OKLAHOMA CITY, Jan. 29, 2020 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE:CHK) today released preliminary 2019
fourth quarter production results and operational achievements.
Highlights include:
Delivered Expected 2019 Production within Capital Expenditure
Guidance:
- Average estimated 2019 fourth quarter oil production range of
125,000 to 126,000 barrels (bbls) of oil per day
- Average estimated 2019 fourth quarter equivalent production
range of 476,000 to 478,000 barrels of oil equivalent (boe) per
day
- Estimated 2019 fourth quarter capital expenditures of
approximately $480 to $490 million
Continued Progress Restoring Balance Sheet, Improving Cash
Costs and Maintaining Liquidity:
- Eliminated approximately $900
million in debt, including retiring the Brazos Valley
Longhorn, L.L.C. ("Brazos Valley") secured revolving credit
facility and debt structure in December
- Reduced gathering, processing and transportation and general
and administrative expenses by approximately $1.20 per boe, or over $335 million, in 2019 compared to 2018
- As of December 31, 2019, the
company had borrowed $1.590 billion
under its revolving credit facility, compared to $1.504 billion drawn at September 30, 2019, resulting in approximately
$1.4 billion of liquidity available
as of December 31, 2019;
approximately $300 million of debt
matures in 2020
Reduced Costs and Grew Production in the Brazos
Valley:
- Increased oil production by 6% year over year, growing average
per well Eagle Ford peak oil rates by approximately 40% to
approximately 900 bbls of oil per day
- Reduced 2019 average well costs per lateral foot by
approximately 9%, recognizing approximately $54 million in drilling and completions savings
year over year
Doug Lawler, Chesapeake's
President and Chief Executive Officer, commented, "We delivered
strong cash flow during the quarter on lower costs and higher oil
volumes. Natural gas and natural gas liquids volumes were
sequentially lower due to our decisions to direct capital to the
highest-margin opportunities in our portfolio, enhancing our
profitability. Our strong results in the fourth quarter have
continued into early 2020 and are setting the foundation for the
company to reach free cash flow this year. We remain committed to
achieving further meaningful debt reduction through asset sales,
capital markets transactions and cost discipline."
Balance Sheet and Hedge Position Update
As of December 31, 2019,
Chesapeake's principal amount of debt outstanding was approximately
$8.9 billion, compared to
$9.7 billion as of September 30, 2019. In December 2019, Chesapeake entered into a secured
first lien last out 4.5-year term loan facility for $1.5 billion to finance a tender offer for
unsecured notes issued by Brazos Valley and Brazos Valley Longhorn
Finance Corp., each a wholly owned subsidiary of Chesapeake, and to
fund the retirement of Brazos Valley's secured revolving credit
facility. The company also exchanged new 11.5% Senior Secured
Second Lien Notes due 2025 for certain outstanding senior unsecured
notes. These transactions resulted in the removal of approximately
$900 million of debt from the
company's balance sheet.
As of January 29, 2020, including
January and February derivative contracts that have settled in
2020, Chesapeake had downside protection on approximately 32
million bbls of oil at an average price of $59.90 per bbl, and downside protection on
approximately 265 billion cubic feet (bcf) of gas at an average
price of $2.76 per thousand cubic
feet of gas.
Operations Update and Highlights
Chesapeake's average daily production for the 2019 fourth
quarter is projected at approximately 476,000 to 478,000 boe per
day, including 125,000 to 126,000 bbls of oil per day. The
company's 2019 fourth quarter projection for total capital
expenditures is approximately $480 to
$490 million.
In Chesapeake's Brazos Valley area in central Texas, total net field production reached a
record of approximately 56,000 boe per day for the 2019 fourth
quarter, including 40,000 bbls of oil per day. Recent highlights
include two three-well Beran pads located in Burleson County, Texas, which, with longer
laterals and optimized completions, have achieved average peak
24-hour initial production rates per well of 1,625 boe per day, of
which approximately 1,550 barrels were oil.
Since Chesapeake closed the Brazos Valley acquisition on
February 1, 2019, the company placed
81 wells on production in 2019 while utilizing four rigs and
developing 655,000 feet of gross lateral footage, compared to 99
wells placed on production during 2018 by the previous operator
using five rigs which developed 660,000 feet of gross lateral
footage. As expected in the company's acquisition analysis, average
completed well costs in 2019 for Lower Eagle Ford wells were
approximately $8.0 million, or
$940 per foot of completed lateral.
Chesapeake estimates a total of approximately $250 million in cost savings and revenue
improvements to the Brazos Valley asset was realized during the
eleven months it operated the asset in 2019, achieving its
projected synergies.
In the company's South Texas Eagle Ford asset, total net
production grew from the 2019 third quarter low, reaching
approximately 104,000 boe per day in the 2019 fourth quarter, of
which 60,000 barrels were oil.
In the Powder River Basin (PRB) in Wyoming, the company largely recovered from
the production challenges experienced in the 2019 third quarter and
early fourth quarter, averaging approximately 21,000 bbls of oil
per day in December. Building on the successful Niobrara well announced in the 2019 third
quarter, the company turned four additional Niobrara wells to sales during the 2019 fourth
quarter, with outstanding results. To date, four of the five wells
have averaged peak initial 24-hour production rates of over 2,000
boe per day, including approximately 1,200 bbls of oil.
In the Marcellus Shale in northeast Pennsylvania, capital efficiencies and wider
spacing continue to deliver strong results, including a daily gross
field production record of 2.67 billion cubic feet of gas per day
set in November 2019 and a net
production record for the 2019 fourth quarter of approximately 975
million cubic feet (mmcf) of gas per day. Additionally, the company
initiated a field compression program in 2019, installing over 70
pad compressors resulting in a capital efficient average gross base
production uplift of approximately 60 mmcf of gas per day since
May. In 2020, the company plans to expand this program to match
operating conditions of offset operators with over 30 pad
compressors currently planned to be installed.
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.
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,
statements regarding our anticipated 2019 fourth quarter results,
statements regarding our intentions to expand the field compression
program and anticipated number of pad compressors to be installed,
management's guidance or forecasts of future events, production,
capital expenditure expense and other estimates, production and
well connection forecasts, estimates of operating costs,
anticipated capital and operational efficiencies, planned
development drilling and expected drilling cost reductions,
expected lateral lengths of wells, general and administrative
expenses, capital expenditures, projected cash flow and
liquidity, our ability to enhance our cash flow
and financial flexibility, plans and objectives for future
operations, 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.
Our condensed consolidated financial statements and related
operating data as of and for the three months and year ended
December 31, 2019 are not yet
available. The estimates of such information in this release are
based on our preliminary operating and financial results as of and
for the three months ended December 31,
2019, and, as of the date of this release, have not been
finalized. These preliminary estimates are derived from our
internal records and are based on the most current information
available to management. We have prepared these estimates on a
basis materially consistent with our historical financial results
and in good faith based on our internal reporting as of and for the
three months ended December 31, 2019.
However, the preliminary financial and operating estimates are not
reviewed and are unaudited, and our normal reporting processes with
respect to the preliminary operational and financial results in
this release have not been fully completed. During the course of
our review process of our operating and financial results as of and
for the three months ended December 31,
2019, we could identify items that would require us to make
adjustments and that could affect our final results. Any such
adjustments could be material.
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; an interruption
in operations at our headquarters due to a catastrophic event;
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.
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.
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INVESTOR
CONTACT:
|
MEDIA
CONTACT:
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CHESAPEAKE ENERGY
CORPORATION
|
Brad Sylvester,
CFA
(405)
935-8870
ir@chk.com
|
Gordon
Pennoyer
(405)
935-8878
media@chk.com
|
6100 North Western
Avenue
P.O. Box
18496
Oklahoma City, OK
73154
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SOURCE Chesapeake Energy Corporation