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Chesapeake exceeds Q4 production expectations, exits Mississippian Lime play

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Chesapeake exceeds Q4 production expectations, exits Mississippian Lime play

Shale oil and gas producer Chesapeake Energy Corp. reported oil, gas and liquids production totals for the fourth quarter of 2017 that exceeded analysts' expectations and said it sold out its position in Oklahoma's Mississippian Lime for roughly $500 million.

Chesapeake said it produced 593,000 barrels of oil equivalent per day in the last quarter of 2017, with 100,000 boe/d of crude production and 2.6 Bcf/d of natural gas production. The analysts' consensus compiled by S&P Global Market Intelligence predicted that Chesapeake would produce 566,280 boe/d, split between 2.44 Bcf/d of gas and 100,000 boe/d of oil. Chesapeake's fourth-quarter 2017 NGL production of 59,500 bbl/d was above expectations for 56,800 bbl/d.

Chesapeake credited the 15% year-over-year production growth to stronger oil production in its Eagle Ford Shale operations in south Texas and higher gas production from the Haynesville and Marcellus shales.

The company sold 238,000 acres of leasehold and 3,000 producing wells in Oklahoma's Mississippian Lime area in three separate deals totaling $500 million in the fourth quarter of 2017 and the first quarter of 2018. Chesapeake did not identify the buyers. It said it will use the money to pay down debt.

Additionally, Chesapeake sold 4.3 million shares of the hydraulic fracturing services and well completions firm FTS International Inc., previously known as Frac Tech Services, during that company's Feb. 2 initial public offering. Chesapeake still holds 22 million shares, or 20.7%, of FTS, a company it helped start in 2006.

"We continue to demonstrate increased productivity and capital efficiency from our investments by delivering these production volumes with a fourth quarter capital spend of roughly $525 million, inclusive of capitalized interest," Chesapeake CEO Doug Lawler said in a statement. "As a result, we currently expect cash flow before changes in working capital of more than $550 million for the 2017 fourth quarter, or approximately $470 million after changes in working capital."

Analysts surveyed by S&P Global Market Intelligence expected Chesapeake to spend $575 million and report a negative-$342 million cash flow for the quarter.

Lawler warned that Chesapeake will reduce its drilling and production in the first quarter to achieve neutral cash flows and will keep production flat in 2018 while spending less.