y DANIEL GILBERT

Chesapeake Energy Corp.'s CHK +0.93% prospects of coaxing crude oil from Ohio's rust belt have dimmed, the company's chief executive said Tuesday, though he maintained the region remains key to the natural-gas giant's future.

Chesapeake, the country's second-biggest gas producer after Exxon Mobil Corp.,XOM -0.97% is seeking to transform itself into a major producer of oil, which is more profitable than natural gas. The Oklahoma City-based company has nearly doubled its oil output in the last year, with the biggest increase coming from its holdings in South Texas.

AUBREY MCCLENDON

In Ohio, Chesapeake executives had expressed optimism about producing oil from the Utica Shale, a deeply buried layer of petroleum-rich rock. Chesapeake owns drilling rights to 1.2 million acres in the Utica, and roughly a third of them lie in a zone it has described as rich in oil, though the company has focused its drilling in an area known to yield wet natural gases, like ethane and propane.

Aubrey McClendon, Chesapeake's co-founder and CEO, said in May he was confident the company would report good results from oil production.

But on Tuesday, he said the Utica was unlikely to drive a major increase in its oil production. It is not a place "where we are going to probably see a huge amount of oil production growth," Mr. McClendon said at an investor conference. "And to the extent the oil works, it will be with some other companies."

Still, Mr. McClendon said the company is pleased with its results in the Utica, calling it "one of our foundational plays for decades to come."

A Chesapeake spokesman said Tuesday, "For the time being, we are pleased to let other companies commit their capital to the oil window" of the Utica.

Analysts said they weren't surprised by Mr. McClendon's assessment, noting the company's focus on producing wet gas, which is more profitable than regular "dry" gas. A surge in natural-gas production from shale, led by Chesapeake and its rivals, has glutted the market and caused prices to collapse earlier this year to depths not seen in more than a decade.

In response, Chesapeake has spent heavily to acquire drilling rights to areas where it could extract higher-margin fuels, including large swaths of Colorado and the border between Kansas and Oklahoma. But prices for natural-gas liquids have also been dented recently by overproduction.

When oil's share of production declines, profits suffer, said Tim Rezvan, an analyst at Sterne Agee. But he pointed out that Chesapeake, and other companies like Gulfport Energy Corp. GPOR -2.37% have reported prolific volumes of both wet and dry natural gas in the Utica. "The numbers are just staggering," he said.