© Reuters. FILE PHOTO: A 3D printed oil barrels and oil pump jack are seen in front of displayed Chesapeake Energy logo in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – Chesapeake Energy (NYSE:) said it would cut spending and output this year as it sees the market being “oversupplied”, causing the company’s shares to rise more than 7% on Wednesday.

Gas prices fell 30% this year because a mild winter did not dent storage as much as expected amid lowered heating demand. The weakness was despite an Arctic freeze in January that briefly caused gas demand to soar to a record high. [NGA/]

On a conference call, Chesapeake said the oversupplied gas market led the company it to cut one well each at the Marcellus and Haynesville basins while also reducing capital expenditure guidance by about 20%.

“We would assume that demand would come back in some measured fashion and therefore, we could return production in a measured fashion,” Chief Executive Domenic Dell (NYSE:)’Osso said on the call.

“We feel comfortable pausing turn-in lines and slowing completions activity, slowing drilling activity to match that cadence should be considered as we would also be comfortable accelerating those cycle times in the future when needed.”

The reduced wells and spending would lead to production falling to 2.7 billion cubic feet per day (bcfd) in 2024, down from around 3.5 bcfd in 2023, Chesapeake said.

However, the company expects better supply-demand fundamentals in the long term, and sees a “step change in demand in 2025 as incremental LNG capacity comes online,” along with higher natgas supply domestically.

Chesapeake in January agreed to buy smaller rival Southwestern Energy (NYSE:) in an all-stock transaction of $7.4 billion, which was pending approval.

“We can continue to work on things from an integration standpoint. If it (the deal) takes longer, we won’t let that distract us in any way. We’re well into the work required for a successful integration,” Dell’Osso added.