OKLAHOMA CITY, Feb. 23, 2017 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE: CHK) today reported financial and
operational results for the 2016 full year and fourth quarter plus
other recent developments. Highlights include:
- Average 2016 production of 635,400 boe per day,
comparable to 2015 levels, adjusted for asset sales
- Total oil and natural gas proved reserves of
approximately 1.7 billion barrels of oil equivalent (bboe), a 14%
increase compared to 2015 levels
- Replaced 249% of production through extensions and
discoveries, compared to 93% in 2015 (excluding reserve
revisions)
- Reduced production expenses by approximately $336 million, or 28% per boe of production,
compared to 2015
- Reduced gathering, processing and transportation expenses
by approximately $264 million, or 7%
per boe of production, compared to 2015
- Improved financial flexibility and reduced leverage
driven by noncore asset sales, refinancings, open market
repurchases and exchanges of near and mid-term debt maturities as
well as preferred stock
- Enhanced operating flexibility through reductions of
future midstream commitments
Doug Lawler, Chesapeake's Chief Executive Officer,
commented, "During 2016, we made significant progress in improving
our capital efficiency, decreasing cash costs and future midstream
commitments while improving our liquidity and leverage profile,
which resulted in a much stronger foundation for Chesapeake going forward. In 2017, we are
capitalizing on these improvements across our cost structure to
increase shareholder returns from our high-quality, diversified oil
and natural gas portfolio. Our increase in activity over 2016
levels positions Chesapeake to
deliver increased profitability and long-term value for our
shareholders."
2016 Full Year Results
For the 2016 full year, Chesapeake's revenues declined by 38% from the
2015 full year due to a decrease in the average realized commodity
prices received for its oil and natural gas production, lower
production volumes, increased unrealized hedging losses 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 full year of approximately 635,400
barrels of oil equivalent (boe) consisted of approximately 90,800
barrels (bbls) of oil, 2.867 billion cubic feet (bcf) of natural
gas and 66,700 bbls of natural gas liquids (NGL). During 2016,
Chesapeake divested properties
with average daily production of approximately 73,500 boe.
Average production expenses during the 2016 full year were
$3.05 per boe, while G&A expenses
(including stock-based compensation) during the 2016 full year were
$1.03 per boe. Combined production
and G&A expenses (including stock-based compensation) during
the 2016 full year were $4.08 per
boe, a decrease of 21% from the 2015 full year. Gathering,
processing and transportation expenses during the 2016 full year
were $7.98 per boe, a decrease of 7%
from the 2015 full year. A summary of the company's production and
operating expense guidance for 2017 is provided in the Outlook
dated February 23, 2017, beginning on
page 21.
Chesapeake reported a net loss
available to common stockholders of $4.881
billion, or $6.39 per share,
while the company's ebitda for the 2016 full year was a loss of
$3.142 billion. The primary drivers
of the net loss were noncash impairments of the carrying value of
Chesapeake's oil and natural gas
properties totaling $2.520 billion,
largely resulting from decreases in the trailing 12-month average
first-day-of-the-month oil and natural gas prices used in the
company's impairment calculations, Barnett Shale exit costs of
approximately $645 million and
unrealized hedging losses of $818
million as prices marginally recovered. Adjusting for these
and other items that are typically excluded by securities analysts,
the 2016 full year adjusted net loss available to common
stockholders was $138 million, or
$0.05 per common share, while the
company's adjusted ebitda was $1.339
billion in the 2016 full year. Reconciliations of financial
measures calculated in accordance with generally accepted
accounting principles (GAAP) to non-GAAP measures are provided on
pages 13 – 19 of this release.
2016 Fourth Quarter Results
For the 2016 fourth quarter, Chesapeake's revenues declined by 24% year
over year due to a decrease in the average realized commodity
prices for its oil production, lower production volumes and
increased unrealized hedging losses. Average daily production for
the 2016 fourth quarter of approximately 574,500 barrels of oil
equivalent (boe) consisted of approximately 90,400 bbls of oil,
2.562 bcf of natural gas and 57,100 bbls of NGL.
Average production expenses during the 2016 fourth quarter were
$2.98 per boe, while G&A expenses
(including stock-based compensation) during the 2016 fourth quarter
were $1.28 per boe. Combined
production and G&A expenses (including stock-based
compensation) during the 2016 fourth quarter were $4.26 per boe, a decrease of 8% year over year.
Gathering, processing and transportation expenses during the 2016
fourth quarter were $7.92 per boe, a
decrease of 30% year over year, primarily due to minimum volume
commitment shortfall payments accrued in the 2015 fourth quarter
for our Barnett Shale operating area.
Chesapeake reported a net loss
available to common stockholders of $741
million, or $0.84 per share,
while the company's ebitda for the 2016 fourth quarter was a loss
of $198 million. The primary drivers
of the net loss were $395 million in
unrealized losses on the company's oil and natural gas commodity
derivatives and the loss on exchange of preferred stock of
$428 million which represents the
fair value of the additional shares of common stock issued in the
exchange over the shares that would have been issuable pursuant to
the original conversion terms. Adjusting for these and other items
that are typically excluded by securities analysts, the 2016 fourth
quarter adjusted net income available to common stockholders was
$93 million, or $0.07 per common share, while the company's
adjusted ebitda was $385 million in
the 2016 fourth quarter. Reconciliations of financial measures
calculated in accordance with GAAP to non-GAAP measures are
provided on pages 13 – 19 of this release.
Capital Spending Overview
Chesapeake's total capital
investments were approximately $1.7
billion during the 2016 full year, compared to approximately
$3.6 billion in the 2015 full year. A
summary of the company's 2016 and 2015 capital expenditures as well
as the current 2017 guidance is provided in the table below.
|
2015
|
2016
|
2017
|
Operated activity
comparison
|
Q4
|
FY
|
Q4
|
FY
|
Outlook
|
Average rig
count
|
14
|
28
|
12
|
10
|
16 -
18
|
Gross wells
spud
|
66
|
499
|
60
|
213
|
380 -
440
|
Gross wells
completed
|
85
|
547
|
82
|
365
|
420 -
485
|
Gross wells
connected
|
100
|
650
|
110
|
428
|
415 -
480
|
|
|
|
|
|
|
Type of cost ($ in
millions)
|
|
|
|
|
|
Drilling and
completion costs
|
$405
|
$2,959
|
$365
|
$1,316
|
|
Exploration costs,
leasehold and additions to other PP&E
|
55
|
231
|
38
|
130
|
|
Subtotal capital
expenditures
|
$460
|
$3,190
|
$403
|
$1,446
|
$1,700 -
$2,300
|
Capitalized
interest
|
88
|
424
|
60
|
251
|
200
|
Total capital
expenditures
|
$548
|
$3,614
|
$463
|
$1,697
|
$1,900 -
$2,500
|
Balance Sheet and Liquidity
As of December 31, 2016,
Chesapeake's debt principal
balance was approximately $10.0
billion, compared to $9.7
billion as of December 31,
2015, with approximately $882
million cash on hand. Subsequent to December 31, 2016, Chesapeake reduced its debt principal balance
by approximately $901 million through
the following actions:
- repayment upon maturity of $258
million of our 6.25% Euro-denominated senior notes due
January 2017;
- retirement of approximately $287
million of principal amount of our outstanding contingent
convertible senior notes and $2
million of non-convertible senior notes for an aggregate of
$286 million pursuant to tender
offers;
- redemption and retirement of $133
million remaining principal balance of our outstanding 6.5%
Senior Notes due 2017; and
- open market repurchases of approximately $221 million principal amount of our outstanding
unsecured senior notes for $224
million.
Following the 2017 reductions in the principal balance of the
company's outstanding debt, Chesapeake has approximately $9.1 billion in outstanding debt, with no
outstanding borrowings on its revolving credit facility. Since
December 31, 2015, Chesapeake has reduced the principal amount of
debt due or that could be put to the company in 2017 and 2018 by
approximately $2.7 billion, or 97%,
from $2.770 billion to $77 million.
Also in January 2017, the company
completed private exchanges of an aggregate of approximately 10
million shares of its common stock for (i) 150,948 shares of 5.00%
Cumulative Convertible Preferred Stock (Series 2005B), (ii) 72,600
shares of 5.75% Cumulative Convertible Preferred Stock and (iii)
12,500 shares of 5.75% Cumulative Convertible Preferred Stock
(Series A), with an aggregate liquidation value of approximately
$100 million. On February 15, 2017, Chesapeake reinstated the payment of dividends
on each series of its outstanding convertible preferred stock and
paid our dividends in arrears.
Following the debt principal reductions, reinstatement of
preferred dividends inclusive of payment of dividends in arrears
and reductions in midstream obligations detailed below,
Chesapeake expects to end February
with approximately $300 million in
cash on hand.
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 central Texas to Total
S.A. (NYSE: TOT) and simultaneously terminate a portion of future
gas gathering and transportation commitments associated with this
asset. Chesapeake received
approximately $218 million in
proceeds for these assets, which closed on October 31, 2016.
Also in the 2016 third quarter, the company sold the majority of
its upstream and midstream assets in the Devonian Shale located in
West Virginia, Kentucky, and Virginia. In connection with this divestiture,
the company repurchased one of its two remaining volumetric
production payment (VPP) transactions, resulting in nominal net
proceeds. Chesapeake retained the
deeper drilling rights in the area after this disposition, which
closed on December 21, 2016.
In the 2017 first quarter, Chesapeake closed on two separate sales
transactions of acreage and producing properties in its Haynesville
Shale operating area in northern Louisiana for gross proceeds of approximately
$915 million. Included in the sale
were approximately 119,500 net acres and approximately 576 wells
producing 80 million cubic feet of gas (mmcf) per day. Chesapeake continues to focus on select asset
divestitures and is planning to sell additional noncore and
non-operated properties in 2017.
Midstream Update
In the 2016 fourth quarter, Chesapeake signed a definitive contract to
restructure its natural gas gathering and service agreement in its
Powder River Basin operating area with Williams Partners L.P. and
Crestwood Equity Partners L.P. The restructured services replaced
the current cost-of-service arrangement and improved economics that
support increased development across an expanded area of dedication
in the region and became effective January
1, 2017, for a 20-year term.
Chesapeake continues to work to
reduce and optimize its gathering, processing and transportation
commitments across all of its operating areas. In February 2017, the company successfully reduced
crude transportation commitments related to the Seaway Pipeline by
assigning these commitments to a separate third party, effective
April 1, 2017. These commitments
totaled approximately $450 million
and Chesapeake paid approximately
$290 million to assign the contract.
As a result, the company expects its marketing margin to improve
significantly in 2018 over 2017 expected levels and return to
profitability after 2018. In addition, the company utilized
$100 million of the proceeds from the
divestiture of its assets in the Barnett Shale to buy down
approximately $110 million of its
related natural gas transportation obligations. This new agreement
is expected to be effective March 1,
2017.
Operations Update
Chesapeake's average daily
production for the 2016 fourth quarter was approximately 574,500
boe and is further detailed in the table below. For the 2017 first
quarter, the company expects its average daily production to range
between 515,000 and 535,000 boe, of which average daily oil
production is expected to range between 80,000 and 85,000 barrels
per day, which is consistent with prior guidance. Chesapeake's projected production volumes and
capital expenditure program are subject to capital allocation
decisions throughout the year and can be adjusted based on
prevailing market conditions.
|
2016
|
2016
|
2015
|
Operating area net
production (mboe/day)
|
Q4
|
Q3
|
Q4
|
Eagle Ford
|
104
|
101
|
97
|
Haynesville
|
135
|
139
|
102
|
Marcellus
|
134
|
134
|
130
|
Utica
|
108
|
127
|
140
|
Mid-Continent
|
53
|
55
|
94
|
Powder River
Basin
|
12
|
14
|
20
|
Barnett
|
19
|
59
|
70
|
Other
|
10
|
9
|
8
|
Total
production
|
575
|
638
|
661
|
Chesapeake is currently
utilizing 17 drilling rigs across its operating areas, six of which
are located in the Eagle Ford Shale, four in the Mid-Continent
area, three in the Haynesville Shale, two in the Powder River Basin
and two in Northeast Appalachia.
Chesapeake plans to utilize an
average of 17 rigs throughout the year and intends to spud and
place in production approximately 400 and 450 gross operated wells,
respectively, in 2017.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and operational
results during the 2016 fourth quarter and full year as compared to
results in prior periods.
|
|
Three Months
Ended
|
|
Full Year
Ended
|
|
|
12/31/16
|
|
12/31/15
|
|
12/31/16
|
|
12/31/15
|
Oil equivalent
production (in mmboe)
|
|
53
|
|
|
61
|
|
|
233
|
|
|
248
|
|
Oil production (in
mmbbls)
|
|
8
|
|
|
9
|
|
|
33
|
|
|
42
|
|
Average realized oil
price ($/bbl)(a)
|
|
47.37
|
|
|
64.04
|
|
|
43.58
|
|
|
66.91
|
|
Natural gas
production (in bcf)
|
|
236
|
|
|
268
|
|
|
1,049
|
|
|
1,070
|
|
Average realized
natural gas price ($/mcf)(a)
|
|
2.41
|
|
|
2.35
|
|
|
2.20
|
|
|
2.72
|
|
NGL production (in
mmbbls)
|
|
5
|
|
|
7
|
|
|
24
|
|
|
28
|
|
Average realized NGL
price ($/bbl)(a)
|
|
20.90
|
|
|
14.07
|
|
|
14.43
|
|
|
14.06
|
|
Production expenses
($/boe)
|
|
(2.98)
|
|
|
(3.62)
|
|
|
(3.05)
|
|
|
(4.22)
|
|
Gathering, processing
and transportation expenses ($/boe)
|
|
(7.92)
|
|
|
(11.34)
|
|
|
(7.98)
|
|
|
(8.55)
|
|
Oil -
($/bbl)
|
|
(3.87)
|
|
|
(3.53)
|
|
|
(3.61)
|
|
|
(3.38)
|
|
Natural Gas -
($/mcf)
|
|
(1.46)
|
|
|
(2.26)
|
|
|
(1.47)
|
|
|
(1.66)
|
|
NGL -
($/bbl)
|
|
(8.05)
|
|
|
(7.47)
|
|
|
(7.83)
|
|
|
(7.37)
|
|
Production taxes
($/boe)
|
|
(0.38)
|
|
|
(0.19)
|
|
|
(0.32)
|
|
|
(0.40)
|
|
General and
administrative expenses ($/boe)(b)
|
|
(1.11)
|
|
|
(0.84)
|
|
|
(0.87)
|
|
|
(0.77)
|
|
Stock-based
compensation ($/boe)
|
|
(0.17)
|
|
|
(0.18)
|
|
|
(0.16)
|
|
|
(0.18)
|
|
DD&A of oil and
natural gas properties ($/boe)
|
|
(4.05)
|
|
|
(5.37)
|
|
|
(4.31)
|
|
|
(8.47)
|
|
DD&A of other
assets ($/boe)
|
|
(0.40)
|
|
|
(0.50)
|
|
|
(0.45)
|
|
|
(0.53)
|
|
Interest expenses
($/boe)(a)
|
|
(1.61)
|
|
|
(1.70)
|
|
|
(1.18)
|
|
|
(1.30)
|
|
Marketing, gathering
and compression net margin ($ in
millions)(c)
|
|
(25)
|
|
|
2
|
|
|
(194)
|
|
|
243
|
|
Operating cash flow
($ in millions)(d)
|
|
(120)
|
|
|
386
|
|
|
528
|
|
|
2,268
|
|
Operating cash flow
($/boe)
|
|
(2.27)
|
|
|
6.35
|
|
|
2.27
|
|
|
9.15
|
|
Adjusted ebitda ($ in
millions)(e)
|
|
385
|
|
|
298
|
|
|
1,339
|
|
|
2,385
|
|
Adjusted ebitda
($/boe)
|
|
7.28
|
|
|
4.90
|
|
|
5.76
|
|
|
9.62
|
|
Net loss available to
common stockholders ($ in millions)
|
|
(741)
|
|
|
(2,228)
|
|
|
(4,881)
|
|
|
(14,856)
|
|
Loss per share –
diluted ($)
|
|
(0.84)
|
|
|
(3.36)
|
|
|
(6.39)
|
|
|
(22.43)
|
|
Adjusted net income
(loss) available to common stockholders ($ in
millions)(f)
|
|
93
|
|
|
(168)
|
|
|
(138)
|
|
|
(329)
|
|
Adjusted income
(loss) per share ($)(g)
|
|
0.07
|
|
|
(0.19)
|
|
|
(0.05)
|
|
|
(0.24)
|
|
|
|
(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 December 31, 2016 and December
31, 2015, unrealized gains (losses) were zero and $5 million,
respectively. For the year ended December 31, 2016 and December 31,
2015, unrealized gains (losses) were ($297 million) and $296
million, respectively.
|
(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 19.
|
(f)
|
Defined as net income
available to common stockholders, as adjusted to remove the effects
of certain items detailed on pages 13 - 16.
|
(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 Fourth Quarter and Year-End Financial and Operational
Results Conference Call Information
A conference call to discuss this release has been scheduled on
Thursday, February 23, 2017 at
9:00 am EDT. The telephone number to
access the conference call is 719-325-2355 or toll-free
888-417-8531. The passcode for the call is 2585187. 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 2585187. 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.
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; the availability of cash flows from operations and
other funds to finance reserve replacement costs or satisfy our
debt obligations; 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 by Seventy Seven Energy Inc.'s (SSE) former creditors 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; 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. In addition, this news release contains
time-sensitive information that reflects management's best judgment
only as of the date of this news release.
|
|
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
Brad Sylvester,
CFA (405)
935-8870 ir@chk.com
|
Gordon Pennoyer
(405) 935-8878
media@chk.com
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
($ in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December
31,
|
|
Years
Ended December
31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
REVENUES:
|
|
|
|
|
|
|
|
|
Oil, natural gas and
NGL
|
|
$
|
678
|
|
|
$
|
1,269
|
|
|
$
|
3,288
|
|
|
$
|
5,391
|
|
Marketing, gathering
and compression
|
|
1,343
|
|
|
1,380
|
|
|
4,584
|
|
|
7,373
|
|
Total
Revenues
|
|
2,021
|
|
|
2,649
|
|
|
7,872
|
|
|
12,764
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
158
|
|
|
220
|
|
|
710
|
|
|
1,046
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
419
|
|
|
690
|
|
|
1,855
|
|
|
2,119
|
|
Production
taxes
|
|
20
|
|
|
12
|
|
|
74
|
|
|
99
|
|
Marketing, gathering
and compression
|
|
1,368
|
|
|
1,378
|
|
|
4,778
|
|
|
7,130
|
|
General and
administrative
|
|
68
|
|
|
62
|
|
|
240
|
|
|
235
|
|
Restructuring and
other termination costs
|
|
3
|
|
|
(3)
|
|
|
6
|
|
|
36
|
|
Provision for legal
contingencies
|
|
11
|
|
|
(6)
|
|
|
123
|
|
|
353
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
214
|
|
|
326
|
|
|
1,002
|
|
|
2,099
|
|
Depreciation and
amortization of other assets
|
|
21
|
|
|
30
|
|
|
104
|
|
|
130
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
2,831
|
|
|
2,520
|
|
|
18,238
|
|
Impairments of fixed
assets and other
|
|
43
|
|
|
27
|
|
|
838
|
|
|
194
|
|
Net (gains) losses on
sales of fixed assets
|
|
(7)
|
|
|
1
|
|
|
(12)
|
|
|
4
|
|
Total Operating
Expenses
|
|
2,318
|
|
|
5,568
|
|
|
12,238
|
|
|
31,683
|
|
LOSS FROM
OPERATIONS
|
|
(297)
|
|
|
(2,919)
|
|
|
(4,366)
|
|
|
(18,919)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(99)
|
|
|
(107)
|
|
|
(296)
|
|
|
(317)
|
|
Losses on
investments
|
|
(5)
|
|
|
(39)
|
|
|
(8)
|
|
|
(96)
|
|
Impairments of
investments
|
|
(119)
|
|
|
(53)
|
|
|
(119)
|
|
|
(53)
|
|
Losses on sales of
investments
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
Gains (losses) on
purchases or exchanges of debt
|
|
(19)
|
|
|
279
|
|
|
236
|
|
|
279
|
|
Other
income
|
|
7
|
|
|
5
|
|
|
19
|
|
|
8
|
|
Total Other Income
(Expense)
|
|
(235)
|
|
|
85
|
|
|
(178)
|
|
|
(179)
|
|
LOSS BEFORE INCOME
TAXES
|
|
(532)
|
|
|
(2,834)
|
|
|
(4,544)
|
|
|
(19,098)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
|
|
|
|
Current income
taxes
|
|
(19)
|
|
|
(30)
|
|
|
(19)
|
|
|
(36)
|
|
Deferred income
taxes
|
|
(171)
|
|
|
(619)
|
|
|
(171)
|
|
|
(4,427)
|
|
Total Income Tax
Benefit
|
|
(190)
|
|
|
(649)
|
|
|
(190)
|
|
|
(4,463)
|
|
NET
LOSS
|
|
(342)
|
|
|
(2,185)
|
|
|
(4,354)
|
|
|
(14,635)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
(50)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
|
(343)
|
|
|
(2,185)
|
|
|
(4,356)
|
|
|
(14,685)
|
|
Preferred stock
dividends
|
|
30
|
|
|
(43)
|
|
|
(97)
|
|
|
(171)
|
|
Loss on exchange of
preferred stock
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
|
—
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(741)
|
|
|
$
|
(2,228)
|
|
|
$
|
(4,881)
|
|
|
$
|
(14,856)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.84)
|
|
|
$
|
(3.36)
|
|
|
$
|
(6.39)
|
|
|
$
|
(22.43)
|
|
Diluted
|
|
$
|
(0.84)
|
|
|
$
|
(3.36)
|
|
|
$
|
(6.39)
|
|
|
$
|
(22.43)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
|
|
|
|
Basic
|
|
887
|
|
|
663
|
|
|
764
|
|
|
662
|
|
Diluted
|
|
887
|
|
|
663
|
|
|
764
|
|
|
662
|
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
882
|
|
|
$
|
825
|
|
Other current
assets
|
|
1,260
|
|
|
1,655
|
|
Total Current
Assets
|
|
2,142
|
|
|
2,480
|
|
|
|
|
|
|
Property and
equipment, (net)
|
|
10,654
|
|
|
14,298
|
|
Other
assets
|
|
277
|
|
|
536
|
|
Total
Assets
|
|
$
|
13,073
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
3,648
|
|
|
$
|
3,685
|
|
Long-term debt,
net
|
|
9,938
|
|
|
10,311
|
|
Other long-term
liabilities
|
|
645
|
|
|
921
|
|
Total
Liabilities
|
|
14,231
|
|
|
14,917
|
|
|
|
|
|
|
Preferred
stock
|
|
1,771
|
|
|
3,062
|
|
Noncontrolling
interests
|
|
257
|
|
|
259
|
|
Common stock and
other stockholders' equity
|
|
(3,186)
|
|
|
(924)
|
|
Total Equity
(Deficit)
|
|
(1,158)
|
|
|
2,397
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
13,073
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Common shares
outstanding (in millions)
|
|
895
|
|
|
663
|
|
Principal amount of
debt outstanding
|
|
$
|
9,989
|
|
|
$
|
9,706
|
|
CHESAPEAKE ENERGY
CORPORATION
ROLL-FORWARD OF
PROVED RESERVES
YEAR ENDED
DECEMBER 31, 2016
(unaudited)
|
|
|
|
|
|
Mmboe(a)
|
|
|
|
Beginning balance,
December 31, 2015
|
|
1,504
|
Production
|
|
(233)
|
Acquisitions
|
|
55
|
Divestitures
|
|
(241)
|
Revisions - changes
to previous estimates
|
|
113
|
Revisions -
price
|
|
(70)
|
Extensions and
discoveries
|
|
580
|
Ending balance,
December 31, 2016
|
|
1,708
|
|
|
|
Proved reserves
growth rate before acquisitions and divestitures
|
|
26%
|
Proved reserves
growth rate after acquisitions and divestitures
|
|
14%
|
|
|
|
Proved developed
reserves
|
|
1,189
|
Proved developed
reserves percentage
|
|
70%
|
|
|
|
PV-10 ($ in
millions)(a)
|
|
$
|
4,405
|
|
|
|
|
(a)
|
Reserve volumes and
PV-10 value estimated using SEC reserve recognition standards and
pricing assumptions based on the trailing 12-month average
first-day-of-the-month prices as of December 31, 2016 of $42.75 per
bbl of oil and $2.49 per mcf of natural gas, before basis
differential adjustments.
|
CHESAPEAKE ENERGY
CORPORATION
RECONCILIATION OF
PV-10
($ in
millions)
(unaudited)
|
|
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
Standardized measure
of discounted future net cash flows
|
$
|
4,379
|
|
|
$
|
4,693
|
|
Discounted future
cash flows for income taxes
|
26
|
|
|
34
|
|
Discounted future net
cash flows before income taxes (PV-10)
|
$
|
4,405
|
|
|
$
|
4,727
|
|
PV-10 is discounted (at 10%) future net cash flows before income
taxes. The standardized measure of discounted future net cash flows
includes the effects of estimated future income tax expenses and is
calculated in accordance with Accounting Standards Codification
Topic 932. Management uses PV-10 as one measure of the value of the
company's current proved reserves and to compare relative values
among peer companies without regard to income taxes. We also
understand that securities analysts and rating agencies use this
measure in similar ways. While PV-10 is based on prices, costs and
discount factors which are consistent from company to company, the
standardized measure is dependent on the unique tax situation of
each individual company.
The company's PV-10 and standardized measure were calculated
using the following prices, before basis differential adjustments:
$42.75 per bbl of oil and
$2.49 per mcf of natural gas as of
December 31, 2016, and $50.28 per bbl of oil and $2.58 per mcf of natural gas as of December 31, 2015.
CHESAPEAKE ENERGY
CORPORATION
|
SUPPLEMENTAL
DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND
INTEREST EXPENSE
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December
31,
|
|
Years
Ended December
31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net
Production:
|
|
|
|
|
|
|
|
|
Oil
(mmbbl)
|
|
8
|
|
|
9
|
|
|
33
|
|
|
42
|
|
Natural gas
(bcf)
|
|
236
|
|
|
268
|
|
|
1,049
|
|
|
1,070
|
|
NGL
(mmbbl)
|
|
5
|
|
|
7
|
|
|
24
|
|
|
28
|
|
Oil equivalent
(mmboe)
|
|
53
|
|
|
61
|
|
|
233
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas
and NGL Sales ($ in millions):
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
399
|
|
|
$
|
355
|
|
|
$
|
1,351
|
|
|
$
|
1,904
|
|
Oil derivatives –
realized gains (losses)(a)
|
|
(5)
|
|
|
238
|
|
|
97
|
|
|
880
|
|
Oil derivatives –
unrealized gains (losses)(a)
|
|
(101)
|
|
|
(92)
|
|
|
(318)
|
|
|
(536)
|
|
Total Oil
Sales
|
|
293
|
|
|
501
|
|
|
1,130
|
|
|
2,248
|
|
|
|
|
|
|
|
|
|
|
Natural gas
sales
|
|
610
|
|
|
533
|
|
|
2,155
|
|
|
2,470
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
|
(41)
|
|
|
96
|
|
|
151
|
|
|
437
|
|
Natural gas
derivatives – unrealized gains (losses)(a)
|
|
(296)
|
|
|
41
|
|
|
(500)
|
|
|
(157)
|
|
Total Natural Gas
Sales
|
|
273
|
|
|
670
|
|
|
1,806
|
|
|
2,750
|
|
|
|
|
|
|
|
|
|
|
NGL sales
|
|
113
|
|
|
98
|
|
|
360
|
|
|
393
|
|
NGL derivatives –
realized gains (losses)(a)
|
|
(3)
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
NGL derivatives –
unrealized gains (losses)(a)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total NGL
Sales
|
|
112
|
|
|
98
|
|
|
352
|
|
|
393
|
|
Total Oil, Natural
Gas and NGL Sales
|
|
$
|
678
|
|
|
$
|
1,269
|
|
|
$
|
3,288
|
|
|
$
|
5,391
|
|
|
|
|
|
|
|
|
|
|
Average Sales
Price –
|
|
|
|
|
|
|
|
|
excluding gains
(losses) on derivatives:
|
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
47.95
|
|
|
$
|
38.33
|
|
|
$
|
40.65
|
|
|
$
|
45.77
|
|
Natural gas ($ per
mcf)
|
|
$
|
2.59
|
|
|
$
|
1.99
|
|
|
$
|
2.05
|
|
|
$
|
2.31
|
|
NGL ($ per
bbl)
|
|
$
|
21.54
|
|
|
$
|
14.07
|
|
|
$
|
14.76
|
|
|
$
|
14.06
|
|
Oil equivalent ($ per
boe)
|
|
$
|
21.24
|
|
|
$
|
16.20
|
|
|
$
|
16.63
|
|
|
$
|
19.23
|
|
|
|
|
|
|
|
|
|
|
Average Sales
Price –
|
|
|
|
|
|
|
|
|
including realized
gains (losses) on derivatives:
|
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
47.37
|
|
|
$
|
64.04
|
|
|
$
|
43.58
|
|
|
$
|
66.91
|
|
Natural gas ($ per
mcf)
|
|
$
|
2.41
|
|
|
$
|
2.35
|
|
|
$
|
2.20
|
|
|
$
|
2.72
|
|
NGL ($ per
bbl)
|
|
$
|
20.90
|
|
|
$
|
14.07
|
|
|
$
|
14.43
|
|
|
$
|
14.06
|
|
Oil equivalent ($ per
boe)
|
|
$
|
20.30
|
|
|
$
|
21.70
|
|
|
$
|
17.66
|
|
|
$
|
24.54
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
($ in millions):
|
|
|
|
|
|
|
|
|
Interest(b)
|
|
$
|
87
|
|
|
$
|
107
|
|
|
$
|
286
|
|
|
$
|
329
|
|
Interest rate
derivatives – realized (gains) losses(c)
|
|
(2)
|
|
|
(2)
|
|
|
(11)
|
|
|
(6)
|
|
Interest rate
derivatives – unrealized (gains) losses(c)
|
|
14
|
|
|
2
|
|
|
21
|
|
|
(6)
|
|
Total Interest
Expense
|
|
$
|
99
|
|
|
$
|
107
|
|
|
$
|
296
|
|
|
$
|
317
|
|
|
|
(a)
|
Realized gains and
losses include the following items: (i) settlements and accruals
for 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:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
Beginning
cash
|
|
$
|
4
|
|
$
|
1,759
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
|
(254)
|
|
179
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(347)
|
|
(399)
|
Acquisitions of
proved and unproved properties(b)
|
|
(205)
|
|
(126)
|
Proceeds from
divestitures of proved and unproved properties
|
|
418
|
|
1
|
Additions to other
property and equipment(c)
|
|
(5)
|
|
(29)
|
Proceeds from sales
of other property and equipment
|
|
61
|
|
9
|
Other
|
|
(3)
|
|
(2)
|
Net cash used in
investing activities
|
|
(81)
|
|
(546)
|
|
|
|
|
|
Net cash provided
by (used in) financing activities
|
|
1,213
|
|
(567)
|
Change in cash and
cash equivalents
|
|
878
|
|
(934)
|
Ending
cash
|
|
$
|
882
|
|
$
|
825
|
|
|
(a)
|
Includes capitalized
interest of $2 million and $2 million for the three months ended
December 31, 2016 and 2015, respectively.
|
(b)
|
Includes capitalized
interest of $56 million and $81 million for the three months ended
December 31, 2016 and 2015, respectively.
|
(c)
|
Includes capitalized
interest $1 million for the three months ended December 31,
2015. No capitalized interest was recorded for the three months
ended December 31, 2016.
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED CASH FLOW DATA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
YEARS
ENDED:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
Beginning
cash
|
|
$
|
825
|
|
|
$
|
4,108
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
|
(204)
|
|
|
1,234
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(1,295)
|
|
|
(3,095)
|
|
Acquisitions of
proved and unproved properties(b)
|
|
(788)
|
|
|
(533)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
1,406
|
|
|
189
|
|
Additions to other
property and equipment(c)
|
|
(37)
|
|
|
(143)
|
|
Proceeds from sales
of other property and equipment
|
|
131
|
|
|
89
|
|
Cash paid for title
defects
|
|
(69)
|
|
|
—
|
|
Additions to
investments
|
|
—
|
|
|
(1)
|
|
Decrease in
restricted cash
|
|
—
|
|
|
52
|
|
Other
|
|
(8)
|
|
|
(9)
|
|
Net cash used in
investing activities
|
|
(660)
|
|
|
(3,451)
|
|
|
|
|
|
|
Net cash provided
by (used in) financing activities
|
|
921
|
|
|
(1,066)
|
|
Change in cash and
cash equivalents
|
|
57
|
|
|
(3,283)
|
|
Ending
cash
|
|
$
|
882
|
|
|
$
|
825
|
|
|
|
(a)
|
Includes capitalized
interest of $6 million and $24 million for the years ended
December 31, 2016 and 2015, respectively.
|
(b)
|
Includes capitalized
interest of $236 million and $387 million for the years ended
December 31, 2016 and 2015, respectively.
|
(c)
|
Includes capitalized
interest of $1 million and $4 million for the years ended
December 31, 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:
|
December 31,
2016
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(741)
|
|
|
887
|
|
$
|
(0.84)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
395
|
|
|
|
|
0.45
|
|
Restructuring and
other termination costs
|
3
|
|
|
|
|
—
|
|
Provision for legal
contingencies
|
11
|
|
|
|
|
0.01
|
|
Impairments of fixed
assets and other
|
43
|
|
|
|
|
0.05
|
|
Net gains on sales of
fixed assets
|
(7)
|
|
|
|
|
(0.01)
|
|
Impairments of
investments
|
119
|
|
|
|
|
0.13
|
|
Losses on purchases
or exchanges of debt
|
19
|
|
|
|
|
0.02
|
|
Other
|
13
|
|
|
|
|
0.02
|
|
Loss on exchange of
preferred stock
|
428
|
|
|
|
|
0.48
|
|
Income tax
benefit(b)
|
(190)
|
|
|
|
|
(0.21)
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
93
|
|
|
|
|
0.10
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
(30)
|
|
|
|
|
(0.03)
|
|
Total adjusted net
income attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
63
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 211
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 December 31, 2016 was
35.7%.
|
(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:
|
December 31,
2015
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(2,228)
|
|
|
663
|
|
$
|
(3.36)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
53
|
|
|
|
|
0.08
|
|
Unrealized gains on
supply contract derivatives
|
(5)
|
|
|
|
|
(0.01)
|
|
Restructuring and
other termination costs
|
(3)
|
|
|
|
|
—
|
|
Provision for legal
contingencies
|
(6)
|
|
|
|
|
(0.01)
|
|
Impairment of oil and
natural gas properties
|
2,831
|
|
|
|
|
4.27
|
|
Impairments of fixed
assets and other
|
27
|
|
|
|
|
0.04
|
|
Net losses on sales
of fixed assets
|
1
|
|
|
|
|
—
|
|
Impairments of
investments
|
53
|
|
|
|
|
0.08
|
|
Gains on purchases or
exchanges of debt
|
(279)
|
|
|
|
|
(0.42)
|
|
Other
|
—
|
|
|
|
|
—
|
|
Tax effect of above
items(b)
|
(612)
|
|
|
|
|
(0.92)
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(168)
|
|
|
|
|
(0.25)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
43
|
|
|
|
|
0.06
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(125)
|
|
|
|
|
$
|
(0.19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 114
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 December 31, 2015 was
22.9%.
|
(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)
|
|
|
|
|
|
|
YEAR
ENDED:
|
December 31,
2016
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(4,881)
|
|
|
764
|
|
$
|
(6.39)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
818
|
|
|
|
|
1.07
|
|
Unrealized losses on
supply contract derivatives
|
297
|
|
|
|
|
0.39
|
|
Restructuring and
other termination costs
|
6
|
|
|
|
|
0.01
|
|
Provision for legal
contingencies
|
123
|
|
|
|
|
0.16
|
|
Impairment of oil and
natural gas properties
|
2,520
|
|
|
|
|
3.30
|
|
Impairments of fixed
assets and other
|
838
|
|
|
|
|
1.10
|
|
Net gains on sales of
fixed assets
|
(12)
|
|
|
|
|
(0.02)
|
|
Impairments of
investments
|
119
|
|
|
|
|
0.16
|
|
Loss on sale of
investment
|
10
|
|
|
|
|
0.01
|
|
Gains on purchases or
exchanges of debt
|
(236)
|
|
|
|
|
(0.31)
|
|
Other
|
22
|
|
|
|
|
0.03
|
|
Loss on exchange of
preferred stock
|
428
|
|
|
|
|
0.56
|
|
Income tax
benefit(b)
|
(190)
|
|
|
|
|
(0.25)
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(138)
|
|
|
|
|
(0.18)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
97
|
|
|
|
|
0.13
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(41)
|
|
|
|
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 247
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
(b)
|
Our effective tax
rate in the year ended December 31, 2016 was 4.2%.
|
(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)
|
|
|
|
|
|
|
YEAR
ENDED:
|
December 31,
2015
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net loss available
to common stockholders
|
$
|
(14,856)
|
|
|
662
|
|
$
|
(22.43)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
687
|
|
|
|
|
1.04
|
|
Unrealized gains on
supply contract derivatives
|
(295)
|
|
|
|
|
(0.45)
|
|
Restructuring and
other termination costs
|
36
|
|
|
|
|
0.05
|
|
Provision for legal
contingencies
|
353
|
|
|
|
|
0.53
|
|
Impairment of oil and
natural gas properties
|
18,238
|
|
|
|
|
27.55
|
|
Impairments of fixed
assets and other
|
194
|
|
|
|
|
0.29
|
|
Net losses on sales
of fixed assets
|
4
|
|
|
|
|
0.01
|
|
Impairments of
investments
|
53
|
|
|
|
|
0.08
|
|
Gains on purchases or
exchanges of debt
|
(279)
|
|
|
|
|
(0.42)
|
|
Tax rate
adjustment
|
(17)
|
|
|
|
|
(0.03)
|
|
Other
|
(9)
|
|
|
|
|
(0.02)
|
|
Tax effect of above
items(b)
|
(4,438)
|
|
|
|
|
(6.70)
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(329)
|
|
|
|
|
(0.50)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
171
|
|
|
|
|
0.26
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(158)
|
|
|
|
|
(0.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include 114
million shares that were considered antidilutive for calculating
earnings per share in accordance with GAAP.
|
(b)
|
Our effective tax
rate in the year ended December 31, 2015 was 23.4%.
|
(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:
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(254)
|
|
|
$
|
179
|
|
Changes in assets and
liabilities
|
|
134
|
|
|
207
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
(120)
|
|
|
$
|
386
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(342)
|
|
|
$
|
(2,185)
|
|
Interest
expense
|
|
99
|
|
|
107
|
|
Income tax
benefit
|
|
(190)
|
|
|
(649)
|
|
Depreciation and
amortization of other assets
|
|
21
|
|
|
30
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
214
|
|
|
326
|
|
EBITDA(b)
|
|
$
|
(198)
|
|
|
$
|
(2,371)
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(254)
|
|
|
$
|
179
|
|
Changes in assets and
liabilities
|
|
134
|
|
|
207
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
85
|
|
|
104
|
|
Gains (losses) on
commodity derivatives, net
|
|
(444)
|
|
|
284
|
|
Gains on supply
contract derivatives, net
|
|
—
|
|
|
5
|
|
Cash (receipts)
payments on commodity and supply contract derivative settlements,
net
|
|
40
|
|
|
(273)
|
|
Renegotiations of
natural gas gathering contracts
|
|
49
|
|
|
—
|
|
Stock-based
compensation
|
|
(12)
|
|
|
(17)
|
|
Restructuring and
other termination costs
|
|
(2)
|
|
|
3
|
|
Provision for legal
contingencies
|
|
(10)
|
|
|
19
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
(2,831)
|
|
Impairments of fixed
assets and other
|
|
318
|
|
|
(16)
|
|
Net gains (losses) on
sales of fixed assets
|
|
7
|
|
|
(1)
|
|
Investment
activity
|
|
(5)
|
|
|
(39)
|
|
Impairment of
investment
|
|
(119)
|
|
|
(53)
|
|
Gains on purchases or
exchanges of debt
|
|
(19)
|
|
|
304
|
|
Other
items
|
|
34
|
|
|
(246)
|
|
EBITDA(b)
|
|
$
|
(198)
|
|
|
$
|
(2,371)
|
|
|
|
(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. Operating cash flow for the three months
ended December 31, 2016 includes $361 million paid to terminate
certain gas gathering agreements and $49 million paid to
renegotiate certain gas gathering agreements.
|
(b)
|
Ebitda represents net
income before interest expense, income taxes, and depreciation,
depletion and amortization expense. Ebitda is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that it provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. This measure is
widely used by investors and rating agencies in the valuation,
comparison, rating and investment recommendations of
companies. Ebitda is also a financial measurement that, with
certain negotiated adjustments, is reported to our lenders pursuant
to our bank credit agreements and is used in the financial
covenants in our bank credit agreements. Ebitda is not a
measure of financial performance under GAAP. Accordingly, it
should not be considered as a substitute for net income, income
from operations or cash flow provided by operating activities
prepared in accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
OPERATING CASH FLOW AND EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
YEARS
ENDED:
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(204)
|
|
|
$
|
1,234
|
|
Changes in assets and
liabilities
|
|
732
|
|
|
1,034
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
528
|
|
|
$
|
2,268
|
|
|
|
|
|
|
YEARS
ENDED:
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(4,354)
|
|
|
$
|
(14,635)
|
|
Interest
expense
|
|
296
|
|
|
317
|
|
Income tax
benefit
|
|
(190)
|
|
|
(4,463)
|
|
Depreciation and
amortization of other assets
|
|
104
|
|
|
130
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
1,002
|
|
|
2,099
|
|
EBITDA(b)
|
|
$
|
(3,142)
|
|
|
$
|
(16,552)
|
|
|
|
|
|
|
YEARS
ENDED:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(204)
|
|
|
$
|
1,234
|
|
Changes in assets and
liabilities
|
|
732
|
|
|
1,034
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
275
|
|
|
321
|
|
Gains (losses) on
commodity derivatives, net
|
|
(578)
|
|
|
624
|
|
Gains (losses) on
supply contract derivatives, net
|
|
(151)
|
|
|
295
|
|
Cash receipts on
commodity and supply contract derivative settlements,
net
|
|
(448)
|
|
|
(1,132)
|
|
Renegotiations of
natural gas gathering contracts
|
|
115
|
|
|
—
|
|
Stock-based
compensation
|
|
(52)
|
|
|
(78)
|
|
Restructuring and
other termination costs
|
|
(3)
|
|
|
14
|
|
Provision for legal
contingencies
|
|
(87)
|
|
|
(340)
|
|
Impairment of oil and
natural gas properties
|
|
(2,520)
|
|
|
(18,238)
|
|
Impairments of fixed
assets and other
|
|
(467)
|
|
|
(175)
|
|
Net gains (losses) on
sales of fixed assets
|
|
12
|
|
|
(4)
|
|
Investment
activity
|
|
(18)
|
|
|
(96)
|
|
Impairment of
investment
|
|
(119)
|
|
|
(53)
|
|
Gains on purchases or
exchanges of debt
|
|
236
|
|
|
304
|
|
Other
items
|
|
135
|
|
|
(262)
|
|
EBITDA(b)
|
|
$
|
(3,142)
|
|
|
$
|
(16,552)
|
|
|
|
(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. Operating cash flow for the year ended
December 31, 2016 includes $361 million paid to terminate certain
gas gathering agreements and $115 million paid to renegotiate
certain gas gathering agreements.
|
(b)
|
Ebitda represents net
income before interest expense, income taxes, and depreciation,
depletion and amortization expense. Ebitda is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that it provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. This measure
is widely used by investors and rating agencies in the valuation,
comparison, rating and investment recommendations of
companies. Ebitda is also a financial measurement that, with
certain negotiated adjustments, is reported to our lenders pursuant
to our bank credit agreements and is used in the financial
covenants in our bank credit agreements. Ebitda is not a measure of
financial performance under GAAP. Accordingly, it should not
be considered as a substitute for net income, income from
operations or cash flow provided by operating activities prepared
in accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
EBITDA
|
|
$
|
(198)
|
|
|
$
|
(2,371)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
|
395
|
|
|
51
|
|
Unrealized gains on
supply contract derivatives
|
|
—
|
|
|
(5)
|
|
Restructuring and
other termination costs
|
|
3
|
|
|
(3)
|
|
Provision for legal
contingencies
|
|
11
|
|
|
(6)
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
2,831
|
|
Impairments of fixed
assets and other
|
|
43
|
|
|
27
|
|
Net (gains) losses on
sales of fixed assets
|
|
(7)
|
|
|
1
|
|
Impairment of
investment
|
|
119
|
|
|
53
|
|
(Gains) losses on
purchases or exchanges of debt
|
|
19
|
|
|
(279)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
—
|
|
Other
|
|
1
|
|
|
(1)
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
385
|
|
|
$
|
298
|
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
YEARS
ENDED:
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
EBITDA
|
|
$
|
(3,142)
|
|
|
$
|
(16,552)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
|
818
|
|
|
693
|
|
Unrealized (gains)
losses on supply contract derivatives
|
|
297
|
|
|
(295)
|
|
Restructuring and
other termination costs
|
|
6
|
|
|
36
|
|
Provision for legal
contingencies
|
|
123
|
|
|
353
|
|
Impairment of oil and
natural gas properties
|
|
2,520
|
|
|
18,238
|
|
Impairments of fixed
assets and other
|
|
838
|
|
|
194
|
|
Net (gains) losses on
sales of fixed assets
|
|
(12)
|
|
|
4
|
|
Impairment of
investment
|
|
119
|
|
|
53
|
|
Loss on sale of
investment
|
|
10
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
(236)
|
|
|
(279)
|
|
Net income
attributable to noncontrolling interests
|
|
(2)
|
|
|
(50)
|
|
Other
|
|
—
|
|
|
(10)
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
1,339
|
|
|
$
|
2,385
|
|
|
|
(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. 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 period ended
December 31, 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.
PV-9 – December 31,
2016 @ NYMEX Strip
|
$
|
11,887
|
Less: Change in
discount factor from 9 to 10
|
(658)
|
PV-10 – December 31,
2016 @ NYMEX Strip
|
11,229
|
Less: Change in
pricing assumption from NYMEX Strip to SEC
|
(6,824)
|
PV-10 – December 31,
2016 @ SEC
|
4,405
|
Less: Present value
of future income tax discounted at 10%
|
(26)
|
Standardized measure
of discounted future cash flows – December 31, 2016
|
$
|
4,379
|
CHESAPEAKE
ENERGY CORPORATION
MANAGEMENT'S OUTLOOK AS OF
FEBRUARY 23, 2017
Chesapeake periodically
provides guidance on certain factors that affect the company's
future financial performance. New information or changes from the
company's February 14, 2017 Outlook
are italicized bold below.
|
Year Ending
12/31/2017
|
|
|
Adjusted Production
Growth(a)
|
(3%) to 2%
|
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
|
Estimated Realized
Hedging Effects(b) (based on 2/9/17 strip
prices):
|
|
Oil -
$/bbl
|
($0.15)
|
Natural gas -
$/mcf
|
($0.24)
|
NGL -
$/bbl
|
$0.06
|
Estimated Basis to
NYMEX Prices:
|
|
Oil -
$/bbl
|
$1.55 -
$1.75
|
Natural gas -
$/mcf
|
$0.35 -
$0.45
|
NGL -
$/bbl
|
$4.00 -
$4.40
|
Operating Costs per
Boe of Projected Production:
|
|
Production
expense
|
$2.50 -
$2.70
|
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 -
$8.50
|
Production
taxes
|
$0.40 -
$0.50
|
General and
administrative(c)
|
$1.20 -
$1.30
|
Stock-based
compensation (noncash)
|
$0.10 -
$0.20
|
DD&A of natural
gas and liquids assets
|
$4.00 -
$5.00
|
Depreciation of other
assets
|
$0.40 -
$0.50
|
Interest
expense(d)
|
$1.85 -
$1.95
|
Marketing, gathering
and compression net margin(e)
|
($80) -
($60)
|
Book Tax
Rate
|
0%
|
Capital Expenditures
($ in millions)(f)
|
$1,700 -
$2,300
|
Capitalized Interest
($ in millions)
|
$200
|
Total Capital
Expenditures ($ in millions)
|
$1,900 -
$2,500
|
|
|
(a)
|
Based on 2016
production of 547 mboe per day, adjusted for 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.
|
(f)
|
Includes capital
expenditures for drilling and completion, leasehold, geological and
geophysical costs, rig termination payments and other property and
plant and equipment. Excludes any additional proved property
acquisitions.
|
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 February 22, 2017, the
company had downside protection, through open swaps, on its 2017
oil production at an average price of $50.19 per bbl. The company had downside price
protection, through open swaps and two-way collars, on its 2017
natural gas production at an average price of $3.07 per mcf. Chesapeake also had downside price protection,
through open swaps, on a portion of its 2017 ethane production at
an average price of $0.28 per
gallon.
In addition, the company had downside protection, through open
swaps and two-way collars, on a portion of its 2018 natural gas
production at an average price of $3.09 per mcf.
The company's crude oil hedging positions as of February 22, 2017 were as follows:
Open Crude Oil
Swaps; Gains from Closed
|
Crude Oil Trades
and Call Option Premiums
|
|
|
|
|
|
|
|
Open Swaps
(mbbls)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total Gains from
Closed Trades
and Premiums
for
Call
Options
($ in
millions)
|
Q1 2017
|
5,850
|
|
$
|
50.01
|
|
|
$
|
22
|
|
Q2 2017
|
5,915
|
|
$
|
50.12
|
|
|
23
|
|
Q3 2017
|
5,612
|
|
$
|
50.27
|
|
|
23
|
|
Q4 2017
|
5,612
|
|
$
|
50.36
|
|
|
23
|
|
Total 2017
|
22,989
|
|
$
|
50.19
|
|
|
$
|
91
|
|
Total 2018 –
2022
|
|
|
|
|
$
|
(13)
|
|
Crude Oil Net
Written Call Options
|
|
|
|
|
Call
Options
(mbbls)
|
Avg. NYMEX
Strike
Price
|
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 February 22, 2017 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)
|
Q1 2017
|
144
|
|
$
|
3.22
|
|
|
$
|
(3)
|
|
Q2 2017
|
157
|
|
$
|
2.96
|
|
|
(1)
|
|
Q3 2017
|
158
|
|
$
|
3.00
|
|
|
(2)
|
|
Q4 2017
|
140
|
|
$
|
3.10
|
|
|
(3)
|
|
Total 2017
|
599
|
|
$
|
3.07
|
|
|
$
|
(9)
|
|
Total 2018 –
2022
|
120
|
|
$
|
3.13
|
|
|
$
|
(69)
|
|
Natural Gas
Two-Way Collars
|
|
|
|
|
|
Open
Collars
(bcf)
|
Avg.
NYMEX
Bought Put
Price
|
Avg.
NYMEX
Sold Call
Price
|
Q1 2017
|
23
|
$
|
3.00
|
|
$
|
3.48
|
|
Total 2017
|
23
|
$
|
3.00
|
|
$
|
3.48
|
|
Total 2018
|
47
|
$
|
3.00
|
|
$
|
3.25
|
|
Natural Gas Net
Written Call Options
|
|
|
|
|
Call
Options
(bcf)
|
Avg. NYMEX
Strike
Price
|
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 –
2020
|
66
|
$
|
12.00
|
|
Natural Gas Basis
Protection Swaps
|
|
|
|
|
Volume
(bcf)
|
Avg. NYMEX
plus/(minus)
|
Q1 2017
|
13
|
$
|
0.35
|
Q2 2017
|
5
|
$
|
(0.46)
|
Q3 2017
|
6
|
$
|
(0.46)
|
Q4 2017
|
6
|
$
|
(0.46)
|
Total 2017
|
30
|
$
|
(0.11)
|
Total 2018
|
1
|
$
|
(1.03)
|
The company's natural gas liquids hedging positions as of
February 22, 2017 were as
follows:
Open Ethane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
Q1 2017
|
26
|
$
|
0.28
|
Q2 2017
|
27
|
$
|
0.28
|
Total 2017
|
53
|
$
|
0.28
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2016-full-year-and-fourth-quarter-financial-and-operational-results-300412336.html
SOURCE Chesapeake Energy Corporation