Average production expenses during the 2013 second quarter were $0.78 per thousand cubic feet of natural gas equivalent (mcfe), a decrease of 20% year over year. General and administrative (G&A) expenses (excluding stock-based compensation) were $0.25 per mcfe, a decrease of 36% year over year. To reflect improvements in cost control, Chesapeake is reducing its 2013 per unit G&A expense guidance range by $0.05 to $0.25 – $0.30 per mcfe.
A complete summary of the company’s guidance for 2013 is provided in the Outlook dated August 1, 2013 which is attached to this release as Schedule “A” beginning on Page 17. This updates information previously provided in the Outlook dated May 1, 2013.
Asset Sales Update
Chesapeake continues to make significant progress in selling noncore assets. During the first half of 2013, the company received proceeds of approximately $2.4 billion from asset sales. During the 2013 third quarter to date, the company has completed the sales of additional assets in the Haynesville Shale and Eagle Ford Shale to subsidiaries of EXCO Resources, Inc. (NYSE:XCO) for total consideration of approximately $1 billion (inclusive of approximately $100 million that is subject to customary post-closing contingencies) and expects to complete today the sale of midstream assets in the Mississippi Lime play to SemGroup Corporation (NYSE:SEMG) for total consideration of approximately $300 million. Chesapeake is also pursuing several other transactions of varying sizes that may reach completion before the end of 2013.
The company continues to achieve strong operational results in its most active plays, as highlighted below.
Eagle Ford Shale (South Texas)
In the Eagle Ford Shale play, Chesapeake connected 140 wells to sales during the 2013 second quarter, which was substantially more than the 111 wells connected during the 2013 first quarter. Net production during the 2013 second quarter averaged approximately 85,000 barrels of oil equivalent (boe) per day (190,000 gross operated boe per day). This represents an increase of 135% year over year and 14% sequentially. The average peak daily production rate of the 140 wells that commenced first production during the 2013 second quarter was approximately 900 boe per day. Approximately 66% of the company’s Eagle Ford production during the 2013 second quarter was oil, 14% was NGL and 20% was natural gas.
Chesapeake is currently operating 15 rigs in the Eagle Ford and, due to reduced cycle times and the sale discussed above, plans to reduce its operated rig count to 10 by the end of 2013. Average spud-to-spud cycle time during the quarter was 16 days, down from 21 days year over year. As of June 30, 2013, Chesapeake had drilled a total of 963 wells in the Eagle Ford, which included 795 producing wells, 24 additional wells waiting on pipeline connection and 144 wells in various stages of completion.