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UPDATE 3-Chesapeake Energy to reduce drilling amid natgas price slump

(Updates share price)

By Liz Hampton

Feb 22 (Reuters) - U.S. natural gas producer Chesapeake Energy Corp on Wednesday said it would pull back on drilling and completing wells this year as natural gas prices have crashed to a quarter of what they were last summer.

Chesapeake said it will drop two rigs in the Haynesville region that covers parts of Texas, Arkansas and Louisiana this year, and one rig in Marcellus shale of Pennsylvania and West Virginia.

"We certainly see that it's prudent to pull back capital, and we think we're seeing others do the same," Chief Executive Nick Dell'Osso said of energy firms pulling back in a shale gas play in Louisiana and east Texas.

"We're making money on the capital that we are investing but the margins are not nearly on a full cycle basis what they were historically," he added.

Other operators, primarily private firms, were also pulling back activity in that region, he said. Earlier this month, Comstock Resources Inc said it would cut drilling rigs to seven from nine this year.

Henry Hub natural gas futures on Wednesday briefly dipped below $2 per million British thermal units (mmBtu) for the first time since September 2020, and were down from last year's $8 peak.

Shares of Chesapeake were up 2.3% to $79.77 in midday trading.

Chesapeake, which previously announced plans to sell its oil position to focus on gas production, on Tuesday said it would sell oil assets in South Texas to chemical maker INEOS for $1.4 billion.

That deal comes a month after it agreed to sell a separate part of its assets there to Wildfire Energy for $1.43 billion.

Chesapeake expects to receive $1.7 billion in after-tax proceeds from those sales.

Rival shale oil producer Diamondback Energy on Wednesday said it was increasing its non-core asset sale target to at least $1 billion by the end of this year, up from $500 million previously. (Reporting by Liz Hampton in Denver Editing by Mark Potter, Nick Zieminski and Marguerita Choy)