OREANDA-NEWS. Chesapeake will stop paying common stock dividends beginning in the third quarter as lower commodity prices squeeze cash flow, limiting the independent's ability to fund drilling.

Suspending the dividend of $0.35 per share will save about $240mn annually, it said.

The announcement may mark the start of a fresh round of belt tightening by US independents following a 20pc plunge in oil prices since the peak touched in May.

A small group of producers, including Chesapeake, had announced a step up in drilling activities in the second half following the recovery in oil from the near six-year lows touched in first quarter. The latest pullback, combined with persistently low natural gas and NGL prices, may make companies more cautious about stepping up activities, however.

The company said it still has $2bn of unrestricted cash on its balance sheet and an undrawn $4bn revolving credit facility as of 30 June.

Privately held FourPoint Energy acquired oil and gas assets in Oklahoma from Chesapeake and CHK Cleveland Tonkawa for $840mn. The assets cover nearly 250,000 net acres centered in Roger Mills and Ellis counties, Oklahoma, including an interest in about 1,500 producing wells primarily in the Cleveland, Tonkawa and Marmaton formations with average daily net output of about 21,500 b/d of oil equivalent (boe/d).

Since chief executive Doug Lawler took the helm in May 2013, Chesapeake, the second largest US natural gas producer behind ExxonMobil, has undergone a significant transformation. Following a debt-fueled land acquisition binge that left it cash-strapped but with one of the largest portfolios of US shale resources in the industry, the company has sold billions of dollars in US assets and spun off its midstream business.