The oil sector is experiencing strong buying interest Monday morning. The positive sentiment comes amid higher oil prices in U.S. trading and after Chesapeake Energy Corp. (CHK) cut its capital expenditure plans.
Shares of Chesapeake Energy have jumped about 32% on the news, while Cabot Gas & Oil (COG) and Pyramid Oil Co. (PDO) shares have risen over 15%.
Around 11:00 am Eastern Time, Chesapeake Energy shares were up $3.68 at $15.00 per share, while Cabot stock was up $3.49 at $25.78 and shares of Pyramid were up 47 cents at $3.27.
Other stocks posting double-digit percentage gains include St. Mary Land & Exploration Co. (SM), Newfield Exploration (NFX), Parallel Petroleum Corp. (PLLL), Comstock Resources Inc. (CRK), FieldPoint Petroleum Corp. (FPP), Questar Corp. (STR) and Penn Virginia Corp. (PVA)
Oil climbed off a multi-year low on Monday as President-elect Barack Obama's plan to revive the economy could help demand. Light sweet crude for January delivery moved to $43.78 a barrel, up $2.97 on the session. Prices climbed as high as $44.16 a barrel in early dealing.
On Sunday, Chesapeake Energy said it further cut its capital expenditure plans for 2009 and 2010 in order to achieve a cash neutral budget that does not depend on future asset sales due to increased uncertainty about the U.S. economy and the natural gas and oil markets. The company also announced that it has plans to build up to $4 billion in additional cash resources in 2009 and 2010 through further asset monetization.
The company announced a cut in its drilling capital expenditure budget for 2009 and 2010 by a combined $2.9 billion, or 31%, and has also reduced its leasehold and producing property acquisition budget for 2009 and 2010 by a combined $2.2 billion, or 78%.
In total, since July 31, 2008, Chesapeake has reduced its planned 2009 and 2010 drilling, leasehold and producing property acquisition budget by about $9.8 billion, or 58%, to about $7.2 billion.
The company is now utilizing about 130 operated rigs, down from a peak of 158 operated rigs in August 2008, and plans to further reduce its operated rig count to 110 to 115 rigs early in the 2009 first quarter.
Chesapeake expects its drilling carries will save the company about $1.2 billion of capital expenditures in 2009 and about $1.1 billion in 2010. The company now expects production growth of about 5-10% in 2009 and 10-15% in 2010.
Chesapeake is targeting to have proved reserves of 13.5 - 14.0 tcfe by year-end 2009, net of anticipated sales of proved reserves through volumetric production payments (VPPs).
The company is in discussions to sell certain Chesapeake-operated producing assets in the Anadarko and Arkoma Basins in its fourth VPP transaction. Chesapeake will retain future drilling rights on the properties. For accounting purposes, the transaction will be treated as a sale and the company's proved reserves and production will be reduced accordingly. This transaction is expected to be complete by year-end 2008.
In addition, the company is negotiating with multiple parties for either a minority investment in its midstream operations or the purchase of portion of its existing midstream assets. Chesapeake anticipates completing a midstream transaction, subject to reaching an agreement on acceptable terms, in the 2009 first quarter.
Over the past month, Chesapeake has also restructured its hedging position to provide further downside price protection. Chesapeake currently has approximately 76% of its anticipated 2009 natural gas production hedged through swaps and collars.
Chesapeake said it plans to terminate the Distribution Agency Agreements it has with three securities firms and will not issue any shares under the equity distribution program described in its prospectus supplement dated November 26. In addition, the company plans to amend its acquisition shelf registration statement filed on Form S-4 to reduce the number of common shares to be registered from 50 million to 25 million.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.