OKLAHOMA CITY, Nov. 3, 2016 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE: CHK) today reported financial and
operational results for the 2016 third quarter plus other recent
developments. Highlights include:
- Enhanced operating and capital efficiencies drive 2016
third quarter average production of 638,100 boe per
day
- Oil production of 86,600 barrels per day lower
sequentially after divestiture impacts of 8,200 barrels per day in
the 2016 third quarter; 2016 fourth quarter oil production
projected to be 90,000 to 95,000 barrels per day
- Decrease in production expenses of $0.25 per boe sequentially, resulting in lower
full-year 2016 and 2017 production expense guidance
- Improved financial flexibility following refinancing of
near and mid-term maturities through new offerings and subsequent
tender offers
- Enhanced operating flexibility through Barnett Shale
exit, Mid-Continent and Rockies gathering agreement restructuring
and significant reductions of future midstream
commitments
- Total liquidity following Barnett Shale closing of
approximately $3.7
billion
- Over 60% and 50% of projected natural gas and oil
production, respectively, hedged in 2017
- Exit rate production, driven by oil volumes, poised to
grow significantly in 2017 and 2018
Doug Lawler, Chesapeake's Chief Executive Officer,
commented, "We continue to make progress in reducing leverage,
decreasing total cash costs and improving future midstream
expenses. Our achievements in these areas, particularly in regard
to our balance sheet, provide a stronger foundation for improving
profitability and enhanced returns from our capital program in 2017
and beyond. As we have previously stated, our large resource
base and significant inventory of high-return drilling
opportunities offer long-term growth and flexibility for our
shareholders."
2016 Third Quarter Results
For the 2016 third quarter, Chesapeake's revenues declined by 33% year
over year due to a decrease in the average realized commodity
prices received for its production, lower production volumes and a
decrease in the volumes sold and prices received by the company's
marketing affiliate on behalf of third-party producers. Average
daily production for the 2016 third quarter of approximately
638,100 barrels of oil equivalent (boe) consisted of approximately
86,600 barrels (bbls) of oil, 2.914 billion cubic feet (bcf) of
natural gas and 65,700 bbls of natural gas liquids (NGL).
Chesapeake's operating expenses
continue to decline. Average production expenses during the 2016
third quarter were $2.80 per boe,
while G&A expenses (including stock-based compensation) during
the 2016 third quarter were $1.08 per
boe. Combined production and G&A expenses (including
stock-based compensation) during the 2016 third quarter were
$3.88 per boe, a decrease of 20% year
over year and 5% from the 2016 second quarter. A summary of the
company's production and operating cost guidance for 2016 and 2017
is provided in the Outlook dated November 3,
2016, beginning on Page
20.
Chesapeake reported a net loss
available to common stockholders of $1.197
billion, or $1.54 per share,
while the company's ebitda for the 2016 third quarter was a loss of
$801 million. The primary drivers of
the net loss were Barnett Shale exit costs of approximately
$616 million and a noncash impairment
of the carrying value of Chesapeake's oil and natural gas properties of
approximately $433 million, largely
resulting from decreases in the trailing 12-month average
first-day-of-the-month oil and natural gas prices as of
September 30, 2016, as compared to
June 30, 2016. Adjusting for these
and other items that are typically excluded by securities analysts,
the 2016 third quarter adjusted net income available to common
stockholders was $27 million, or
$0.09 per common share, while the
company's adjusted ebitda was $421
million in the 2016 third quarter. These adjusted results
include a recorded gain of $146
million of proceeds related to the sale of a long-term
natural gas supply contract which was sold in the 2016 third
quarter and reflected in the company's marketing, gathering and
compression revenues. Reconciliations of financial measures
calculated in accordance with generally accepted accounting
principles (GAAP) to non-GAAP measures are provided on pages 12 –
18 of this release.
Capital Spending Overview
Chesapeake's total capital
investments were approximately $412
million during the 2016 third quarter, compared to
approximately $623 million in the
2015 third quarter, as summarized in the table below. A summary of
the company's capital expenditure guidance for 2016 and 2017 is
provided in the Outlook dated November 3,
2016, beginning on Page
20.
|
2016
|
2016
|
2015
|
Operated activity
comparison
|
Q3
|
Q2
|
Q3
|
Average rig
count
|
11
|
9
|
18
|
Gross wells
completed
|
80
|
131
|
84
|
Gross wells
spud
|
63
|
49
|
81
|
Gross wells
connected
|
105
|
141
|
112
|
|
|
|
|
Type of cost ($ in
millions)
|
|
|
|
Drilling and
completion costs
|
$
|
332
|
|
$
|
337
|
|
$
|
467
|
|
Exploration costs,
leasehold and additions to other PP&E
|
21
|
|
56
|
|
57
|
|
Subtotal capital
expenditures
|
$
|
353
|
|
$
|
393
|
|
$
|
524
|
|
Capitalized
interest
|
59
|
|
63
|
|
99
|
|
Total guided
capital expenditures
|
$
|
412
|
|
$
|
456
|
|
$
|
623
|
|
Balance Sheet and Liquidity
As of September 30, 2016,
Chesapeake's debt principal
balance was approximately $8.7
billion, including approximately $240
million of borrowings outstanding on the company's revolving
credit facility, compared to $9.7
billion as of December 31,
2015, and $11.7 billion as of
September 30, 2015.
During the 2016 third quarter, the company entered into a
$1.5 billion secured five-year term
loan facility. Chesapeake used the
net proceeds from this term loan to purchase and retire
$898 million principal amount of its
senior notes and $708 million
principal amount of its contingent convertible senior notes for
$1.5 billion pursuant to tender
offers.
In October 2016, Chesapeake issued in a private placement
$1.25 billion principal amount of
unsecured 5.5% Convertible Senior Notes due 2026. The company
intends to use the net proceeds for general corporate purposes,
which may include debt repurchases and the repayment of borrowings
under its credit facility and senior notes with near-term
maturities as they become due. Additionally, the company completed
private exchanges in aggregate of approximately 110.3 million
shares of its common stock for 134,000 shares of 5.00% Cumulative
Convertible Preferred Stock (Series 2005B), 606,271 shares of 5.75%
Cumulative Convertible Preferred Stock and 553,007 shares of 5.75%
Cumulative Convertible Preferred Stock (Series A). This amount of
preferred stock represents approximately $1.2 billion of liquidation value, which was
exchanged at a discount of approximately 40%. The company also
repurchased in the open market approximately $105 million principal amount of its outstanding
debt scheduled to mature or that could be put to the company in
2017 and 2018 for $106 million.
Since September 30, 2015,
Chesapeake has significantly
reduced its near-term debt maturities. As of November 2, 2016, Chesapeake's principal debt maturities by
year, including debt that could be put to the company, are as
follows:
|
Principal
Amount
|
|
11/2/2016
|
9/30/2015
|
2016
|
$
|
—
|
|
$
|
500
|
|
2017
|
625
|
|
2,212
|
|
2018
|
599
|
|
1,016
|
|
2019
|
504
|
|
1,500
|
|
2020-2026
(a)
|
7,894
|
|
6,496
|
|
Total
|
$
|
9,622
|
|
$
|
11,724
|
|
|
(a) Includes $1.25
billion principal amount of unsecured 5.5% Convertible Senior Notes
issued on October 5, 2016.
|
Asset Acquisitions and Divestitures Update
In the 2016 third quarter, the company entered into an agreement
to convey its interests in the Barnett Shale operating area located
in North Texas to Total S.A.
(NYSE: TOT) and simultaneously terminate future commitments
associated with this asset. The transaction closed on October 31, 2016, and Chesapeake paid $334
million to terminate an existing gathering agreement with
Williams Partners L.P. (NYSE: WPZ) ("Williams").
Also in the 2016 third quarter, the company entered into a
purchase and sale agreement to sell the majority of its upstream
and midstream assets in the Devonian Shale located in West Virginia and Kentucky, which includes approximately 882,000
net acres and approximately 5,600 wells along with related
gathering assets, as well as other property, plant and equipment.
Chesapeake will retain deep
drilling rights in the area after the anticipated disposition. In
connection with this divestiture, the company expects to repurchase
one of its two remaining volumetric production payment (VPP)
transactions. All of the acquired interests will be conveyed in the
divestiture and the company will no longer have any future
obligations related to this VPP. After the repurchase of this VPP,
the company expects net cash proceeds from this disposition to be
nominal.
In the 2016 third quarter, Chesapeake purchased additional working
interests in certain of its operated properties in its Haynesville
Shale operating area for approximately $85
million, adding approximately 72,500 net acres to its net
acreage position and approximately 55 million cubic feet (mmcf) per
day of net natural gas production.
The company continues to focus on select asset divestitures and
is currently planning to sell additional properties by year-end
2016, including a portion of its Haynesville Shale properties.
Midstream Update
In addition to the gas gathering agreement termination with
Williams in the Barnett Shale, Chesapeake renegotiated its existing
cost-of-service gas gathering agreement with Williams in the
Mid-Continent operating area to a fixed-fee arrangement in exchange
for a $66 million payment in the 2016
third quarter. This new agreement became effective July 1, 2016.
The company also accelerated the value of a long-term natural
gas supply contract in the 2016 third quarter by selling rights
under a long-term gas supply agreement for $146 million in cash proceeds. In connection with
this sale, the company reversed a $280
million derivative asset which was reflected as an
unrealized hedging loss during the current quarter.
In October 2016, Chesapeake announced that it signed a letter
of intent to restructure its natural gas gathering and service
agreement in its Powder River Basin operating area with Williams
and Crestwood Equity Partners L.P. (NYSE: CEQP). The restructured
services are expected to replace the current cost-of-service
arrangement and improve economics which support increased
development across an expanded area of dedication in the region.
Subject to board approvals from all three companies of the
definitive agreement, the restructured services are to become
effective January 1, 2017, for a
20-year term.
Operations Update
Chesapeake's average daily
production for the 2016 third quarter was approximately 638,100 boe
and is further detailed in the table below. For the 2016 fourth
quarter, the company expects its average daily production to range
between 550,000 and 570,000 boe (including approximately one month
of production from the Barnett Shale assets). With average daily
oil production of approximately 91,000 barrels per day for the
month of October 2016, the company
expects its average daily oil production to range between 90,000
and 95,000 barrels per day for the 2016 fourth quarter.
Chesapeake currently expects
its exit rate production to grow significantly over the next two
years. The company is currently projecting an exit-to-exit increase
in total production from the fourth quarter of 2016 to the fourth
quarter of 2017 of approximately 7%, adjusted for asset sales. More
importantly, the company is projecting an exit-to-exit increase in
its oil production from the fourth quarter of 2016 to the fourth
quarter of 2017 of approximately 10%. For 2018, the company is
currently projecting an increase in its total production from the
fourth quarter of 2017 to the fourth quarter of 2018 of
approximately 15%, primarily driven by an exit-to-exit increase in
its oil production from the fourth quarter of 2017 to the fourth
quarter of 2018 of approximately 20%. Chesapeake's projected growth rates are
preliminary and its flexible capital expenditure program will be
adjusted based on prevailing market conditions and are subject to
final capital allocation decisions for 2017 and 2018.
|
2016
|
2016
|
2015
|
Operating area net
production (mboe/day)
|
Q3
|
Q2
|
Q3
|
Eagle Ford
|
101
|
|
92
|
|
108
|
|
Haynesville
|
139
|
|
126
|
|
106
|
|
Marcellus
|
134
|
|
134
|
|
135
|
|
Utica
|
127
|
|
137
|
|
106
|
|
Mid-Continent
|
55
|
|
78
|
|
118
|
|
Powder River
Basin
|
14
|
|
16
|
|
21
|
|
Barnett
|
59
|
|
65
|
|
63
|
|
Other
|
9
|
|
9
|
|
10
|
|
Total
production
|
638
|
|
657
|
|
667
|
|
Chesapeake is currently
utilizing 11 drilling rigs across its operating areas, three of
which are located in the Eagle Ford Shale, three in the Haynesville
Shale, three in the Mid-Continent area and two rigs in the Utica
Shale. Chesapeake plans to utilize
its existing rigs through year-end and plans to drill 50 to 60
wells and place approximately 100 to 110 wells on production in the
2016 fourth quarter.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and operational
results during the 2016 third quarter as compared to results in
prior periods.
|
|
Three Months
Ended
|
|
|
09/30/16
|
|
06/30/16
|
|
09/30/15
|
Oil equivalent
production (in mmboe)
|
|
59
|
|
|
60
|
|
|
61
|
|
Oil production (in
mmbbls)
|
|
8
|
|
|
8
|
|
|
11
|
|
Average realized oil
price ($/bbl)(a)
|
|
45.24
|
|
|
44.31
|
|
|
66.04
|
|
Natural gas
production (in bcf)
|
|
268
|
|
|
269
|
|
|
263
|
|
Average realized
natural gas price ($/mcf)(a)
|
|
2.13
|
|
|
1.97
|
|
|
2.51
|
|
NGL production (in
mmbbls)
|
|
6
|
|
|
7
|
|
|
7
|
|
Average realized NGL
price ($/bbl)(a)
|
|
13.70
|
|
|
12.88
|
|
|
10.90
|
|
Production expenses
($/boe)
|
|
(2.80)
|
|
|
(3.05)
|
|
|
(4.09)
|
|
Gathering, processing
and transportation expenses ($/boe)
|
|
(8.07)
|
|
|
(8.04)
|
|
|
(7.88)
|
|
Oil -
($/bbl)
|
|
(3.67)
|
|
|
(3.64)
|
|
|
(3.35)
|
|
Natural Gas -
($/mcf)
|
|
(1.47)
|
|
|
(1.48)
|
|
|
(1.49)
|
|
NGL -
($/bbl)
|
|
(8.13)
|
|
|
(7.61)
|
|
|
(8.03)
|
|
Production taxes
($/boe)
|
|
(0.29)
|
|
|
(0.32)
|
|
|
(0.42)
|
|
General and
administrative expenses ($/boe)(b)
|
|
(0.90)
|
|
|
(0.86)
|
|
|
(0.64)
|
|
Stock-based
compensation ($/boe)
|
|
(0.18)
|
|
|
(0.16)
|
|
|
(0.15)
|
|
DD&A of oil and
natural gas properties ($/boe)
|
|
(4.35)
|
|
|
(4.43)
|
|
|
(7.95)
|
|
DD&A of other
assets ($/boe)
|
|
(0.42)
|
|
|
(0.48)
|
|
|
(0.51)
|
|
Interest expenses
($/boe)(a)
|
|
(1.20)
|
|
|
(1.00)
|
|
|
(1.41)
|
|
Marketing, gathering
and compression net margin ($ in millions)(c)
|
|
(162)
|
|
|
(25)
|
|
|
58
|
|
Operating cash flow
($ in millions)(d)
|
|
209
|
|
|
176
|
|
|
476
|
|
Operating cash flow
($/boe)
|
|
3.56
|
|
|
2.94
|
|
|
7.76
|
|
Adjusted ebitda ($ in
millions)(e)
|
|
421
|
|
|
252
|
|
|
560
|
|
Adjusted ebitda
($/boe)
|
|
7.17
|
|
|
4.21
|
|
|
9.12
|
|
Net loss available to
common stockholders ($ in millions)
|
|
(1,197)
|
|
|
(1,792)
|
|
|
(4,695)
|
|
Loss per share –
diluted ($)
|
|
(1.54)
|
|
|
(2.48)
|
|
|
(7.08)
|
|
Adjusted net income
(loss) available to common stockholders ($ in millions)(f)
|
|
27
|
|
|
(145)
|
|
|
(83)
|
|
Adjusted income
(loss) per share ($)(g)
|
|
0.09
|
|
|
(0.14)
|
|
|
(0.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes the effects
of realized gains (losses) from hedging, but excludes the effects
of unrealized gains (losses) from hedging.
|
(b)
|
Excludes expenses
associated with stock-based compensation and restructuring and
other termination costs.
|
(c)
|
Includes revenue,
operating expenses and unrealized gains (losses) on supply contract
derivatives, but excludes depreciation and amortization of other
assets. For the three months ended September 30, 2016, June 30,
2016 and September 30, 2015, unrealized gains (losses) were ($280
million), ($37 million) and $70 million, respectively.
Additionally, the three months ended September 30, 2016 includes
$146 million of proceeds related to the sale of the supply
contract.
|
(d)
|
Defined as cash flow
provided by operating activities before changes in assets and
liabilities.
|
(e)
|
Defined as net income
before interest expense, income taxes and depreciation, depletion
and amortization expense, as adjusted to remove the effects of
certain items detailed on page 18.
|
(f)
|
Defined as net income
available to common stockholders, as adjusted to remove the effects
of certain items detailed on page 12.
|
(g)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
2016 Third Quarter Financial and Operational Results
Conference Call Information
A conference call to discuss this release has been scheduled on
Thursday, November 3, 2016, at
9:00 am EDT. The telephone number to
access the conference call is 913-312-6668 or toll-free
888-609-5667. The passcode for the call is 2510197. The number to
access the conference call replay is 719-457-0820 or toll-free
888-203-1112 and the passcode for the replay is 2510197. The
conference call will be webcast and can be found at
www.chk.com in the "Investors" section of the company's
website. The webcast of the conference will be available on the
website for one year.
Headquartered in Oklahoma
City, Chesapeake Energy Corporation's (NYSE: CHK) operations
are focused on discovering and developing its large and
geographically diverse resource base of unconventional oil and
natural gas assets onshore in the United States. The company
also owns oil and natural gas marketing and natural gas gathering
and compression businesses. Further information is available
at www.chk.com where Chesapeake routinely posts announcements,
updates, events, investor information, presentations and news
releases.
This news release and the accompanying Outlook include
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are statements
other than statements of historical fact. They include statements
that give our current expectations or forecasts of future events,
production and well connection forecasts, estimates of operating
costs, anticipated capital and operational efficiencies, planned
development drilling and expected drilling cost reductions, general
and administrative expenses, capital expenditures, the timing of
anticipated noncore asset sales and proceeds to be received
therefrom, projected cash flow and liquidity, our
ability to enhance our cash flow and financial flexibility, plans
and objectives for future operations (including our ability to
optimize base production and execute gas gathering agreements), the
ability of our employees, portfolio strength and operational
leadership to create long-term value, and the assumptions on which
such statements are based. Although we believe the expectations and
forecasts reflected in the forward-looking statements are
reasonable, we can give no assurance they will prove to have been
correct. They can be affected by inaccurate or changed assumptions
or by known or unknown risks and uncertainties.
Factors that could cause actual results to differ materially
from expected results include those described under "Risk Factors"
in Item 1A of our annual report on Form 10-K and any updates to
those factors set forth in Chesapeake's subsequent quarterly reports on
Form 10-Q or current reports on Form 8-K (available at
http://www.chk.com/investors/sec-filings). These risk factors
include the volatility of oil, natural gas and NGL prices; the
limitations our level of indebtedness may have on our financial
flexibility; our inability to access the capital markets on
favorable terms or at all; the availability of cash flows from
operations and other funds to finance reserve replacement costs or
satisfy our debt obligations; a further downgrade in our credit
rating requiring us to post more collateral under certain
commercial arrangements; write-downs of our oil and natural gas
asset carrying values due to low commodity prices; our ability to
replace reserves and sustain production; uncertainties inherent in
estimating quantities of oil, natural gas and NGL reserves and
projecting future rates of production and the amount and timing of
development expenditures; our ability to generate profits or
achieve targeted results in drilling and well operations; leasehold
terms expiring before production can be established; commodity
derivative activities resulting in lower prices realized on oil,
natural gas and NGL sales; the need to secure derivative
liabilities and the inability of counterparties to satisfy their
obligations; adverse developments or losses from pending or future
litigation and regulatory proceedings, including royalty claims;
charges incurred in response to market conditions and in connection
with our ongoing actions to reduce financial leverage and
complexity; drilling and operating risks and resulting liabilities;
effects of environmental protection laws and regulation on our
business; legislative and regulatory initiatives further regulating
hydraulic fracturing; our need to secure adequate supplies of water
for our drilling operations and to dispose of or recycle the water
used; impacts of potential legislative and regulatory actions
addressing climate change; federal and state tax proposals
affecting our industry; potential OTC derivatives regulation
limiting our ability to hedge against commodity price fluctuations;
competition in the oil and gas exploration and production industry;
a deterioration in general economic, business or industry
conditions; negative public perceptions of our industry; limited
control over properties we do not operate; pipeline and gathering
system capacity constraints and transportation interruptions;
terrorist activities and cyber-attacks adversely impacting our
operations; potential challenges of our spin-off of Seventy Seven
Energy Inc. (SSE) in connection with SSE's recently completed
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code; an
interruption in operations at our headquarters due to a
catastrophic event; the continuation of suspended dividend payments
on our common stock and preferred stock; certain anti-takeover
provisions that affect shareholder rights; and our inability to
increase or maintain our liquidity through debt repurchases,
capital exchanges, asset sales, joint ventures, farmouts or other
means.
In addition, disclosures concerning the estimated
contribution of derivative contracts to our future results of
operations are based upon market information as of a specific
date. These market prices are subject to significant
volatility. Our production forecasts are also dependent upon
many assumptions, including estimates of production decline rates
from existing wells and the outcome of future drilling
activity. Expected asset sales may not be completed in the
time frame anticipated or at all. We caution you not to place
undue reliance on our forward-looking statements, which speak only
as of the date of this news release, and we undertake no obligation
to update any of the information provided in this release or the
accompanying Outlook, except as required by applicable law.
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
Brad Sylvester,
CFA
|
Gordon
Pennoyer
|
(405) 935-8870
|
(405)
935-8878
|
ir@chk.com
|
media@chk.com
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
($ in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
2016
|
|
2015
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
|
$
|
1,177
|
|
|
$
|
1,363
|
|
Marketing, gathering
and compression
|
|
1,099
|
|
|
2,013
|
|
Total
Revenues
|
|
2,276
|
|
|
3,376
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
164
|
|
|
251
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
473
|
|
|
483
|
|
Production
taxes
|
|
17
|
|
|
25
|
|
Marketing, gathering
and compression
|
|
1,261
|
|
|
1,955
|
|
General and
administrative
|
|
63
|
|
|
49
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
53
|
|
Provision for legal
contingencies
|
|
8
|
|
|
—
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
255
|
|
|
488
|
|
Depreciation and
amortization of other assets
|
|
25
|
|
|
31
|
|
Impairment of oil and
natural gas properties
|
|
433
|
|
|
5,416
|
|
Impairments of fixed
assets and other
|
|
751
|
|
|
79
|
|
Net gains on sales of
fixed assets
|
|
—
|
|
|
(1)
|
|
Total Operating
Expenses
|
|
3,450
|
|
|
8,829
|
|
LOSS FROM
OPERATIONS
|
|
(1,174)
|
|
|
(5,453)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
|
(73)
|
|
|
(88)
|
|
Losses on
investments
|
|
(1)
|
|
|
(33)
|
|
Gains on purchases or
exchanges of debt
|
|
87
|
|
|
—
|
|
Other income
(expense)
|
|
7
|
|
|
(2)
|
|
Total Other Income
(Expense)
|
|
20
|
|
|
(123)
|
|
LOSS BEFORE INCOME
TAXES
|
|
(1,154)
|
|
|
(5,576)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
Current income
taxes
|
|
—
|
|
|
—
|
|
Deferred income
taxes
|
|
—
|
|
|
(937)
|
|
Total Income Tax
Benefit
|
|
—
|
|
|
(937)
|
|
NET
LOSS
|
|
(1,154)
|
|
|
(4,639)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
(13)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
|
(1,155)
|
|
|
(4,652)
|
|
Preferred stock
dividends
|
|
(42)
|
|
|
(43)
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(1,197)
|
|
|
$
|
(4,695)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
Basic
|
|
$
|
(1.54)
|
|
|
$
|
(7.08)
|
|
Diluted
|
|
$
|
(1.54)
|
|
|
$
|
(7.08)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
|
777
|
|
|
663
|
|
Diluted
|
|
777
|
|
|
663
|
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
($ in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
|
2016
|
|
2015
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
|
$
|
2,610
|
|
|
$
|
4,122
|
|
Marketing, gathering
and compression
|
|
3,241
|
|
|
5,993
|
|
Total
Revenues
|
|
5,851
|
|
|
10,115
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
552
|
|
|
826
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
1,436
|
|
|
1,429
|
|
Production
taxes
|
|
54
|
|
|
87
|
|
Marketing, gathering
and compression
|
|
3,410
|
|
|
5,751
|
|
General and
administrative
|
|
172
|
|
|
174
|
|
Restructuring and
other termination costs
|
|
3
|
|
|
39
|
|
Provision for legal
contingencies
|
|
112
|
|
|
359
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
791
|
|
|
1,773
|
|
Depreciation and
amortization of other assets
|
|
83
|
|
|
100
|
|
Impairment of oil and
natural gas properties
|
|
2,331
|
|
|
15,407
|
|
Impairments of fixed
assets and other
|
|
795
|
|
|
167
|
|
Net (gains) losses on
sales of fixed assets
|
|
(5)
|
|
|
3
|
|
Total Operating
Expenses
|
|
9,734
|
|
|
26,115
|
|
LOSS FROM
OPERATIONS
|
|
(3,883)
|
|
|
(16,000)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
|
(197)
|
|
|
(210)
|
|
Losses on
investments
|
|
(3)
|
|
|
(57)
|
|
Loss on sale of
investment
|
|
(10)
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
255
|
|
|
—
|
|
Other
income
|
|
13
|
|
|
3
|
|
Total Other Income
(Expense)
|
|
58
|
|
|
(264)
|
|
LOSS BEFORE INCOME
TAXES
|
|
(3,825)
|
|
|
(16,264)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
Current income
taxes
|
|
—
|
|
|
(6)
|
|
Deferred income
taxes
|
|
—
|
|
|
(3,808)
|
|
Total Income Tax
Benefit
|
|
—
|
|
|
(3,814)
|
|
NET
LOSS
|
|
(3,825)
|
|
|
(12,450)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
(50)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
|
(3,826)
|
|
|
(12,500)
|
|
Preferred stock
dividends
|
|
(127)
|
|
|
(128)
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(3,953)
|
|
|
$
|
(12,628)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
Basic
|
|
$
|
(5.47)
|
|
|
$
|
(19.07)
|
|
Diluted
|
|
$
|
(5.47)
|
|
|
$
|
(19.07)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
|
722
|
|
|
662
|
|
Diluted
|
|
722
|
|
|
662
|
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
September
30,
2016
|
|
December
31,
2015
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
4
|
|
|
$
|
825
|
|
Other current
assets
|
|
1,063
|
|
|
1,655
|
|
Total Current
Assets
|
|
1,067
|
|
|
2,480
|
|
|
|
|
|
|
Property and
equipment, (net)
|
|
11,051
|
|
|
14,298
|
|
Other
assets
|
|
405
|
|
|
536
|
|
Total
Assets
|
|
$
|
12,523
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
3,606
|
|
|
$
|
3,685
|
|
Long-term debt,
net
|
|
9,022
|
|
|
10,311
|
|
Other long-term
liabilities
|
|
827
|
|
|
921
|
|
Total
Liabilities
|
|
13,455
|
|
|
14,917
|
|
|
|
|
|
|
Preferred
stock
|
|
3,036
|
|
|
3,062
|
|
Noncontrolling
interests
|
|
259
|
|
|
259
|
|
Common stock and
other stockholders' equity
|
|
(4,227)
|
|
|
(924)
|
|
Total
Equity
|
|
(932)
|
|
|
2,397
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
12,523
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Common shares
outstanding (in millions)
|
|
776
|
|
|
663
|
|
Principal amount of
debt outstanding
|
|
$
|
8,717
|
|
|
$
|
9,706
|
|
CHESAPEAKE ENERGY
CORPORATION
|
SUPPLEMENTAL
DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND
INTEREST EXPENSE
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net
Production:
|
|
|
|
|
|
|
|
|
Oil
(mmbbl)
|
|
8
|
|
|
11
|
|
|
25
|
|
|
32
|
|
Natural gas
(bcf)
|
|
268
|
|
|
263
|
|
|
814
|
|
|
802
|
|
NGL
(mmbbl)
|
|
6
|
|
|
7
|
|
|
19
|
|
|
21
|
|
Oil equivalent
(mmboe)
|
|
59
|
|
|
61
|
|
|
180
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas
and NGL Sales ($ in millions):
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
342
|
|
|
$
|
469
|
|
|
$
|
952
|
|
|
$
|
1,549
|
|
Oil derivatives –
realized gains (losses)(a)
|
|
18
|
|
|
224
|
|
|
102
|
|
|
641
|
|
Oil derivatives –
unrealized gains (losses)(a)
|
|
23
|
|
|
(100)
|
|
|
(217)
|
|
|
(444)
|
|
Total Oil
Sales
|
|
383
|
|
|
593
|
|
|
837
|
|
|
1,746
|
|
|
|
|
|
|
|
|
|
|
Natural gas
sales
|
|
622
|
|
|
590
|
|
|
1,545
|
|
|
1,937
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
|
(50)
|
|
|
70
|
|
|
192
|
|
|
341
|
|
Natural gas
derivatives – unrealized gains (losses)(a)
|
|
131
|
|
|
33
|
|
|
(204)
|
|
|
(198)
|
|
Total Natural Gas
Sales
|
|
703
|
|
|
693
|
|
|
1,533
|
|
|
2,080
|
|
|
|
|
|
|
|
|
|
|
NGL sales
|
|
84
|
|
|
77
|
|
|
247
|
|
|
296
|
|
NGL derivatives –
realized gains (losses)(a)
|
|
(2)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
NGL derivatives –
unrealized gains (losses)(a)
|
|
9
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Total NGL
Sales
|
|
91
|
|
|
77
|
|
|
240
|
|
|
296
|
|
Total Oil, Natural
Gas and NGL Sales
|
|
$
|
1,177
|
|
|
$
|
1,363
|
|
|
$
|
2,610
|
|
|
$
|
4,122
|
|
|
|
|
|
|
|
|
|
|
Average Sales
Price – excluding gains
(losses) on derivatives:
|
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
42.94
|
|
|
$
|
44.60
|
|
|
$
|
38.21
|
|
|
$
|
47.90
|
|
Natural gas ($ per
mcf)
|
|
$
|
2.32
|
|
|
$
|
2.25
|
|
|
$
|
1.90
|
|
|
$
|
2.41
|
|
NGL ($ per
bbl)
|
|
$
|
13.93
|
|
|
$
|
10.90
|
|
|
$
|
12.90
|
|
|
$
|
14.06
|
|
Oil equivalent ($ per
boe)
|
|
$
|
17.86
|
|
|
$
|
18.52
|
|
|
$
|
15.27
|
|
|
$
|
20.21
|
|
|
|
|
|
|
|
|
|
|
Average Sales
Price –including realized
gains (losses) on derivatives:
|
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
45.24
|
|
|
$
|
66.04
|
|
|
$
|
42.31
|
|
|
$
|
67.73
|
|
Natural gas ($ per
mcf)
|
|
$
|
2.13
|
|
|
$
|
2.51
|
|
|
$
|
2.13
|
|
|
$
|
2.84
|
|
NGL ($ per
bbl)
|
|
$
|
13.70
|
|
|
$
|
10.90
|
|
|
$
|
12.66
|
|
|
$
|
14.06
|
|
Oil equivalent ($ per
boe)
|
|
$
|
17.30
|
|
|
$
|
23.33
|
|
|
$
|
16.88
|
|
|
$
|
25.47
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
($ in millions):
|
|
|
|
|
|
|
|
|
Interest(b)
|
|
$
|
74
|
|
|
$
|
88
|
|
|
$
|
199
|
|
|
$
|
222
|
|
Interest rate
derivatives – realized (gains) losses(c)
|
|
(3)
|
|
|
(2)
|
|
|
(9)
|
|
|
(4)
|
|
Interest rate
derivatives – unrealized (gains) losses(c)
|
|
2
|
|
|
2
|
|
|
7
|
|
|
(8)
|
|
Total Interest
Expense
|
|
$
|
73
|
|
|
$
|
88
|
|
|
$
|
197
|
|
|
$
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Realized gains and
losses include the following items: (i) settlements of
nondesignated derivatives related to current period production
revenues, (ii) prior period settlements for option premiums and for
early-terminated derivatives originally scheduled to settle against
current period production revenues, and (iii) gains and losses
related to de-designated cash flow hedges originally designated to
settle against current period production revenues. Unrealized gains
and losses include the change in fair value of open derivatives
scheduled to settle against future period production revenues
offset by amounts reclassified as realized gains and losses during
the period. Although we no longer designate our derivatives as cash
flow hedges for accounting purposes, we believe these definitions
are useful to management and investors in determining the
effectiveness of our price risk management program.
|
|
(b)
|
Net of amounts
capitalized.
|
|
(c)
|
Realized (gains)
losses include settlements related to the current period interest
accrual and the effect of (gains) losses on early termination
trades. Unrealized (gains) losses include changes in the fair value
of open interest rate derivatives offset by amounts reclassified to
realized (gains) losses during the period.
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED CASH FLOW DATA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
Beginning
cash
|
|
$
|
4
|
|
|
$
|
2,051
|
|
|
|
|
|
|
Net cash provided
by operating activities
|
|
376
|
|
|
318
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(339)
|
|
|
(528)
|
|
Acquisitions of
proved and unproved properties(b)
|
|
(157)
|
|
|
(141)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
24
|
|
|
174
|
|
Additions to other
property and equipment(c)
|
|
(7)
|
|
|
(21)
|
|
Proceeds from sales
of other property and equipment
|
|
—
|
|
|
73
|
|
Decrease in
restricted cash
|
|
—
|
|
|
52
|
|
Other
|
|
(1)
|
|
|
(2)
|
|
Net cash used in
investing activities
|
|
(480)
|
|
|
(393)
|
|
|
|
|
|
|
Net cash provided
by (used in) financing activities
|
|
104
|
|
|
(217)
|
|
Change in cash and
cash equivalents
|
|
—
|
|
|
(292)
|
|
Ending
cash
|
|
$
|
4
|
|
|
$
|
1,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes capitalized
interest of $1 million and $3 million for the three months ended
September 30, 2016 and 2015, respectively.
|
|
|
(b)
|
Includes capitalized
interest of $56 million and $93 million for the three months ended
September 30, 2016 and 2015, respectively.
|
|
|
(c)
|
Includes capitalized
interest of a nominal amount and $1 million for the three months
ended September 30, 2016 and 2015, respectively.
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED CASH FLOW DATA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
|
September
30, 2016
|
|
September 30,
2015
|
|
|
|
|
|
Beginning
cash
|
|
$
|
825
|
|
|
$
|
4,108
|
|
|
|
|
|
|
Net cash provided
by operating activities
|
|
50
|
|
|
1,055
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(948)
|
|
|
(2,696)
|
|
Acquisitions of
proved and unproved properties(b)
|
|
(583)
|
|
|
(407)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
988
|
|
|
188
|
|
Additions to other
property and equipment(c)
|
|
(32)
|
|
|
(114)
|
|
Proceeds from sales
of other property and equipment
|
|
70
|
|
|
80
|
|
Cash paid for title
defects
|
|
(69)
|
|
|
—
|
|
Additions to
investments
|
|
—
|
|
|
(1)
|
|
Decrease in
restricted cash
|
|
—
|
|
|
52
|
|
Other
|
|
(5)
|
|
|
(7)
|
|
Net cash used in
investing activities
|
|
(579)
|
|
|
(2,905)
|
|
|
|
|
|
|
Net cash used in
financing activities
|
|
(292)
|
|
|
(499)
|
|
Change in cash and
cash equivalents
|
|
(821)
|
|
|
(2,349)
|
|
Ending
cash
|
|
$
|
4
|
|
|
$
|
1,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes capitalized
interest of $5 million and $21 million for the nine months ended
September 30, 2016 and 2015, respectively.
|
|
|
(b)
|
Includes capitalized
interest of $179 million and $305 million for the nine months ended
September 30, 2016 and 2015, respectively.
|
|
|
(c)
|
Includes capitalized
interest of $1 million and $3 million for the nine months ended
September 30, 2016 and 2015, respectively.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
(in millions,
except per share data)
|
(unaudited)
|
|
THREE MONTHS
ENDED:
|
September 30,
2016
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(1,197)
|
|
777
|
|
$
|
(1.54)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized gains on
commodity derivatives
|
(163)
|
|
|
|
|
|
(0.21)
|
Unrealized losses on
supply contract derivatives
|
280
|
|
|
|
|
|
0.36
|
Provision for legal
contingencies
|
8
|
|
|
|
|
|
0.01
|
Impairment of oil and
natural gas properties
|
433
|
|
|
|
|
|
0.56
|
Impairments of fixed
assets and other
|
751
|
|
|
|
|
|
0.97
|
Gains on purchases or
exchanges of debt
|
(87)
|
|
|
|
|
|
(0.11)
|
Other
|
2
|
|
|
|
|
|
—
|
Tax effect of above
items(b)
|
—
|
|
|
|
|
|
—
|
Adjusted net
income available to common stockholders(c)
(Non-GAAP)
|
27
|
|
|
|
|
|
0.04
|
|
|
|
|
|
|
Preferred stock
dividends
|
42
|
|
|
|
|
|
0.05
|
Total adjusted net
income attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
69
|
|
|
|
$
|
0.09
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 113
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
|
|
(b)
|
Our effective tax
rate in the three months ended September 30, 2016 was 0%;
thus, there is no tax effect on the reconciling
adjustments.
|
|
|
(c)
|
Adjusted net income
and adjusted earnings per common share are not measures of
financial performance under accounting principles generally
accepted in the United States (GAAP), and should not be considered
as an alternative to net income available to common stockholders or
earnings per share. Adjusted net income available to common
stockholders and adjusted earnings per share exclude certain items
that management believes affect the comparability of operating
results. The company believes these adjusted financial measures are
a useful adjunct to earnings calculated in accordance with GAAP
because:
|
|
|
|
(i)
|
Management uses
adjusted net income available to common stockholders to evaluate
the company's operational trends and performance relative to other
oil and natural gas producing companies.
|
|
|
|
(ii)
|
Adjusted net income
available to common stockholders is more comparable to earnings
estimates provided by securities analysts.
|
|
|
|
(iii)
|
Items excluded
generally are one-time items or items whose timing or amount cannot
be reasonably estimated. Accordingly, any guidance provided
by the company generally excludes information regarding these types
of items.
|
|
|
(d)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
(in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
September 30,
2015
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(4,695)
|
|
|
663
|
|
|
$
|
(7.08)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
67
|
|
|
|
|
0.10
|
|
Unrealized gains on
supply contract derivatives
|
(70)
|
|
|
|
|
(0.10)
|
|
Restructuring and
other termination costs
|
53
|
|
|
|
|
0.08
|
|
Impairment of oil and
natural gas properties
|
5,416
|
|
|
|
|
8.17
|
|
Impairments of fixed
assets and other
|
79
|
|
|
|
|
0.12
|
|
Net gains on sales of
fixed assets
|
(1)
|
|
|
|
|
—
|
|
Tax effect of above
items(b)
|
(932)
|
|
|
|
|
(1.41)
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(83)
|
|
|
|
|
(0.12)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
43
|
|
|
|
|
0.06
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(40)
|
|
|
|
|
$
|
(0.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 113
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
|
|
(b)
|
Our effective tax
rate in the three months ended September 30, 2015 was
16.8%.
|
|
|
(c)
|
Adjusted net income
and adjusted earnings per common share are not measures of
financial performance under accounting principles generally
accepted in the United States (GAAP), and should not be considered
as an alternative to net income available to common stockholders or
earnings per share. Adjusted net income available to common
stockholders and adjusted earnings per share exclude certain items
that management believes affect the comparability of operating
results. The company believes these adjusted financial measures are
a useful adjunct to earnings calculated in accordance with GAAP
because:
|
|
|
|
(i)
|
Management uses
adjusted net income available to common stockholders to evaluate
the company's operational trends and performance relative to other
oil and natural gas producing companies.
|
|
|
|
|
|
|
|
|
(ii)
|
Adjusted net income
available to common stockholders is more comparable to earnings
estimates provided by securities analysts.
|
|
|
|
|
|
|
|
|
(iii)
|
Items excluded
generally are one-time items or items whose timing or amount cannot
be reasonably estimated. Accordingly, any guidance provided
by the company generally excludes information regarding these types
of items.
|
|
|
|
|
|
|
|
(d)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
(in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
September 30,
2016
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(3,953)
|
|
|
722
|
|
|
$
|
(5.47)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
423
|
|
|
|
|
0.58
|
|
Unrealized losses on
supply contract derivatives
|
297
|
|
|
|
|
0.41
|
|
Restructuring and
other termination costs
|
3
|
|
|
|
|
—
|
|
Provision for legal
contingencies
|
112
|
|
|
|
|
0.16
|
|
Impairment of oil and
natural gas properties
|
2,331
|
|
|
|
|
3.23
|
|
Impairments of fixed
assets and other
|
795
|
|
|
|
|
1.10
|
|
Net gains on sales of
fixed assets
|
(5)
|
|
|
|
|
(0.01)
|
|
Loss on sale of
investment
|
10
|
|
|
|
|
0.01
|
|
Gains on purchases or
exchanges of debt
|
(255)
|
|
|
|
|
(0.35)
|
|
Tax rate
adjustment
|
—
|
|
|
|
|
—
|
|
Other
|
8
|
|
|
|
|
0.01
|
|
Tax effect of above
items(b)
|
—
|
|
|
|
|
—
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(234)
|
|
|
|
|
(0.33)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
127
|
|
|
|
|
0.18
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(107)
|
|
|
|
|
$
|
(0.15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 113
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
|
|
(b)
|
Our effective tax
rate in the nine months ended September 30, 2016 was 0%; thus,
there is no tax effect on the reconciling adjustments.
|
|
|
(c)
|
Adjusted net income
and adjusted earnings per share are not measures of financial
performance under accounting principles generally accepted in the
United States (GAAP), and should not be considered as an
alternative to net income available to common stockholders or
earnings per share. Adjusted net income available to common
stockholders and adjusted earnings per share exclude certain items
that management believes affect the comparability of operating
results. The company believes these adjusted financial measures are
a useful adjunct to earnings calculated in accordance with GAAP
because:
|
|
|
|
(i)
|
Management uses
adjusted net income available to common stockholders to evaluate
the company's operational trends and performance relative to other
oil and natural gas producing companies.
|
|
|
|
|
(ii)
|
Adjusted net income
available to common stockholders is more comparable to earnings
estimates provided by securities analysts.
|
|
|
|
|
(iii)
|
Items excluded
generally are one-time items or items whose timing or amount cannot
be reasonably estimated. Accordingly, any guidance provided
by the company generally excludes information regarding these types
of items.
|
|
|
|
(d)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
|
(in millions,
except per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
September 30,
2015
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(12,628)
|
|
|
662
|
|
$
|
(19.07)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
642
|
|
|
|
|
|
0.97
|
Unrealized gains on
supply contract derivatives
|
(290)
|
|
|
|
|
|
(0.44)
|
Restructuring and
other termination costs
|
39
|
|
|
|
|
|
0.06
|
Provision for legal
contingencies
|
359
|
|
|
|
|
|
0.54
|
Impairment of oil and
natural gas properties
|
15,407
|
|
|
|
|
|
23.27
|
Impairments of fixed
assets and other
|
167
|
|
|
|
|
|
0.25
|
Net losses on sales
of fixed assets
|
3
|
|
|
|
|
|
—
|
Tax rate
adjustment
|
(17)
|
|
|
|
|
|
(0.02)
|
Other
|
(17)
|
|
|
|
|
|
(0.02)
|
Tax effect of above
items(b)
|
(3,827)
|
|
|
|
|
|
(5.78)
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(162)
|
|
|
|
|
|
(0.24)
|
|
|
|
|
|
|
Preferred stock
dividends
|
128
|
|
|
|
|
|
0.19
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(34)
|
|
|
|
|
|
(0.05)
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 115
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
|
|
(b)
|
Our effective tax
rate in the nine months ended September 30, 2015 was
23.5%.
|
|
|
(c)
|
Adjusted net income
and adjusted earnings per common share are not measures of
financial performance under accounting principles generally
accepted in the United States (GAAP), and should not be considered
as an alternative to net income available to common stockholders or
earnings per share. Adjusted net income available to common
stockholders and adjusted earnings per share exclude certain items
that management believes affect the comparability of operating
results. The company believes these adjusted financial measures are
a useful adjunct to earnings calculated in accordance with GAAP
because:
|
|
|
|
(i)
|
Management uses
adjusted net income available to common stockholders to evaluate
the company's operational trends and performance relative to other
oil and natural gas producing companies.
|
|
|
|
|
|
(ii)
|
Adjusted net income
available to common stockholders is more comparable to earnings
estimates provided by securities analysts.
|
|
|
|
|
|
(iii)
|
Items excluded
generally are one-time items or items whose timing or amount cannot
be reasonably estimated. Accordingly, any guidance provided
by the company generally excludes information regarding these types
of items.
|
|
|
|
|
(d)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
OPERATING CASH FLOW AND EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
September
30,
2016
|
|
September
30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
$
|
376
|
|
|
$
|
318
|
|
Changes in assets and
liabilities
|
|
(167)
|
|
|
158
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
209
|
|
|
$
|
476
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
September
30, 2016
|
|
September 30,
2015
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,154)
|
|
|
$
|
(4,639)
|
|
Interest
expense
|
|
73
|
|
|
88
|
|
Income tax
benefit
|
|
—
|
|
|
(937)
|
|
Depreciation and
amortization of other assets
|
|
25
|
|
|
31
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
255
|
|
|
488
|
|
EBITDA(b)
|
|
$
|
(801)
|
|
|
$
|
(4,969)
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
$
|
376
|
|
|
$
|
318
|
|
Changes in assets and
liabilities
|
|
(167)
|
|
|
158
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
71
|
|
|
86
|
|
Gains on commodity
derivatives, net
|
|
129
|
|
|
227
|
|
Gains (losses) on
supply contract derivatives, net
|
|
(134)
|
|
|
70
|
|
Cash receipts on
commodity and supply contract derivative settlements,
net
|
|
(101)
|
|
|
(223)
|
|
Amendment of natural
gas gathering contract
|
|
66
|
|
|
—
|
|
Stock-based
compensation
|
|
(15)
|
|
|
(18)
|
|
Restructuring and
other termination costs
|
|
1
|
|
|
(53)
|
|
Provision for legal
contingencies
|
|
27
|
|
|
—
|
|
Impairment of oil and
natural gas properties
|
|
(433)
|
|
|
(5,416)
|
|
Impairments of fixed
assets and other
|
|
(751)
|
|
|
(79)
|
|
Net gains on sales of
fixed assets
|
|
—
|
|
|
1
|
|
Investment
activity
|
|
(1)
|
|
|
(33)
|
|
Gains on purchases or
exchanges of debt
|
|
87
|
|
|
—
|
|
Other
items
|
|
44
|
|
|
(7)
|
|
EBITDA(b)
|
|
$
|
(801)
|
|
|
$
|
(4,969)
|
|
|
|
|
|
|
|
|
(a)
|
Operating cash flow
represents net cash provided by operating activities before changes
in assets and liabilities. Operating cash flow is presented
because management believes it is a useful adjunct to net cash
provided by operating activities under GAAP. Operating cash
flow is widely accepted as a financial indicator of an oil and
natural gas company's ability to generate cash that is used to
internally fund exploration and development activities and to
service debt. This measure is widely used by investors and
rating agencies in the valuation, comparison, rating and investment
recommendations of companies within the oil and natural gas
exploration and production industry. Operating cash flow is
not a measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating,
investing or financing activities as an indicator of cash flows, or
as a measure of liquidity.
|
|
|
(b)
|
Ebitda represents net
income before interest expense, income taxes, and depreciation,
depletion and amortization expense. Ebitda is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that it provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. This measure is
widely used by investors and rating agencies in the valuation,
comparison, rating and investment recommendations of
companies. Ebitda is also a financial measurement that, with
certain negotiated adjustments, is reported to our lenders pursuant
to our bank credit agreements and is used in the financial
covenants in our bank credit agreements. Ebitda is not a
measure of financial performance under GAAP. Accordingly, it
should not be considered as a substitute for net income, income
from operations or cash flow provided by operating activities
prepared in accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
OPERATING CASH FLOW AND EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
$
|
50
|
|
|
$
|
1,055
|
|
Changes in assets and
liabilities
|
|
598
|
|
|
877
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
648
|
|
|
$
|
1,932
|
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(3,825)
|
|
|
$
|
(12,450)
|
|
Interest
expense
|
|
197
|
|
|
210
|
|
Income tax
benefit
|
|
—
|
|
|
(3,814)
|
|
Depreciation and
amortization of other assets
|
|
83
|
|
|
100
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
791
|
|
|
1,773
|
|
EBITDA(b)
|
|
$
|
(2,754)
|
|
|
$
|
(14,181)
|
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
$
|
50
|
|
|
$
|
1,055
|
|
Changes in assets and
liabilities
|
|
598
|
|
|
877
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
190
|
|
|
218
|
|
Gains (losses) on
commodity derivatives, net
|
|
(134)
|
|
|
340
|
|
Gains (losses) on
supply contract derivatives, net
|
|
(151)
|
|
|
290
|
|
Cash receipts on
commodity and supply contract derivative settlements,
net
|
|
(487)
|
|
|
(859)
|
|
Amendment of natural
gas gathering contract
|
|
66
|
|
|
—
|
|
Stock-based
compensation
|
|
(40)
|
|
|
(61)
|
|
Restructuring and
other termination costs
|
|
(1)
|
|
|
(39)
|
|
Provision for legal
contingencies
|
|
(77)
|
|
|
(359)
|
|
Impairment of oil and
natural gas properties
|
|
(2,331)
|
|
|
(15,407)
|
|
Impairments of fixed
assets and other
|
|
(785)
|
|
|
(159)
|
|
Net gains (losses) on
sales of fixed assets
|
|
5
|
|
|
(3)
|
|
Investment
activity
|
|
(13)
|
|
|
(57)
|
|
Gains on purchases or
exchanges of debt
|
|
255
|
|
|
—
|
|
Other
items
|
|
101
|
|
|
(17)
|
|
EBITDA(b)
|
|
$
|
(2,754)
|
|
|
$
|
(14,181)
|
|
|
|
|
|
|
|
|
(a)
|
Operating cash flow
represents net cash provided by operating activities before changes
in assets and liabilities. Operating cash flow is presented
because management believes it is a useful adjunct to net cash
provided by operating activities under GAAP. Operating cash
flow is widely accepted as a financial indicator of an oil and
natural gas company's ability to generate cash that is used to
internally fund exploration and development activities and to
service debt. This measure is widely used by investors and
rating agencies in the valuation, comparison, rating and investment
recommendations of companies within the oil and natural gas
exploration and production industry. Operating cash flow is
not a measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating,
investing or financing activities as an indicator of cash flows, or
as a measure of liquidity.
|
|
|
(b)
|
Ebitda represents net
income before interest expense, income taxes, and depreciation,
depletion and amortization expense. Ebitda is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that it provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. This measure
is widely used by investors and rating agencies in the valuation,
comparison, rating and investment recommendations of
companies. Ebitda is also a financial measurement that, with
certain negotiated adjustments, is reported to our lenders pursuant
to our bank credit agreements and is used in the financial
covenants in our bank credit agreements. Ebitda is not a
measure of financial performance under GAAP. Accordingly, it
should not be considered as a substitute for net income, income
from operations or cash flow provided by operating activities
prepared in accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
EBITDA
|
|
$
|
(801)
|
|
|
$
|
(4,969)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized (gains)
losses on commodity derivatives
|
|
(163)
|
|
|
67
|
|
Unrealized (gains)
losses on supply contract derivatives
|
|
280
|
|
|
(70)
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
53
|
|
Provision for legal
contingencies
|
|
8
|
|
|
—
|
|
Impairment of oil and
natural gas properties
|
|
433
|
|
|
5,416
|
|
Impairments of fixed
assets and other
|
|
751
|
|
|
79
|
|
Net gains on sales of
fixed assets
|
|
—
|
|
|
(1)
|
|
Gains on purchases or
exchanges of debt
|
|
(87)
|
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
(13)
|
|
Other
|
|
1
|
|
|
(2)
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
421
|
|
|
$
|
560
|
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
NINE MONTHS
ENDED:
|
|
September 30,
2016
|
|
September 30,
2015
|
|
|
|
|
|
EBITDA
|
|
$
|
(2,754)
|
|
|
$
|
(14,181)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
|
423
|
|
|
642
|
|
Unrealized (gains)
losses on supply contract derivatives
|
|
297
|
|
|
(290)
|
|
Restructuring and
other termination costs
|
|
3
|
|
|
39
|
|
Provision for legal
contingencies
|
|
112
|
|
|
359
|
|
Impairment of oil and
natural gas properties
|
|
2,331
|
|
|
15,407
|
|
Impairments of fixed
assets and other
|
|
795
|
|
|
167
|
|
Net (gains) losses on
sales of fixed assets
|
|
(5)
|
|
|
3
|
|
Loss on sale of
investment
|
|
10
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
(255)
|
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
(50)
|
|
Other
|
|
(1)
|
|
|
(9)
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
955
|
|
|
$
|
2,087
|
|
|
|
|
|
|
|
|
(a)
|
Adjusted ebitda
excludes certain items that management believes affect the
comparability of operating results. The company believes
these non-GAAP financial measures are a useful adjunct to ebitda
because:
|
|
|
|
(i)
|
Management uses
adjusted ebitda to evaluate the company's operational trends and
performance relative to other oil and natural gas producing
companies.
|
|
|
|
|
(ii)
|
Adjusted ebitda is
more comparable to estimates provided by securities
analysts.
|
|
|
|
|
(iii)
|
Items excluded
generally are one-time items or items whose timing or amount cannot
be reasonably estimated. Accordingly, any guidance provided
by the company generally excludes information regarding these types
of items.
|
|
|
|
Accordingly, adjusted
EBITDA should not be considered as a substitute for net income,
income from operations or cash flow provided by operating
activities prepared in accordance with GAAP.
|
CHESAPEAKE
ENERGY CORPORATION
RECONCILIATION OF PV-9 AND PV-10 TO STANDARDIZED MEASURE
($ in millions)
(unaudited)
PV-9 is a non-GAAP metric used in the determination of the value
of collateral under Chesapeake's
credit facility. PV-10 is a non-GAAP metric used by the industry,
investors and analysts to estimate the present value, discounted at
10% per annum, of estimated future cash flows of the company's
estimated proved reserves before income tax and asset retirement
obligations. The following table shows the reconciliation of PV-9
and PV-10 to the company's standardized measure of discounted
future net cash flows, the most directly comparable GAAP measure,
for the year ended December 31, 2015
and for the interim period ended September
30, 2016. Management believes that PV-9 provides useful
information to investors regarding the company's collateral
position and that PV-10 provides useful information to investors
because it is widely used by professional analysts and
sophisticated investors in evaluating oil and natural gas
companies. Because there are many unique factors that can impact an
individual company when estimating the amount of future income
taxes to be paid, management believes the use of a pre-tax measure
is valuable for evaluating the company. Neither PV-9 nor PV-10
should be considered as an alternative to the standardized measure
of discounted future net cash flows as computed under GAAP. With
respect to PV-9 and PV-10 calculated as of an interim date, it is
not practical to calculate taxes for the related interim period
because GAAP does not provide for disclosure of standardized
measure on an interim basis.
PV-9 – September 30,
2016 @ NYMEX Strip
|
$
|
11,847
|
|
Less: Change in
discount factor from 9 to 10
|
(743)
|
|
PV-10 – September 30,
2016 @ NYMEX Strip
|
11,104
|
|
Less: Change in
pricing assumption from NYMEX Strip to SEC
|
(7,284)
|
|
PV-10 – September 30,
2016 @ SEC
|
3,820
|
|
Plus: Change in PV-10
from 12/31/15 to 9/30/16
|
908
|
|
PV-10 – December 31,
2015 @ SEC
|
4,728
|
|
Less: Present value
of future income tax discounted at 10%
|
(34)
|
|
Standardized measure
of discounted future cash flows – December 31, 2015
|
$
|
4,694
|
|
CHESAPEAKE
ENERGY CORPORATION
MANAGEMENT'S OUTLOOK AS OF
NOVEMBER 3, 2016
Chesapeake periodically
provides guidance on certain factors that affect the company's
future financial performance. Changes from the company's
August 9, 2016 Outlook are
italicized bold below.
|
Year Ending
12/31/2016
|
Adjusted Production
Growth(a)
|
0% to
3%
|
Absolute
Production
|
|
Liquids -
mmbbls
|
56 - 60
|
Oil -
mmbbls
|
33 - 35
|
NGL -
mmbbls
|
23 - 25
|
Natural gas -
bcf
|
1,020 -
1,040
|
Total absolute
production - mmboe
|
226 -
233
|
Absolute daily rate -
mboe
|
617 -
637
|
Estimated Realized
Hedging Effects(b) (based on 11/1/16 strip
prices):
|
|
Oil -
$/bbl
|
$3.13
|
Natural gas -
$/mcf
|
$0.16
|
NGL -
$/bbl
|
($0.33)
|
Estimated Basis to
NYMEX Prices:
|
|
Oil -
$/bbl
|
$2.55 -
$2.65
|
Natural gas -
$/mcf
|
$0.35 -
$0.45
|
NGL -
$/bbl
|
$4.80 -
$5.00
|
Operating Costs per
Boe of Projected Production:
|
|
Production
expense
|
$3.00 -
$3.20
|
Gathering, processing
and transportation expenses
|
$7.60 -
$8.10
|
Oil -
$/bbl
|
$3.75 -
$3.95
|
Natural Gas -
$/mcf
|
$1.40 -
$1.50
|
NGL -
$/bbl
|
$7.60 -
$7.85
|
Production
taxes
|
$0.35 -
$0.45
|
General and
administrative(c)
|
$0.80 -
$0.90
|
Stock-based
compensation (noncash)
|
$0.10 -
$0.20
|
DD&A of natural
gas and liquids assets
|
$3.50 -
$4.50
|
Depreciation of other
assets
|
$0.40 -
$0.50
|
Interest
expense(d)
|
$1.20 -
$1.30
|
Marketing, gathering
and compression net margin(e)
|
$90 -
$100
|
Book Tax
Rate
|
0%
|
Capital Expenditures
($ in millions)(f)
|
$1,400 -
$1,500
|
Capitalized Interest
($ in millions)
|
$250
|
Total Capital
Expenditures ($ in millions)
|
$1,650 -
$1,750
|
|
|
|
|
|
|
|
(a)
|
Based on 2015
production of 550 mboe per day, adjusted for 2015 and 2016
sales.
|
(b)
|
Includes expected
settlements for commodity derivatives adjusted for option
premiums. For derivatives closed early, settlements are
reflected in the period of original contract expiration.
|
(c)
|
Excludes expenses
associated with stock-based compensation.
|
(d)
|
Excludes unrealized
gains (losses) on interest rate derivatives.
|
(e)
|
Includes revenue and
operating expenses. Excludes depreciation and amortization of other
assets and unrealized gains (losses) on supply contract
derivatives.
|
(f)
|
Includes capital
expenditures for drilling and completion, leasehold, geological and
geophysical costs, rig termination payments and other property and
plant and equipment. Excludes approximately $259 million for the
repurchase of overriding royalty interests associated with the sale
of certain of the company's properties and any additional proved
property acquisitions.
|
CHESAPEAKE
ENERGY CORPORATION
MANAGEMENT'S PRELIMINARY OUTLOOK FOR
2017 AS OF NOVEMBER 3, 2016
Chesapeake periodically
provides guidance on certain factors that affect the company's
future financial performance. Changes from the company's
August 9, 2016 Outlook are
italicized bold below.
|
Year
Ending
12/31/2017
|
|
|
Adjusted Production
Growth(a)
|
(5%) to
0%
|
Absolute
Production
|
|
Liquids -
mmbbls
|
51 - 55
|
Oil -
mmbbls
|
33 - 35
|
NGL -
mmbbls
|
18 - 20
|
Natural gas -
bcf
|
860 - 900
|
Total absolute
production - mmboe
|
194 - 205
|
Absolute daily rate -
mboe
|
532 - 562
|
Operating Costs per
Boe of Projected Production:
|
|
Production
expense, production taxes and general and administrative
expenses(b)
|
$4.00 -
$4.50
|
Gathering, processing
and transportation expenses
|
$7.00 -
$7.50
|
Oil -
$/bbl
|
$4.25 -
$4.45
|
Natural Gas -
$/mcf
|
$1.25 -
$1.35
|
NGL -
$/bbl
|
$8.10 -
$8.30
|
Marketing, gathering
and compression net margin(c)
|
($80) -
($60)
|
Capital Expenditures
($ in millions)(d)
|
$1,600 -
$2,400
|
Capitalized Interest
($ in millions)
|
$220
|
Total Capital
Expenditures ($ in millions)
|
$1,820 -
$2,620
|
|
|
|
|
|
|
|
(a)
|
Based on 2016
production of 548 mboe per day, adjusted for 2016 sales.
|
(b)
|
Includes expenses
associated with stock-based compensation.
|
(c)
|
Includes revenue and
operating expenses. Excludes depreciation and amortization of other
assets.
|
(d)
|
Includes capital
expenditures for drilling and completion, leasehold, geological and
geophysical costs, rig termination payments and other property and
plant and equipment.
|
Oil, Natural Gas and Natural Gas Liquids Hedging
Activities
Chesapeake enters into
commodity derivative transactions in order to mitigate a portion of
its exposure to adverse changes in market prices. Please see
the quarterly reports on Form 10-Q and annual reports on Form 10-K
filed by Chesapeake with the SEC
for detailed information about derivative instruments the company
uses, its quarter-end derivative positions and accounting for oil,
natural gas and natural gas liquids derivatives.
As of November 1, 2016, the
company had downside protection, through open swaps, on a portion
of its remaining 2016 oil production at an average price of
$46.84 per bbl. The company had
downside price protection, through open swaps and two-way collars,
on a portion of its remaining 2016 natural gas production at an
average price of $2.86 per mcf.
Chesapeake also had downside price
protection, through open swaps, on a portion of its remaining 2016
ethane and propane production at an average price of $0.17 per gallon and $0.46 per gallon, respectively. In addition, the
company had downside protection, through open swaps, on a portion
of its 2017 oil production at an average price of $49.68 per bbl. The company had downside price
protection, through open swaps and two-way collars, on a portion of
its 2017 natural gas production at an average price of $3.07 per mcf.
The company's crude oil hedging positions as of November 1, 2016 were as follows:
Open Crude Oil
Swaps; Gains from Closed
|
Crude Oil Trades
and Call Option Premiums
|
|
|
|
|
|
|
|
Open Swaps
(mbbls)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total Gains from
Closed Trades
and Premiums
for
Call
Options
($ in
millions)
|
Q4 2016
(a)
|
6,072
|
|
$
|
46.84
|
|
|
$
|
10
|
|
Q1 2017
|
4,500
|
|
$
|
49.47
|
|
|
$
|
22
|
|
Q2 2017
|
4,550
|
|
$
|
49.61
|
|
|
23
|
|
Q3 2017
|
4,232
|
|
$
|
49.77
|
|
|
23
|
|
Q4 2017
|
4,232
|
|
$
|
49.89
|
|
|
23
|
|
Total 2017
|
17,514
|
|
$
|
49.68
|
|
|
$
|
91
|
|
Total 2018 –
2022
|
|
|
|
|
$
|
(13)
|
|
|
|
(a)
|
Certain hedging
arrangements include a sold option to extend at an average price of
$53.67 per bbl covering 0.7 mmbbls in 2016. Sold options are
included with net written call options.
|
Crude Oil Net
Written Call Options
|
|
|
|
|
Call
Options
(mbbls)
|
Avg. NYMEX
Strike
Price
|
Q4 2016
|
3,489
|
$
|
87.25
|
|
Q1 2017
|
1,305
|
$
|
83.50
|
|
Q2 2017
|
1,320
|
$
|
83.50
|
|
Q3 2017
|
1,334
|
$
|
83.50
|
|
Q4 2017
|
1,334
|
$
|
83.50
|
|
Total 2017
|
5,293
|
$
|
83.50
|
|
The company's natural gas hedging positions as of November 1, 2016 were as follows:
Open Natural Gas
Swaps; Losses from Closed
|
Natural Gas Trades
and Call Option Premiums
|
|
|
|
|
|
|
|
Open Swaps
(bcf)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total
Losses
from Closed
Trades
and Premiums
for
Call
Options
($ in
millions)
|
Q4 2016
(a)
|
155
|
|
$
|
2.85
|
|
|
$
|
(28)
|
|
Q1 2017
|
134
|
|
$
|
3.23
|
|
|
$
|
(3)
|
|
Q2 2017
|
135
|
|
$
|
2.95
|
|
|
(1)
|
|
Q3 2017
|
136
|
|
$
|
3.00
|
|
|
(2)
|
|
Q4 2017
|
129
|
|
$
|
3.10
|
|
|
(3)
|
|
Total 2017
|
534
|
|
$
|
3.07
|
|
|
$
|
(9)
|
|
Total 2018 –
2022
|
51
|
|
$
|
2.97
|
|
|
$
|
(69)
|
|
|
|
(a)
|
Certain hedging
arrangements include a sold option to extend at an average price of
$2.80 per mmbtu covering 26 bcf in 2016. Sold options are included
with net written call options.
|
Natural Gas
Two-Way Collars
|
|
|
|
|
|
Open
Collars (bcf)
|
Avg. NYMEX Bought Put
Price
|
Avg. NYMEX Sold Call
Price
|
Q4 2016
|
15
|
$
|
3.00
|
|
$
|
3.48
|
|
Q1 2017
|
23
|
$
|
3.00
|
|
$
|
3.48
|
|
Natural Gas Net
Written Call Options
|
|
|
|
|
Call
Options
(bcf)
|
Avg. NYMEX
Strike
Price
|
Q4 2016
|
46
|
$
|
5.27
|
|
Q1 2017
|
12
|
$
|
9.43
|
|
Q2 2017
|
12
|
$
|
9.43
|
|
Q3 2017
|
12
|
$
|
9.43
|
|
Q4 2017
|
12
|
$
|
9.43
|
|
Total 2017
|
48
|
$
|
9.43
|
|
Total 2018 –
2022
|
66
|
$
|
12.00
|
|
Natural Gas Basis
Protection Swaps
|
|
|
|
|
Volume
(bcf)
|
Avg. NYMEX
plus/(minus)
|
Q4 2016
|
12
|
$
|
0.05
|
|
Q1 2017
|
13
|
$
|
0.35
|
|
Q2 2017
|
6
|
$
|
(0.46)
|
|
Q3 2017
|
6
|
$
|
(0.46)
|
|
Q4 2017
|
6
|
$
|
(0.46)
|
|
Total 2017
|
31
|
$
|
(0.11)
|
|
Total 2018 -
2022
|
1
|
$
|
(0.98)
|
|
The company's natural gas liquids hedging positions as of
November 1, 2016 were as follows:
Open Ethane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX Price of
Open Swaps
|
Q4 2016
|
20
|
$
|
0.17
|
|
Open Propane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX Price of
Open Swaps
|
Q4 2016
|
17
|
$
|
0.46
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2016-third-quarter-financial-and-operational-results-300356700.html
SOURCE Chesapeake Energy Corporation