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Chesapeake Energy Corp. (CHK) said two new wells that it drilled in an oil and natural-gas play in the U.S. Anadarko Basin are producing a significant amount of oil for the cash-strapped company.
The wells, in the Hogshooter play in the Texas Panhandle and West Oklahoma, should help Chesapeake, the second-largest natural-gas producer in the U.S., as it shifts its production focus to more-profitable oil. Chesapeake's cash flow has taken a hit as the price of natural gas has collapsed during a production boom brought on by advances in drilling technology.
The two wells that Chesapeake completed in its 30,000 net acres in the play are producing a combined 8,400 barrels of oil equivalent a day, of which nearly 80% is oil, Chesapeake said.
"This new Hogshooter development area should further enhance our growing liquids production," Chesapeake Chief Executive Aubrey McClendon said.
With production still in early stages and considering the relatively small size of Chesapeake's position in the play, it is too early to decide how positive the discovery could be for the company, Argus Research analyst Phil Weiss said.
"It's positive results, but it's a little early to be telling us about it," Weiss said.
Chesapeake is in the midst of selling oil and natural-gas acreage that it deems outside of its core business as it tries to rein in its heavy debt. The Oklahoma City-based company is trying to bring its debt level to $9.5 billion by the end of 2012. At the end of this year's first quarter, Chesapeake reported total debt of $26.7 billion.
-By Ben Lefebvre, Dow Jones Newswires; 713-547-9201; email@example.com; Twitter: @bjlefebvre