on production which includes 16 wells in the South Texas Rich Eagle Ford asset, according to the release.

Chesapeake said it is currently operating nine rigs and three completion crews including four rigs and two crews in the Marcellus and five rigs and one crew in the Haynesville. The company expects to drill 35 to 45 wells and place 50 to 60 wells on production in the fourth quarter. Year-to-date, the company has acquired 34,000 additional net lease acres in the Marcellus and Haynesville plays at an average cost of $1,500 per acre.

In the Marcellus Shale, Chesapeake achieved its record fastest drilling program performance, averaging 1,367 feet per day during the quarter. This included four of the top 10 longest laterals in the company’s history. In the Haynesville Shale, Chesapeake said it continues to benefit from ongoing midstream debottlenecking and gas flow assurance efforts, which resulted in “lower line pressure and approximately 15 percent quarter-over-quarter reduction in deferred volume due to pipeline/sales disruptions”.

“Our team is operating at the highest and safest levels, and delivered another strong quarter”, Dell’Osso said. “We continue to show the resilience of this organization and assets in the midst of lower commodity prices. Our strong balance sheet and deep liquidity underpin the leading rock, returns, and runway of our portfolio and have allowed us to maintain our repurchase program in the midst of the trough of the commodity cycle. Our focus is clear — to ‘Be LNG Ready’ and opportunistically capitalize on our strong financial position and leading operating performance. We remain confident in our ability to deliver affordable, reliable, lower carbon energy with peer-leading returns to shareholders”.

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