With such strong numbers, it came as no surprise to see solid growth in the production of oil and natural gas liquids (NGL). Average daily oil production grew 6% sequentially and a stout 56% year over year, while NGL production advanced 8% sequentially and 14% year over year. Management said the production increases were driven primarily by strong contributions from the Eagle Ford Shale and Greater Anadarko Basin plays. However, the numbers were not as robust across the board. Natural gas was a notable underperformer. Even though Chesapeake only posted a 2% year-over-year increase in natural gas production, which arrived flat sequentially, I'm willing to give the company a pass here. In my view, it was encouraging that there was solid growth in the northern Marcellus Shale play, which offset weakness in the Haynesville Shale play.
Here's something else to consider: The fact that the company uses techniques like drilling multiple wells from a single drilling pad to increase efficiency demonstrates the commitment Chesapeake now has towards profitability. But I wonder how long the company can look at efficiency strategies such as this while also maintaining a healthy balance of increasing output. To say it more plainly -- although I appreciate the company has heavy debt burdens to the extent of more than $13 billion in long term maturities, production growth can only come from spending. Perhaps this is what the Street has realized given the 16% decline that the stock has suffered since peaking at just under $23 per share.