Chesapeake swears off big spending, shares jump

(Reuters) - Chesapeake Energy Corp said on Tuesday it plans to stop spending heavily on oil and gas properties next year in a strategic shift from land acquisition to resource development, helping to boost the U.S. company's shares by over 10 percent.

Chief Executive Aubrey McClendon has spent heavily to amass more than 15 million acres (6 million hectares) in oil and gas basins around the United States, leaving the company awash in debt and unable to fund its operations without bringing in deep-pocketed partners or selling properties.

Big investors including Carl Icahn and Southeastern Asset Management's Mason Hawkins have pressured McClendon to reduce spending and sell assets to bridge an estimated $10 billion funding gap for this year.

Chesapeake is pledging to lower spending and focus on producing higher-priced oil and natural gas liquids from basins it considers key, while it sheds up to $14 billion in assets this year and up to $5 billion in 2013.

In addition, the Oklahoma City, Oklahoma company will cut its capital budget by $6 billion next year, McClendon said. Its 2012 capex is estimated at $13 billion.

"We believe Chesapeake's performance can improve even further from this very high level as we progress from operations designed for new asset identification and capture to a more manufacturing-like operations approach," McClendon told analysts and investors on a conference call.

Spending on new acreage is winding down as Chesapeake wraps up leasing in Ohio's Utica shale and a few other basins, the company said.

Next year, the oil and gas company will spend about $100 million per quarter on land acquisition, down sharply from nearly $1 billion in the first quarter, the executive said.

On Monday after the close of trading, Chesapeake reported higher second-quarter earnings that were lifted by a gain from the sale of its midstream master limited partnership.

Shares of Chesapeake rose $1.81 to $19.51 on Tuesday. The stock was the second-most actively traded on the New York Stock Exchange.

(Reporting by Anna Driver in Houston; editing by Gerald E. McCormick, Jeffrey Benkoe and Dale Hudson)

Source: http://news.yahoo.com/chesapeake-swears-off-big-spending-shares-jump-145435174--finance.html

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