Chesapeake Energy Corp on Thursday cut its capital budget for the year by more than a fifth as Chief Executive Officer Doug Lawler focuses on drilling in U.S. shale basins with the highest returns, but the company's oil production outlook disappointed and shares fell as much as 5 percent.

Analysts at energy-focused investment bank Simmons & Co in Houston said the company's forecast for oil growth of 1 percent to 5 percent, a figure that does not adjust for 2013 asset sales, fell short of their expectations for growth of 12 percent.

The Oklahoma City-based company said it would spend between $5.2 billion and $5.6 billion this year, about 20 percent less than its 2013 capital expenditure estimate of $6.9 billion.

Lawler, who replaced Chesapeake's co-founder and former CEO Aubrey McClendon in June, has pledged to cut costs and debt while growing oil and gas production in the company's most profitable fields.

"We are going to be a low cost producer and we are going to be efficient in our investment," Lawler told investors on a conference call.

He said the company is still very focused on growing its liquids output, but will not drill for oil in places where returns are not good.

About 35 percent of Chesapeake's 2014 budget is earmarked for drilling in the Eagle Ford shale field.

The company was targeting more than $4 billion from asset sales in 2013. On an absolute basis, Chesapeake is targeting 2014 production growth of 2 to 4 percent, it said on Thursday.

Adjusting for 2013 asset sales, the company said it expected overall production growth to rise 8 percent to 10 percent this year. Oil output is forecast to rise 8 to 12 percent, natural gas liquids production to increase 44 to 49 percent and natural gas output to climb 4 to 6 percent.

A rise in natural gas and natural gas liquids output from the company's operations in central United States, the Utica shale in Ohio and Marcellus shale in the U.S. Northeast is also expected to contribute to production growth in 2014.

As a result of ongoing cost-cutting initiatives, Chesapeake expects production expenses to fall by about 10 percent to $4.25-$4.75 per barrel of oil equivalent (boe) in 2014.

The company expects general and administrative expenses to slide 25 percent this year.

Chesapeake's shares fell $1.22 to $24.98 in morning trading on the New York Stock Exchange.