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Chesapeake Says Natural Gas to Rebound on Production Cuts

April 18 (Bloomberg) -- U.S. natural-gas prices will rebound as producers reduce drilling and weather normalizes, according to Chesapeake Energy Corp.

“Two-dollar gas prices are not sustainable,” Mike Stice, chief executive officer of Chesapeake Midstream Partners, said in an interview at the Flame conference in Amsterdam. “Prices will rebound. You’ll see a supply impact from these low gas prices. We had a perfect storm in terms of production and warm temperatures. It can’t be repeated.”

Chesapeake has been switching shale production to liquids as as it seeks to survive low gas prices, Stice told delegates earlier. Shale-gas drilling is being sustained beyond what is economic by terms that mean leases are extended if they are productive, he said in the interview.

Gas futures dropped to a 10-year low of $1.94 today on the New York Mercantile Exchange. The contract has fallen 35 percent this year, the biggest drop among the 24 members of the Standard & Poor’s GSCI Index of commodities.

Foreign investors are also drilling to delineate the size of gas reserves, adding to the U.S. glut, he said.

Storage levels will not be this high at the same time next year, he said. Reserves are 59 percent above the five-year seasonal average, according to the Energy Department.

Chesapeake plans to continue focusing on opportunities in the U.S. and won’t look to exploit international resources for the foreseeable future, he said.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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