OKLAHOMA CITY, May 5, 2016 /PRNewswire/ -- Chesapeake Energy
Corporation (NYSE:CHK) today reported financial and operational
results for the 2016 first quarter. Highlights include:
- Signed agreement to sell approximately 42,000 net acres
prospective for the STACK play in Oklahoma for approximately $470 million; includes current production of
3,800 boe per day
- 2016 first quarter production averaged approximately
672,400 boe per day, an increase of 1% year over year, adjusted for
asset sales
- Improved 2016 first quarter cost performance leads to
lower full-year 2016 production expense and GP&T expense
guidance
- Financial strategy remains focused on maximizing
liquidity and liability management; company reiterates target of
$1.2 to $1.7 billion total gross
proceeds from asset divestitures by year-end
Doug Lawler, Chesapeake's Chief
Executive Officer, commented, "Chesapeake is delivering on all four
of the focus points for 2016 that we stated in February: maximizing
liquidity, optimizing our portfolio, increasing cash flow and
reducing debt. We are pleased this morning to announce
approximately $500 million of
incremental asset sales above the $700
million we announced in late February. The STACK acreage
sale we are announcing today accelerates value from a portion
of our undeveloped acreage that currently generates very little
cash flow, giving us the ability to enhance current liquidity. This
transaction contributes substantially to achieving our previously
announced target of an incremental $500
million to $1 billion of asset sales by year-end. We
anticipate subsequent divestitures during the second and third
quarters.
"Our cash costs continue to decline, and we remain sharply
focused on improving our margins through continued progress with
our midstream and downstream partners. As a result, we have
recognized incremental improvements in both our production expense
and our total gathering, processing and transportation expenses and
revised our 2016 guidance accordingly. Additionally, since
January 1, 2016, we have reduced debt
that matures or can be put to us in 2017 by approximately
$282 million. Our recently amended
revolving credit facility agreement gives us sufficient liquidity
and capacity to pursue additional reductions of our near-term
maturities as opportunities arise."
2016 First Quarter Results
For the 2016 first quarter, Chesapeake reported a net loss
available to common stockholders of $964
million, or $1.44 per fully
diluted share. The primary driver of the net loss was a noncash
impairment of the carrying value of Chesapeake's oil and natural
gas properties of approximately $853
million, largely resulting from decreases in the trailing
12-month average first-day-of-the-month oil and natural gas prices
as of March 31, 2016, compared to
December 31, 2015. Adjusting for
items that are typically excluded by securities analysts, including
the impairment discussed above, the 2016 first quarter adjusted net
loss available to common stockholders was $120 million, or $0.10 per fully diluted share. Reconciliations of
financial measures calculated in accordance with generally accepted
accounting principles to adjusted measures that are typically
calculated by securities analysts are provided on pages 10 – 12 of
this release.
Chesapeake's 2016 first quarter revenues declined by 39% year
over year, primarily due to a decrease in the average realized
commodity prices received for its production. Revenue declines due
to lower commodity prices were partially offset by improvements to
the company's production expenses and general and administrative
(G&A) expenses. Average daily production for the 2016 first
quarter of approximately 672,400 barrels of oil equivalent (boe)
increased 1%, adjusted for asset sales, and consisted of
approximately 95,700 barrels (bbls) of oil, 3.036 billion cubic
feet (bcf) of natural gas and 70,700 bbls of natural gas liquids
(NGL).
Chesapeake's cash expenses continue to decline due to its focus
on cost discipline. Average production expenses during the 2016
first quarter were $3.36 per boe, a
decrease of 31% from the 2015 first quarter. G&A expenses
(including stock-based compensation) during the 2016 first quarter
were $0.79 per boe, a decrease of 13%
from the 2015 first quarter. Sequentially, the company's 2016 first
quarter production expenses per boe and G&A expenses per boe
(including stock-based compensation) declined 7% and 23%,
respectively, compared to the 2015 fourth quarter. As a result of
the company's cost reductions, Chesapeake has lowered its full-year
2016 guidance for production expenses.
Capital Spending Overview
Chesapeake's total capital investments were approximately
$365 million during the 2016 first
quarter, compared to approximately $1.5
billion in the 2015 first quarter, as summarized in the
table below. A summary of the company's guidance for 2016 is
provided in the Outlook dated May 5,
2016, beginning on Page 13.
|
2016
|
2015
|
2015
|
Activity
Comparison
|
Q1
|
Q4
|
Q1
|
Average operated rig
count
|
8
|
14
|
54
|
Gross wells
completed
|
57
|
85
|
261
|
Gross wells
spud
|
41
|
66
|
244
|
Gross wells
connected
|
80
|
100
|
262
|
|
|
|
|
Type of Cost ($ in
millions)
|
|
|
|
Drilling and
completion costs
|
$
|
281
|
$
|
405
|
$
|
1,300
|
Exploration costs and
additions to other PP&E
|
16
|
55
|
63
|
Subtotal capital
expenditures
|
$
|
297
|
$
|
460
|
$
|
1,363
|
Capitalized
interest
|
68
|
88
|
123
|
Total capital
expenditures
|
$
|
365
|
$
|
548
|
$
|
1,486
|
Balance Sheet and Liquidity
As of March 31, 2016, Chesapeake's
debt principal balance was approximately $9.4 billion, including approximately
$367 million of borrowings
outstanding on the company's $4.0
billion revolving credit facility, compared to $9.7 billion as of December 31, 2015, and $11.5 billion as of March
31, 2015. Since January 1,
2016, the company retired its 3.25% Senior Notes due
March 15, 2016, and has repurchased
or exchanged approximately $282
million of debt due or putable in 2017 at an average
discount of approximately 39%.
In April, Chesapeake amended its $4.0
billion revolving credit facility maturing in 2019 to
reaffirm its borrowing base, restructure financial covenants and
increase its ability to issue secured debt. Under the new
amendment, Chesapeake agreed to pledge additional assets as
collateral. As part of the amendment, the next scheduled borrowing
base redetermination review has been postponed until June 2017. Letters of credit issued under the
credit facility were approximately $619
million as of March 31, 2016,
which included a $461 million
supersedeas bond supporting the company's appeal of the judgment
issued in 2015 with respect to the company's 2019 Notes
litigation.
Asset Divestitures Update
In 2016, Chesapeake has closed or has under signed sales
agreements approximately $1.2 billion
in gross proceeds from asset divestitures, or approximately
$950 million in net proceeds after
certain related repurchases of Volumetric Production Payment (VPP)
obligations are met. Transactions signed since February 2016 include the sale of a portion of
the company's acreage and producing properties in its STACK play in
northern Oklahoma for
approximately $470 million to
Newfield Exploration Company (NYSE: NFX). Included in the sale are
approximately 42,000 net acres and 400 producing wells which are
currently producing 3,800 boe per day (approximately 55% liquids),
net to Chesapeake. Substantially all of the company's announced
asset divestitures are expected to close by the end of the third
quarter. For the expected $950
million in net proceeds currently closed or signed in 2016,
the net impact to the company's production is projected to be a
reduction of approximately 35,000 boe per day (approximately 60%
natural gas).
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and
operational results during the 2016 first quarter as compared to
results in prior periods.
|
|
Three Months
Ended
|
|
|
03/31/16
|
|
12/31/15
|
|
03/31/15
|
Oil equivalent
production (in mmboe)
|
|
61
|
|
|
61
|
|
|
62
|
|
Oil production (in
mmbbls)
|
|
9
|
|
|
9
|
|
|
11
|
|
Average realized oil
price ($/bbl)(a)
|
|
37.74
|
|
|
64.04
|
|
|
65.73
|
|
Natural gas
production (in bcf)
|
|
276
|
|
|
268
|
|
|
264
|
|
Average realized
natural gas price ($/mcf)(a)
|
|
2.29
|
|
|
2.35
|
|
|
3.67
|
|
NGL production (in
mmbbls)
|
|
6
|
|
|
7
|
|
|
7
|
|
Average realized NGL
price ($/bbl)(a)
|
|
11.44
|
|
|
14.07
|
|
|
18.40
|
|
Production expenses
($/boe)
|
|
(3.36)
|
|
|
(3.62)
|
|
|
(4.84)
|
|
Gathering, processing
and transportation expenses ($/boe)
|
|
(7.88)
|
|
|
(11.34)
|
|
|
(7.40)
|
|
Production taxes
($/boe)
|
|
(0.30)
|
|
|
(0.19)
|
|
|
(0.45)
|
|
General and
administrative expenses ($/boe)(b)
|
|
(0.66)
|
|
|
(0.84)
|
|
|
(0.72)
|
|
Stock-based
compensation ($/boe)
|
|
(0.13)
|
|
|
(0.18)
|
|
|
(0.19)
|
|
DD&A of oil and
natural gas properties ($/boe)
|
|
(4.43)
|
|
|
(5.37)
|
|
|
(11.08)
|
|
DD&A of other
assets ($/boe)
|
|
(0.48)
|
|
|
(0.50)
|
|
|
(0.57)
|
|
Interest expenses
($/boe)(a)
|
|
(0.98)
|
|
|
(1.70)
|
|
|
(0.98)
|
|
Marketing, gathering
and compression net margin ($ in millions)(c)
|
|
18
|
|
|
2
|
|
|
(25)
|
|
Operating cash flow
($ in millions)(d)
|
|
263
|
|
|
386
|
|
|
882
|
|
Operating cash flow
($/boe)
|
|
4.29
|
|
|
6.35
|
|
|
14.29
|
|
Adjusted ebitda ($ in
millions)(e)
|
|
282
|
|
|
298
|
|
|
928
|
|
Adjusted ebitda
($/boe)
|
|
4.61
|
|
|
4.90
|
|
|
15.02
|
|
Net loss available to
common stockholders ($ in millions)
|
|
(964)
|
|
|
(2,228)
|
|
|
(3,782)
|
|
Earnings (loss) per
share – diluted ($)
|
|
(1.44)
|
|
|
(3.36)
|
|
|
(5.72)
|
|
Adjusted net income
(loss) available to common stockholders ($ in millions)(f)
|
|
(120)
|
|
|
(168)
|
|
|
42
|
|
Adjusted earnings
(loss) per share – diluted ($)
|
|
(0.10)
|
|
|
(0.16)
|
|
|
0.11
|
|
|
|
(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 $20 million, $5 million and a nominal amount
of unrealized gains on supply contract derivatives for the three
months ended March 31, 2016, December 31, 2015 and March 31, 2015,
respectively. Excludes depreciation and amortization of other
assets.
|
(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 12.
|
(f)
|
Defined as net income
available to common stockholders, as adjusted to remove the effects
of certain items detailed on page 10.
|
2016 First Quarter Financial and Operational Results
Conference Call Information
A conference call to discuss this release has been scheduled on
Thursday, May 5, 2016, at
9:00 am EDT. The telephone number to
access the conference call is 913-981-5571 or toll-free
888-211-7449. The passcode for the call is 8725419. 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 8725419. The
conference call will also be webcast live 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.
Chesapeake Energy Corporation (NYSE:CHK) is the
second-largest producer of natural gas and the 13th largest
producer of oil and natural gas liquids in the United States.
Headquartered in Oklahoma City,
the company's operations are focused on discovering and developing
its large and geographically diverse resource base of
unconventional oil and natural gas assets onshore in the U.S.
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 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 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 the event of a bankruptcy of SSE; 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.
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
($ in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2016
|
|
2015
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
|
$
|
993
|
|
|
$
|
1,543
|
|
Marketing, gathering
and compression
|
|
960
|
|
|
1,675
|
|
Total
Revenues
|
|
1,953
|
|
|
3,218
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
206
|
|
|
299
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
482
|
|
|
458
|
|
Production
taxes
|
|
18
|
|
|
28
|
|
Marketing, gathering
and compression
|
|
942
|
|
|
1,700
|
|
General and
administrative
|
|
48
|
|
|
56
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
(10)
|
|
Provision for legal
contingencies
|
|
22
|
|
|
25
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
271
|
|
|
684
|
|
Depreciation and
amortization of other assets
|
|
29
|
|
|
35
|
|
Impairment of oil and
natural gas properties
|
|
853
|
|
|
4,976
|
|
Impairments of fixed
assets and other
|
|
38
|
|
|
4
|
|
Net (gains) losses on
sales of fixed assets
|
|
(4)
|
|
|
3
|
|
Total Operating
Expenses
|
|
2,905
|
|
|
8,258
|
|
LOSS FROM
OPERATIONS
|
|
(952)
|
|
|
(5,040)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
|
(62)
|
|
|
(51)
|
|
Losses on
investments
|
|
—
|
|
|
(7)
|
|
Loss on sale of
investment
|
|
(10)
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
100
|
|
|
—
|
|
Other
income
|
|
3
|
|
|
6
|
|
Total Other Income
(Expense)
|
|
31
|
|
|
(52)
|
|
LOSS BEFORE INCOME
TAXES
|
|
(921)
|
|
|
(5,092)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
Current income
taxes
|
|
—
|
|
|
—
|
|
Deferred income
taxes
|
|
—
|
|
|
(1,372)
|
|
Total Income Tax
Benefit
|
|
—
|
|
|
(1,372)
|
|
NET
LOSS
|
|
(921)
|
|
|
(3,720)
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
(19)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
|
(921)
|
|
|
(3,739)
|
|
Preferred stock
dividends
|
|
(43)
|
|
|
(43)
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(964)
|
|
|
$
|
(3,782)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
Basic
|
|
$
|
(1.44)
|
|
|
$
|
(5.72)
|
|
Diluted
|
|
$
|
(1.44)
|
|
|
$
|
(5.72)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
|
668
|
|
|
661
|
|
Diluted
|
|
668
|
|
|
661
|
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
16
|
|
|
$
|
825
|
|
Other current
assets
|
|
1,476
|
|
|
1,655
|
|
Total Current
Assets
|
|
1,492
|
|
|
2,480
|
|
|
|
|
|
|
Property and
equipment, (net)
|
|
13,291
|
|
|
14,298
|
|
Other
assets
|
|
574
|
|
|
536
|
|
Total
Assets
|
|
$
|
15,357
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
2,833
|
|
|
$
|
3,685
|
|
Long-term debt,
net
|
|
10,062
|
|
|
10,311
|
|
Other long-term
liabilities
|
|
891
|
|
|
921
|
|
Total
Liabilities
|
|
13,786
|
|
|
14,917
|
|
|
|
|
|
|
Preferred
stock
|
|
3,036
|
|
|
3,062
|
|
Noncontrolling
interests
|
|
260
|
|
|
259
|
|
Common stock and
other stockholders' equity
|
|
(1,725)
|
|
|
(924)
|
|
Total
Equity
|
|
1,571
|
|
|
2,397
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
15,357
|
|
|
$
|
17,314
|
|
|
|
|
|
|
Common shares
outstanding (in millions)
|
|
683
|
|
|
663
|
|
Principal amount of
debt outstanding
|
|
$
|
9,425
|
|
|
$
|
9,706
|
|
CHESAPEAKE ENERGY
CORPORATION
|
SUPPLEMENTAL
DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND
INTEREST EXPENSE
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2016
|
|
2015
|
Net
Production:
|
|
|
|
|
Oil
(mmbbl)
|
|
9
|
|
|
11
|
|
Natural gas
(bcf)
|
|
276
|
|
|
264
|
|
NGL
(mmbbl)
|
|
6
|
|
|
7
|
|
Oil equivalent
(mmboe)
|
|
61
|
|
|
62
|
|
|
|
|
|
|
Oil, natural gas
and NGL Sales ($ in millions):
|
|
|
|
|
Oil sales
|
|
$
|
255
|
|
|
$
|
486
|
|
Oil derivatives –
realized gains (losses)(a)
|
|
73
|
|
|
235
|
|
Oil derivatives –
unrealized gains (losses)(a)
|
|
(72)
|
|
|
(110)
|
|
Total Oil
Sales
|
|
256
|
|
|
611
|
|
|
|
|
|
|
Natural gas
sales
|
|
483
|
|
|
770
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
|
150
|
|
|
200
|
|
Natural gas
derivatives – unrealized gains (losses)(a)
|
|
30
|
|
|
(164)
|
|
Total Natural Gas
Sales
|
|
663
|
|
|
806
|
|
|
|
|
|
|
NGL sales
|
|
74
|
|
|
126
|
|
Total NGL
Sales
|
|
74
|
|
|
126
|
|
Total Oil, Natural
Gas and NGL Sales
|
|
$
|
993
|
|
|
$
|
1,543
|
|
|
|
|
|
|
Average Sales
Price – excluding gains (losses) on derivatives:
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
29.34
|
|
|
$
|
44.33
|
|
Natural gas ($ per
mcf)
|
|
$
|
1.75
|
|
|
$
|
2.92
|
|
NGL ($ per
bbl)
|
|
$
|
11.44
|
|
|
$
|
18.40
|
|
Oil equivalent ($ per
boe)
|
|
$
|
13.28
|
|
|
$
|
22.36
|
|
|
|
|
|
|
Average Sales
Price – including realized gains (losses) on
derivatives:
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
37.74
|
|
|
$
|
65.73
|
|
Natural gas ($ per
mcf)
|
|
$
|
2.29
|
|
|
$
|
3.67
|
|
NGL ($ per
bbl)
|
|
$
|
11.44
|
|
|
$
|
18.40
|
|
Oil equivalent ($ per
boe)
|
|
$
|
16.93
|
|
|
$
|
29.40
|
|
|
|
|
|
|
Interest Expense
($ in millions):
|
|
|
|
|
Interest(b)
|
|
$
|
62
|
|
|
$
|
62
|
|
Interest rate
derivatives – realized (gains) losses(c)
|
|
(3)
|
|
|
(1)
|
|
Interest rate
derivatives – unrealized (gains) losses(c)
|
|
3
|
|
|
(10)
|
|
Total Interest
Expense
|
|
$
|
62
|
|
|
$
|
51
|
|
|
|
(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:
|
|
March
31,
2016
|
|
March
31,
2015
|
|
|
|
|
|
Beginning
cash
|
|
$
|
825
|
|
|
$
|
4,108
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
|
(421)
|
|
|
423
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(265)
|
|
|
(1,306)
|
|
Acquisitions of
proved and unproved properties(b)
|
|
(67)
|
|
|
(128)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
62
|
|
|
21
|
|
Additions to other
property and equipment(c)
|
|
(10)
|
|
|
(58)
|
|
Proceeds from sales
of other property and equipment
|
|
9
|
|
|
2
|
|
Other
|
|
(2)
|
|
|
(3)
|
|
Net cash used in
investing activities
|
|
(273)
|
|
|
(1,472)
|
|
|
|
|
|
|
Net cash used in
financing activities
|
|
(115)
|
|
|
(152)
|
|
Change in cash and
cash equivalents
|
|
(809)
|
|
|
(1,201)
|
|
Ending
cash
|
|
$
|
16
|
|
|
$
|
2,907
|
|
|
|
(a)
|
Includes
capitalized interest of $2 million and $11 million for the three
months ended March 31, 2016 and 2015, respectively.
|
|
|
(b)
|
Includes capitalized
interest of $64 million and $109 million for the three months ended
March 31, 2016 and 2015, respectively.
|
|
|
(c)
|
Includes capitalized
interest of $1 million and $1 million for the three months ended
March 31, 2016 and 2015, respectively.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
($ in millions,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March
31,
2016
|
|
December
31,
2015
|
|
March
31,
2015
|
|
|
|
|
|
|
|
Net loss available
to common stockholders
|
|
$
|
(964)
|
|
|
$
|
(2,228)
|
|
|
$
|
(3,782)
|
|
|
|
|
|
|
|
|
Weighted average
common and common equivalent shares outstanding
(a)
|
|
668
|
|
|
663
|
|
|
661
|
|
|
|
|
|
|
|
|
Loss per common
share (diluted)
|
|
(1.44)
|
|
|
(3.36)
|
|
|
(5.72)
|
|
|
|
|
|
|
|
|
Adjustments, net
of tax:
|
|
|
|
|
|
|
Unrealized losses on
commodity and interest rate derivatives
|
|
45
|
|
|
41
|
|
|
192
|
|
Unrealized gains on
supply contract derivatives
|
|
(20)
|
|
|
(4)
|
|
|
—
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
(2)
|
|
|
(7)
|
|
Provision for legal
contingencies
|
|
22
|
|
|
(5)
|
|
|
18
|
|
Impairment of oil and
natural gas properties
|
|
853
|
|
|
2,183
|
|
|
3,635
|
|
Impairments of fixed
assets and other
|
|
38
|
|
|
21
|
|
|
3
|
|
Net (gains) losses on
sales of fixed assets
|
|
(4)
|
|
|
1
|
|
|
2
|
|
Impairment of
investment
|
|
—
|
|
|
41
|
|
|
—
|
|
Loss on sale of
investment
|
|
10
|
|
|
—
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
(100)
|
|
|
(215)
|
|
|
—
|
|
Tax rate
adjustment
|
|
—
|
|
|
—
|
|
|
(17)
|
|
Other
|
|
—
|
|
|
(1)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income (loss) available to common
stockholders(b)
|
|
$
|
(120)
|
|
|
$
|
(168)
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
|
43
|
|
|
43
|
|
|
43
|
|
Total adjusted net
income (loss) attributable to Chesapeake
|
|
$
|
(77)
|
|
|
$
|
(125)
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
Weighted average
fully diluted shares outstanding (in
millions)(c)
|
|
781
|
|
|
777
|
|
|
776
|
|
|
|
|
|
|
|
|
Adjusted earnings
(loss) per share assuming dilution(b)
|
|
$
|
(0.10)
|
|
|
$
|
(0.16)
|
|
|
$
|
0.11
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include
shares that were considered antidilutive for calculating earnings
per share in accordance with GAAP.
|
|
|
(b)
|
Adjusted net income
and adjusted earnings per share assuming dilution 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
diluted earnings per share. Adjusted net income available to
common stockholders and adjusted earnings per share assuming
dilution 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.
|
|
|
(c)
|
Weighted average
fully diluted shares outstanding include shares that were
considered antidilutive for calculating earnings per share in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
OPERATING CASH FLOW AND EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
|
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(421)
|
|
|
$
|
179
|
|
|
$
|
423
|
|
Changes in assets and
liabilities
|
|
684
|
|
|
207
|
|
|
459
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
263
|
|
|
$
|
386
|
|
|
$
|
882
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March
31,
2016
|
|
December
31,
2015
|
|
March
31,
2015
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(921)
|
|
|
$
|
(2,185)
|
|
|
$
|
(3,720)
|
|
Interest
expense
|
|
62
|
|
|
107
|
|
|
51
|
|
Income tax
benefit
|
|
—
|
|
|
(649)
|
|
|
(1,372)
|
|
Depreciation and
amortization of other assets
|
|
29
|
|
|
30
|
|
|
35
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
271
|
|
|
326
|
|
|
684
|
|
EBITDA(b)
|
|
$
|
(559)
|
|
|
$
|
(2,371)
|
|
|
$
|
(4,322)
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March
31,
2016
|
|
December
31,
2015
|
|
March
31,
2015
|
|
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
(421)
|
|
|
$
|
179
|
|
|
$
|
423
|
|
Changes in assets and
liabilities
|
|
684
|
|
|
207
|
|
|
459
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
59
|
|
|
104
|
|
|
61
|
|
Gains on commodity
derivatives, net
|
|
181
|
|
|
284
|
|
|
161
|
|
Gains on supply
contract derivative, net
|
|
20
|
|
|
5
|
|
|
—
|
|
Cash receipts on
commodity derivative settlements, net
|
|
(267)
|
|
|
(273)
|
|
|
(413)
|
|
Stock-based
compensation
|
|
(12)
|
|
|
(17)
|
|
|
(23)
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
3
|
|
|
10
|
|
Provision for legal
contingencies
|
|
(22)
|
|
|
19
|
|
|
(25)
|
|
Impairment of oil and
natural gas properties
|
|
(853)
|
|
|
(2,831)
|
|
|
(4,976)
|
|
Impairments of fixed
assets and other
|
|
(33)
|
|
|
(16)
|
|
|
(2)
|
|
Net gains (losses) on
sales of fixed assets
|
|
4
|
|
|
(1)
|
|
|
(3)
|
|
Investment
activity
|
|
(10)
|
|
|
(92)
|
|
|
(7)
|
|
Gains on purchases or
exchanges of debt
|
|
100
|
|
|
304
|
|
|
—
|
|
Other
items
|
|
11
|
|
|
(246)
|
|
|
13
|
|
EBITDA(b)
|
|
$
|
(559)
|
|
|
$
|
(2,371)
|
|
|
$
|
(4,322)
|
|
|
|
(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:
|
|
March
31,
2016
|
|
December
31,
2015
|
|
March
31,
2015
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
(559)
|
|
|
$
|
(2,371)
|
|
|
$
|
(4,322)
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
|
42
|
|
|
51
|
|
|
274
|
|
Unrealized gains on
supply contract derivatives
|
|
(20)
|
|
|
(5)
|
|
|
—
|
|
Restructuring and
other termination costs
|
|
—
|
|
|
(3)
|
|
|
(10)
|
|
Provision for legal
contingencies
|
|
22
|
|
|
(6)
|
|
|
25
|
|
Impairment of oil and
natural gas properties
|
|
853
|
|
|
2,831
|
|
|
4,976
|
|
Impairments of fixed
assets and other
|
|
38
|
|
|
27
|
|
|
4
|
|
Net (gains) losses on
sales of fixed assets
|
|
(4)
|
|
|
1
|
|
|
3
|
|
Impairment of
investment
|
|
—
|
|
|
53
|
|
|
—
|
|
Loss on sale of
investment
|
|
10
|
|
|
—
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
(100)
|
|
|
(279)
|
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(19)
|
|
Other
|
|
—
|
|
|
(1)
|
|
|
(3)
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
282
|
|
|
$
|
298
|
|
|
$
|
928
|
|
|
|
(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
|
MANAGEMENT'S
OUTLOOK AS OF MAY 5, 2016
|
|
Chesapeake
periodically provides guidance on certain factors that affect the
company's future financial performance. Changes from the company's
February 24, 2016 Outlook are italicized bold
below.
|
|
|
Year
Ending
12/31/2016
|
Adjusted Production
Growth(a)
|
(5%) to 0%
|
Absolute
Production
|
|
Liquids -
mmbbls
|
55 - 59
|
Oil -
mmbbls
|
34 - 36
|
NGL -
mmbbls
|
21 - 23
|
Natural gas -
bcf
|
1,000 -
1,040
|
Total absolute
production - mmboe
|
222 - 232
|
Absolute daily rate -
mboe
|
605 - 635
|
Estimated Realized
Hedging Effects(b) (based on 5/3/16 strip
prices):
|
|
Oil -
$/bbl
|
$3.63
|
Natural gas -
$/mcf
|
$0.25
|
NGL -
$/bbl
|
($0.30)
|
Estimated Basis to
NYMEX Prices:
|
|
Oil -
$/bbl
|
$2.35 -
$2.55
|
Natural gas -
$/mcf
|
$0.30 -
$0.40
|
NGL -
$/bbl
|
$4.95 -
$5.20
|
Operating Costs per
Boe of Projected Production:
|
|
Production
expense
|
$3.40 -
$3.60
|
Gathering, processing
and transportation expenses
|
$7.60 -
$8.10
|
Oil -
$/bbl
|
$3.75 -
$3.95
|
Natural
Gas(c) - $/mcf
|
$1.40 -
$1.50
|
NGL -
$/bbl
|
$7.60 -
$7.85
|
Production
taxes
|
$0.35 -
$0.45
|
General and
administrative(d)
|
$0.60 -
$0.70
|
Stock-based
compensation (noncash)
|
$0.10 -
$0.20
|
DD&A of natural
gas and liquids assets
|
$3.50 -
$4.50
|
Depreciation of other
assets
|
$0.50 -
$0.60
|
Interest
expense(e)
|
$1.05 -
$1.15
|
Marketing, gathering
and compression net margin(f)
|
($20) -
($40)
|
Book Tax
Rate
|
0%
|
Capital Expenditures
($ in millions)(g)
|
$1,000 -
$1,500
|
Capitalized Interest
($ in millions)
|
$260
|
Total Capital
Expenditures ($ in millions)
|
$1,260 -
$1,760
|
|
|
(a)
|
Based on 2015
production of 623 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 a 2016
fourth quarter minimum volume commitment (MVC) shortfall estimate
of approximately $165 to $175 million.
|
(d)
|
Excludes expenses
associated with stock-based compensation.
|
(e)
|
Excludes unrealized
gains (losses) on interest rate derivatives.
|
(f)
|
Includes revenue and
operating expenses. Excludes depreciation and amortization of other
assets and unrealized gains (losses) on supply contract
derivatives.
|
(g)
|
Includes capital
expenditures for drilling and completion, leasehold, geological and
geophysical costs, rig termination payments and other property and
plant and equipment and excludes approximately $245 million for the
expected repurchase of overriding royalty interests associated with
the expected sale of certain of the company's
properties.
|
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 May 3, 2016, the company had
downside protection, through open swaps, on a portion of its
remaining 2016 oil production at an average price of $46.32 per bbl. The company had downside price
protection, through open swaps, on a portion of its remaining 2016
natural gas production at an average price of $2.71 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 $0.46 per gallon, respectively.
The company's crude oil hedging positions as of May 3, 2016 were as follows:
Open Crude Oil
Swaps; Gains from Closed
|
Crude Oil Trades
and Call Option Premiums
|
|
|
|
|
|
|
Open Swaps
(mbbls)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total Gains from
Closed Trades
and Premiums
for
Call
Options
($ in
millions)
|
Q2 2016
|
6,279
|
|
$
|
45.86
|
|
$
|
9
|
Q3 2016
|
5,980
|
|
$
|
46.31
|
|
10
|
Q4 2016
|
5,980
|
|
$
|
46.80
|
|
10
|
Total 2016
(a)
|
18,239
|
|
$
|
46.32
|
|
$
|
29
|
Total 2017 –
2022
|
2,920
|
|
$
|
42.53
|
|
$
|
78
|
|
(a) Certain hedging
arrangements include a sold option to extend at an average price of
$53.67 per bbl covering 2.2 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
|
Q2 2016
|
3,451
|
$
|
87.25
|
Q3 2016
|
3,489
|
$
|
87.25
|
Q4 2016
|
3,488
|
$
|
87.25
|
Total 2016
|
10,428
|
$
|
87.25
|
Total 2017
|
5,293
|
$
|
83.50
|
The company's natural gas hedging positions as of May 3, 2016 were as follows:
Open Natural Gas
Swaps; Gains (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)
|
Q2 2016
|
174
|
|
$
|
2.65
|
|
$
|
(26)
|
Q3 2016
|
179
|
|
$
|
2.69
|
|
(26)
|
Q4 2016
|
123
|
|
$
|
2.84
|
|
(28)
|
Total 2016
(a)
|
476
|
|
$
|
2.71
|
|
$
|
(80)
|
Total 2017 –
2022
|
73
|
|
$
|
2.92
|
|
$
|
(78)
|
|
(a) Certain hedging
arrangements include a sold option to extend at an average price of
$2.80 per mmbtu covering 77 bcf in 2016. Sold options are included
with net written call options.
|
Natural Gas Net
Written Call Options
|
|
|
|
|
Call
Options
(bcf)
|
Avg. NYMEX
Strike
Price
|
Q2 2016
|
45
|
$
|
5.27
|
Q3 2016
|
45
|
$
|
5.27
|
Q4 2016
|
46
|
$
|
5.27
|
Total 2016
|
136
|
$
|
5.27
|
Total 2017 –
2022
|
114
|
$
|
10.92
|
|
Natural Gas Basis
Protection Swaps
|
|
|
|
|
Volume
(bcf)
|
Avg. NYMEX
plus/(minus)
|
Q2 2016
|
10
|
$
|
(0.63)
|
Q3 2016
|
12
|
$
|
(0.66)
|
Q4 2016
|
8
|
$
|
(0.58)
|
Total 2016
|
30
|
$
|
(0.63)
|
Total 2017 -
2022
|
24
|
$
|
(0.48)
|
The company's natural gas liquids hedging positions as of
May 3, 2016 were as follows:
Open Ethane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
Q2 2016
|
57
|
$
|
0.17
|
Q3 2016
|
58
|
$
|
0.17
|
Q4 2016
|
20
|
$
|
0.17
|
Total 2016
|
135
|
$
|
0.17
|
|
Open Propane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
Q2 2016
|
50
|
$
|
0.46
|
Q3 2016
|
50
|
$
|
0.46
|
Q4 2016
|
17
|
$
|
0.46
|
Total 2016
|
117
|
$
|
0.46
|
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
Brad Sylvester,
CFA
|
Gordon
Pennoyer
|
(405)
935-8870
|
(405)
935-8878
|
ir@chk.com
|
media@chk.com
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2016-first-quarter-financial-and-operational-results-300263575.html
SOURCE Chesapeake Energy Corporation