The amount of natural gas in the United States has become so abundant it no longer makes sense for companies to continue to put more resources into it, and that has caused Chesapeake Energy Corp (NYSE:CHK) to transfer $400 million it had targeted natural gas exploration and production, to oil exploration.
Supply of natural gas has put a lot of downward pressure on natural gas prices at a time when oil prices are rising. Oil margins have a larger spread and oil is much more profitable than its counterpart at this time, and for the foreseeable future.
In a press release, Chesapeake said, "In recognition of the significant and persistent value gap that has developed between natural gas and oil prices, Chesapeake has accelerated its transition to a more liquids-rich asset base."
The full-year drilling budget for Chesapeake will remain level, with $4.5 billion to $4.6 billion set aside for that purpose.
Cheasapeake will release its earnings for the second quarter after the market closes today.
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