OKLAHOMA CITY, Feb. 6, 2018 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE:CHK) today provided an update to certain
operational results for the 2017 fourth quarter as well as recent
asset divestiture activity. Highlights include:
- Average 2017 fourth quarter production projected at
593,000 boe per day, including oil production of 100,000 barrels
per day, as previously targeted
- Three Mid-Continent sales agreements for approximately
$500 million
- Sold approximately 4.3 million shares of FTSI for
proceeds of $78 million, retain
approximately 22.0 million shares
Average daily production for the 2017 fourth quarter is
currently projected to be approximately 593,000 barrels of oil
equivalent (boe) per day, representing an increase of 15% year over
year and 10% sequentially when adjusting for asset sales. This
volume consisted of approximately 100,000 barrels of oil, 2.6
billion cubic feet of natural gas and 59,500 bbls of natural gas
liquids per day. The increase in production was primarily driven by
stronger oil production from the company's Eagle Ford operating
area, as well as from significantly higher gas production from its
Marcellus and Haynesville operating areas.
Additionally, the company signed three separate sales agreements
in the 2017 fourth quarter and 2018 first quarter for properties in
its Mid-Continent operating area for aggregate consideration of
approximately $500 million. One of
the dispositions closed in January
2018, while two are subject to certain customary closing
adjustments and are expected to close by the end of the 2018 second
quarter. Included in the sale are producing properties, related
property, plant and equipment and undeveloped acreage in the
company's Mississippian Lime operating area, resulting in an exit
from the Mississippian Lime play of the northern Anadarko Basin, and other properties in
central and western Oklahoma. In
total, these proposed dispositions include approximately 238,000
net acres and 3,000 producing wells that are currently producing
23,000 boe per day (approximately 25% oil) net to Chesapeake. The
company intends to use the proceeds from these divestitures to
reduce outstanding borrowings under its revolving credit facility
in the first half of 2018 or to repurchase higher coupon secured or
unsecured debt to reduce annual interest expense, dependent upon
market conditions.
FTS International (NYSE: FTSI), a provider of hydraulic
fracturing services in North
America and a company in which Chesapeake has owned a
significant stake since 2006, completed its initial public offering
of common shares on February 6, 2018.
Chesapeake sold approximately 4.3 million shares in the initial
public offering for approximately $78
million in proceeds (before underwriting fees and expenses)
and continues to hold approximately 22.0 million shares in the
publicly traded company.
As of December 31, 2017,
Chesapeake had $781 million of
outstanding borrowings under its revolving credit facility and had
used $116 million of the revolving
credit facility for various letters of credit. With cash on hand
and available capacity under its revolving credit facility, the
company had liquidity of approximately $2.9
billion as of December 31,
2017.
Doug Lawler, Chesapeake's Chief
Executive Officer, commented, "We continue to deliver on our
strategy, with notable accomplishments in 2017, including fourth
quarter oil production of 100,000 barrels per day and total
production of 593,000 barrels of oil equivalent per day. We
continue to demonstrate increased productivity and capital
efficiency from our investments by delivering these production
volumes with a fourth quarter capital spend of roughly $525 million, inclusive of capitalized interest.
As a result, we currently expect cash flow before changes in
working capital of more than $550
million for the 2017 fourth quarter, or approximately
$470 million after changes in working
capital.
"In 2018, we are committed to making meaningful progress in
decreasing the amount of debt outstanding on our balance sheet and
improving our margins. The pending sale of our Mississippian Lime
and other Mid-continent assets, as well as our sale of
approximately 4.3 million shares of FTSI, represent a strong start.
We will continue to pursue additional asset divestitures in 2018 to
further reduce debt and interest expense burden and accelerate
value from properties that are presently not effectively competing
for capital in our portfolio.
"Additionally, through disciplined capital spending, reducing
our cycle times and cash costs, and improving our base production,
we remain committed to achieving our goal of cash flow neutrality.
To that end, we expect lower sequential production in the 2018
first quarter, as compared to the 2017 fourth quarter, as a result
of a lower number of wells scheduled to be placed on production in
January and February due to well production curtailments associated
with recent extreme cold temperatures in several of our producing
regions, and these planned asset sales. We currently forecast our
2018 production to build throughout the year, ultimately resulting
in flat production growth on a year over year basis, but with lower
capital spending. We will disclose more about our 2018 plan and
guidance with earnings on February
22.
"We made significant progress across all areas of our company in
2017 and look forward to making 2018 a differential year for
Chesapeake."
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 compression
businesses.
This news release includes "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,
highlights, management's outlook guidance or forecasts of future
events, production and well connection forecasts, estimates of
inflation in oilfield services costs, 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 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 improve
base production, achieve cash flow neutrality and execute gas
gathering, processing and transportation commitments), 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 risks related to anticipated asset
sales (e.g., satisfaction of closing conditions, purchase price
adjustments and actions by purchasers), production growth, debt
reduction and capital expenditures and 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 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; the effectiveness
of our remediation plan for a material weakness; 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, 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
|
Gordon
Pennoyer
|
(405)
935-8870
|
(405)
935-8878
|
ir@chk.com
|
media@chk.com
|
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SOURCE Chesapeake Energy Corporation