OKLAHOMA CITY, May 4, 2017 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE:CHK) today reported financial and
operational results for the 2017 first quarter plus other recent
developments. Highlights include:
- Average 2017 first quarter production of 528,000 boe per
day, above midpoint of guidance of 515,000 to 535,000 boe per
day
- Oil production expected to reach 100,000 barrels per day
by year-end 2017; average 2017 first quarter oil production of
83,700 barrels per day, above midpoint of guidance of 80,000 to
85,000 barrels per day
- Combined production and G&A expenses per boe down 2%
quarter over quarter
- Gathering, processing and transportation expenses per boe
down 6% quarter over quarter
Doug Lawler, Chesapeake's Chief
Executive Officer, commented, "Our operational momentum continues
to build in our Eagle Ford, Powder River Basin and Mid-Continent
oil assets, as we remain on track to reach our production target of
100,000 barrels of oil per day by year-end. We expect our
production to grow significantly in the second half of 2017 as we
place more wells to sales, and as a result, we have raised the
bottom range of our 2017 production guidance. We remain focused on
improving our balance sheet and decreasing our cash costs, while
improving the capital efficiency from our operations. We look
forward to reporting our results as the year progresses."
2017 First Quarter Results
For the 2017 first quarter, Chesapeake's revenues increased by
41% year over year and 36% quarter over quarter primarily due to an
increase in the average realized commodity prices for the company's
production and unrealized hedging gains, partially offset by a
decrease in production volumes sold. Average daily production for
the 2017 first quarter of approximately 528,000 barrels of oil
equivalent (boe) consisted of approximately 83,700 barrels (bbls)
of oil, 2.342 billion cubic feet (bcf) of natural gas and 53,900
bbls of natural gas liquids (NGL).
Average production expenses during the 2017 first quarter were
$2.84 per boe, while G&A expenses
(including stock-based compensation) during the 2017 first quarter
were $1.35 per boe. Combined
production and G&A expenses (including stock-based
compensation) during the 2017 first quarter were $4.19 per boe, an increase of 1% year over year
and a decrease of 2% quarter over quarter. Gathering, processing
and transportation expenses during the 2017 first quarter were
$7.47 per boe, a decrease of 5% year
over year and 6% quarter over quarter, primarily due to the
company's Barnett and Devonian divestitures in 2016.
Chesapeake reported net income available to common stockholders
of $75 million, or $0.08 per share, while the company's ebitda for
the 2017 first quarter was $455
million. Adjusting for unrealized gains on commodity
derivatives, impairments related to the reduction of crude
transportation commitments on the Seaway Pipeline and other related
natural gas transportation obligations of approximately
$393 million, the loss on exchange of
preferred stock and other items, including those that are typically
excluded by securities analysts, the 2017 first quarter adjusted
net income attributable to Chesapeake was $212 million, or $0.23 per common share, while the company's
adjusted ebitda was $525 million in
the 2017 first quarter. Reconciliations of financial measures
calculated in accordance with GAAP to non-GAAP measures are
provided on pages 11 – 12 of this release.
Capital Spending Overview
Chesapeake's total capital investments were approximately
$576 million during the 2017 first
quarter, compared to approximately $463
million in the 2016 fourth quarter and $365 million in the 2016 first quarter. A summary
of the company's guidance for 2017 is provided under "Management's
Outlook as of May 3, 2017," beginning
on page 16.
|
2017
|
2016
|
2016
|
Operated activity
comparison
|
Q1
|
Q4
|
Q1
|
Average rig
count
|
16
|
12
|
8
|
Gross wells
spud
|
87
|
60
|
41
|
Gross wells
completed
|
99
|
82
|
57
|
Gross wells
connected
|
76
|
110
|
80
|
|
|
|
|
Type of cost ($ in
millions)
|
|
|
|
Drilling and
completion costs
|
$
|
506
|
|
$
|
365
|
|
$
|
281
|
|
Exploration costs,
leasehold and additions to other PP&E
|
19
|
|
38
|
|
16
|
|
Subtotal capital
expenditures
|
$
|
525
|
|
$
|
403
|
|
$
|
297
|
|
Capitalized
interest
|
51
|
|
60
|
|
68
|
|
Total capital
expenditures
|
$
|
576
|
|
$
|
463
|
|
$
|
365
|
|
Balance Sheet and Liquidity
As of March 31, 2017, Chesapeake's principal debt balance
was approximately $9.1 billion with
$249 million in cash on hand,
compared to $10.0 billion with
$882 million in cash on hand as of
December 31, 2016. The company's
total liquidity as of March 31, 2017
was approximately $3.3 billion, which
included cash on hand and borrowing capacity of approximately
$3.1 billion under the company's
senior secured revolving credit facility, which had no outstanding
borrowings and $697 million utilized
for various letters of credit (including the $461 million supersedeas bond with respect to the
2014 redemption of Chesapeake's 6.775% Senior Notes due 2019 ("2019
Notes") litigation).
On April 24, 2017, Chesapeake
received notice from the U.S. Supreme Court that it would not
review its appeal related to the company's 2019 Notes litigation.
As a result of this decision, the company satisfied the judgment of
$441 million on April 28, 2017, with cash on hand and from the
company's revolving credit facility. While the company is
disappointed in the Supreme Court's decision, it had posted a
supersedeas bond for the full amount (reflected as an outstanding
letter of credit under the company's revolving credit facility
described above), and therefore the judgment had no further impact
on liquidity. As of May 1,
2017, after making the judgment payment and pro forma the
relief of the associated letters of credit, Chesapeake's liquidity
was approximately $3.3 billion.
Operations Update
Chesapeake's average daily production for the 2017 first quarter
was approximately 528,000 boe and is further detailed in the table
below. Chesapeake's projected production volumes and capital
expenditure program are subject to capital allocation decisions
throughout the year and may be adjusted based on prevailing market
conditions.
|
2017
|
2016
|
2016
|
Operating area net
production (mboe/day)
|
Q1
|
Q4
|
Q1
|
Eagle Ford
|
96
|
104
|
91
|
Haynesville
(1)
|
121
|
135
|
112
|
Marcellus
|
146
|
134
|
144
|
Utica
|
96
|
108
|
138
|
Mid-Continent
|
57
|
53
|
93
|
Powder River
Basin
|
12
|
12
|
17
|
Barnett
|
—
|
19
|
69
|
Other
|
—
|
10
|
8
|
Total
production
|
528
|
575
|
672
|
|
|
(1)
|
Properties sold
during the 2017 first quarter contributed approximately 14 mboe/day
in the 2016 fourth quarter.
|
Chesapeake is currently utilizing 19 drilling rigs (above the
2017 first quarter average of 16) across its operating areas, seven
of which are located in the Eagle Ford Shale, five 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 on production approximately 400 and 450
gross operated wells, respectively, in 2017.
In the Eagle Ford Shale, Chesapeake placed the Blakeway 1C DIM
2H well in production in March 2017
and it reached a peak production rate of approximately 2,800 bbls
of oil per day (3,184 boe per day). The Blakeway well had a 9,800'
lateral and was completed with higher proppant concentration per
foot of lateral and reduced cluster spacing compared to the
company's historical completion methods. The company expects to
place several more wells on production with these enhanced
completion techniques in 2017. The company also drilled its first
Upper Eagle Ford Shale well, the Blakeway 3D DIM 2H, with an
11,300' lateral. This well was fracture stimulated and placed in
production on May 3, 2017. The
company expects to report a production test rate on this well later
this month.
In the Powder River Basin (PRB), Chesapeake's first Turner well,
the Sundquist 9-34-71 USA A TR
13H, was drilled with a 7,100' lateral and placed in production in
March 2017, reaching a peak rate of
2,560 boe per day (78% oil). Average daily gross cumulative
production from the Sundquist well was approximately 1,522 boe per
day during its first 30 days of production, resulting in cumulative
gross oil production of approximately 36,000 bbls over that time.
The company expects to place its second Turner well, the Rankin
5-33-68 A TR 1H drilled with a 4,500' lateral, on production soon
and report a production test rate on this well later this month.
Chesapeake plans to drill up to 10 additional wells in the Turner
formation in 2017. Chesapeake also placed on production its first
of two scheduled Parkman wells this year, the Sundquist 9-34-71
USA A PK 15H, with a 7,000'
lateral which, while currently production constrained, has reached
a peak rate of 714 bbls of oil
per day (763 boe per day).
Chesapeake also placed three notable Niobrara wells on production
during the 2017 first quarter which had been drilled, but
uncompleted, that had peak rates of approximately 750, 1,155 and
1,215 bbls of oil per day (1,575, 1,650 and 1,930 boe per day),
respectively. Chesapeake expects additional results from these and
other formations in the PRB, including the Sussex and a deeper
Mowry test, later this year.
In the Mid-Continent, Chesapeake drilled its first
extended-lateral well in Major
County targeting the Saint Genevieve formation (Meramec
silt). This well had a completed lateral length of 9,900' and was
placed in production in late April of 2017. The company expects to
report a production test rate on this well later this month.
Chesapeake expects to drill up to 20 additional extended-lateral
wells in the Saint Genevieve formation in 2017. The company also
expects to test additional formations in its Mid-Continent area,
including the Chester limestone and sandstone formations, later
this year. Chesapeake controls approximately 230,000 net acres that
it believes are prospective for the Chester and has drilled and
collected two full core samples of the section earlier this year to
help optimize its completion designs. The company expects first
results from the Chester in the third and fourth quarters of
2017.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and
operational results during the 2017 first quarter compared to
results in prior periods.
|
|
Three Months
Ended
|
|
|
03/31/17
|
|
12/31/16
|
|
03/31/16
|
Oil equivalent
production (in mmboe)
|
|
48
|
|
|
53
|
|
|
61
|
|
Oil production (in
mmbbls)
|
|
8
|
|
|
8
|
|
|
9
|
|
Average realized oil
price ($/bbl)(a)
|
|
51.72
|
|
|
47.37
|
|
|
37.74
|
|
Natural gas
production (in bcf)
|
|
211
|
|
|
236
|
|
|
276
|
|
Average realized
natural gas price ($/mcf)(a)
|
|
3.02
|
|
|
2.41
|
|
|
2.29
|
|
NGL production (in
mmbbls)
|
|
5
|
|
|
5
|
|
|
6
|
|
Average realized NGL
price ($/bbl)(a)
|
|
24.04
|
|
|
20.90
|
|
|
11.44
|
|
Production expenses
($/boe)
|
|
(2.84)
|
|
|
(2.98)
|
|
|
(3.36)
|
|
Gathering, processing
and transportation expenses ($/boe)
|
|
(7.47)
|
|
|
(7.92)
|
|
|
(7.88)
|
|
Oil -
($/bbl)
|
|
(3.85)
|
|
|
(3.87)
|
|
|
(3.29)
|
|
Natural Gas -
($/mcf)
|
|
(1.35)
|
|
|
(1.46)
|
|
|
(1.46)
|
|
NGL -
($/bbl)
|
|
(8.47)
|
|
|
(8.05)
|
|
|
(7.59)
|
|
Production taxes
($/boe)
|
|
(0.47)
|
|
|
(0.38)
|
|
|
(0.30)
|
|
General and
administrative expenses ($/boe)(b)
|
|
(1.18)
|
|
|
(1.11)
|
|
|
(0.66)
|
|
Stock-based
compensation ($/boe)
|
|
(0.17)
|
|
|
(0.17)
|
|
|
(0.13)
|
|
DD&A of oil and
natural gas properties ($/boe)
|
|
(4.15)
|
|
|
(4.03)
|
|
|
(4.30)
|
|
DD&A of other
assets ($/boe)
|
|
(0.44)
|
|
|
(0.40)
|
|
|
(0.48)
|
|
Interest expense
($/boe)(a)
|
|
(1.97)
|
|
|
(1.61)
|
|
|
(0.98)
|
|
Marketing, gathering
and compression net margin ($ in millions)(c)
|
|
(44)
|
|
|
(25)
|
|
|
18
|
|
Net cash provided by
(used in) operating activities ($ in millions)
|
|
99
|
|
|
(254)
|
|
|
(421)
|
|
Net cash provided by
(used in) operating activities ($/boe)
|
|
2.06
|
|
|
(4.79)
|
|
|
(6.90)
|
|
Operating cash flow
($ in millions)(d)
|
|
(14)
|
|
|
(120)
|
|
|
263
|
|
Operating cash flow
($/boe)
|
|
(0.29)
|
|
|
(2.27)
|
|
|
4.29
|
|
Adjusted ebitda ($ in
millions)(e)
|
|
525
|
|
|
385
|
|
|
282
|
|
Adjusted ebitda
($/boe)
|
|
11.05
|
|
|
7.28
|
|
|
4.61
|
|
Net income (loss)
available to common stockholders ($ in millions)
|
|
75
|
|
|
(740)
|
|
|
(1,111)
|
|
Income (loss) per
share – diluted ($)
|
|
0.08
|
|
|
(0.83)
|
|
|
(1.66)
|
|
Adjusted net income
(loss) attributable to Chesapeake ($ in
millions)(f)
|
|
212
|
|
|
64
|
|
|
(69)
|
|
Adjusted income
(loss) per share ($)(g)
|
|
0.23
|
|
|
0.07
|
|
|
(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 for the three months ended March 31, 2016,
unrealized gains (losses) on supply contract derivatives, but
excludes depreciation and amortization of other assets. For the
three months ended March 31, 2016, unrealized gains were $20
million. No other period had such gains (losses).
|
(d)
|
Defined as cash flow
provided by operating activities before changes in assets and
liabilities. Operating cash flow for the three months ended March
31, 2017 includes $290 million paid to assign an oil transportation
agreement to a third party and $103 million paid to terminate
future natural gas transportation commitments.
|
(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 14.
|
(f)
|
Defined as net income
(loss) attributable to Chesapeake, as adjusted to remove the
effects of certain items detailed on pages 11 - 12.
|
(g)
|
Our presentation of
diluted adjusted net income (loss) per share excludes shares
considered antidilutive when calculating diluted earnings per share
in accordance with GAAP.
|
2017 First Quarter Financial and Operational Results
Conference Call Information
A conference call to discuss this release has been scheduled on
Thursday, May 4, 2017 at 9:00 am EDT. The telephone number to access the
conference call is 719-325-2224 or toll-free 888-466-4582. The
passcode for the call is 6673789. 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 6673789. 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 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, guidance 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, 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 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
March 31,
|
|
|
2017
|
|
2016
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
|
$
|
1,469
|
|
|
$
|
993
|
|
Marketing, gathering
and compression
|
|
1,284
|
|
|
960
|
|
Total
Revenues
|
|
2,753
|
|
|
1,953
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
135
|
|
|
206
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
355
|
|
|
482
|
|
Production
taxes
|
|
22
|
|
|
18
|
|
Marketing, gathering
and compression
|
|
1,328
|
|
|
942
|
|
General and
administrative
|
|
65
|
|
|
48
|
|
Provision for legal
contingencies
|
|
(2)
|
|
|
33
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
197
|
|
|
263
|
|
Depreciation and
amortization of other assets
|
|
21
|
|
|
29
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
997
|
|
Impairments of fixed
assets and other
|
|
391
|
|
|
38
|
|
Net gains on sales of
fixed assets
|
|
—
|
|
|
(4)
|
|
Total Operating
Expenses
|
|
2,512
|
|
|
3,052
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
241
|
|
|
(1,099)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
|
(95)
|
|
|
(62)
|
|
Loss on sale of
investment
|
|
—
|
|
|
(10)
|
|
Gains (losses) on
purchases or exchanges of debt
|
|
(7)
|
|
|
100
|
|
Other
income
|
|
3
|
|
|
3
|
|
Total Other Income
(Expense)
|
|
(99)
|
|
|
31
|
|
INCOME (LOSS)
BEFORE INCOME TAXES
|
|
142
|
|
|
(1,068)
|
|
Income Tax
Expense
|
|
1
|
|
|
—
|
|
NET INCOME
(LOSS)
|
|
141
|
|
|
(1,068)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
—
|
|
NET INCOME (LOSS)
ATTRIBUTABLE TO CHESAPEAKE
|
|
140
|
|
|
(1,068)
|
|
Preferred stock
dividends
|
|
(23)
|
|
|
(43)
|
|
Loss on exchange of
preferred stock
|
|
(41)
|
|
|
—
|
|
Earnings allocated to
participating securities
|
|
(1)
|
|
|
—
|
|
NET INCOME (LOSS)
AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
75
|
|
|
$
|
(1,111)
|
|
EARNINGS (LOSS)
PER COMMON SHARE:
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
|
$
|
(1.66)
|
|
Diluted
|
|
$
|
0.08
|
|
|
$
|
(1.66)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
|
906
|
|
|
668
|
|
Diluted
|
|
907
|
|
|
668
|
|
CHESAPEAKE ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
249
|
|
|
$
|
882
|
|
Other current
assets
|
|
1,111
|
|
|
1,260
|
|
Total Current
Assets
|
|
1,360
|
|
|
2,142
|
|
|
|
|
|
|
Property and
equipment, (net)
|
|
10,081
|
|
|
10,609
|
|
Other
assets
|
|
258
|
|
|
277
|
|
Total
Assets
|
|
$
|
11,699
|
|
|
$
|
13,028
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
2,788
|
|
|
$
|
3,648
|
|
Long-term debt,
net
|
|
9,509
|
|
|
9,938
|
|
Other long-term
liabilities
|
|
605
|
|
|
645
|
|
Total
Liabilities
|
|
12,902
|
|
|
14,231
|
|
|
|
|
|
|
Preferred
stock
|
|
1,671
|
|
|
1,771
|
|
Noncontrolling
interests
|
|
256
|
|
|
257
|
|
Common stock and
other stockholders' equity
|
|
(3,130)
|
|
|
(3,231)
|
|
Total Equity
(Deficit)
|
|
(1,203)
|
|
|
(1,203)
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
11,699
|
|
|
$
|
13,028
|
|
|
|
|
|
|
Common shares
outstanding (in millions)
|
|
908
|
|
|
896
|
|
Principal amount of
debt outstanding
|
|
$
|
9,081
|
|
|
$
|
9,989
|
|
CHESAPEAKE ENERGY
CORPORATION
|
SUPPLEMENTAL
DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND
INTEREST EXPENSE
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
2017
|
|
2016
|
Net
Production:
|
|
|
|
|
Oil
(mmbbl)
|
|
8
|
|
|
9
|
|
Natural gas
(bcf)
|
|
211
|
|
|
276
|
|
NGL
(mmbbl)
|
|
5
|
|
|
6
|
|
Oil equivalent
(mmboe)
|
|
48
|
|
|
61
|
|
|
|
|
|
|
Oil, natural gas
and NGL Sales ($ in millions):
|
|
|
|
|
Oil sales
|
|
$
|
378
|
|
|
$
|
255
|
|
Oil derivatives –
realized gains (losses)(a)
|
|
11
|
|
|
73
|
|
Oil derivatives –
unrealized gains (losses)(a)
|
|
94
|
|
|
(72)
|
|
Total oil
sales
|
|
483
|
|
|
256
|
|
|
|
|
|
|
Natural gas
sales
|
|
653
|
|
|
483
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
|
(16)
|
|
|
150
|
|
Natural gas
derivatives – unrealized gains (losses)(a)
|
|
231
|
|
|
30
|
|
Total natural gas
sales
|
|
868
|
|
|
663
|
|
|
|
|
|
|
NGL sales
|
|
116
|
|
|
74
|
|
NGL derivatives –
realized gains (losses)(a)
|
|
1
|
|
|
—
|
|
NGL derivatives –
unrealized gains (losses)(a)
|
|
1
|
|
|
—
|
|
Total NGL
sales
|
|
118
|
|
|
74
|
|
Total oil, natural
gas and NGL sales
|
|
$
|
1,469
|
|
|
$
|
993
|
|
|
|
|
|
|
Average Sales
Price – excluding gains (losses) on derivatives:
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
50.24
|
|
|
$
|
29.34
|
|
Natural gas ($ per
mcf)
|
|
$
|
3.10
|
|
|
$
|
1.75
|
|
NGL ($ per
bbl)
|
|
$
|
23.78
|
|
|
$
|
11.44
|
|
Oil equivalent ($ per
boe)
|
|
$
|
24.13
|
|
|
$
|
13.28
|
|
|
|
|
|
|
Average Sales
Price – including realized gains (losses) on
derivatives:
|
|
|
|
|
Oil ($ per
bbl)
|
|
$
|
51.72
|
|
|
$
|
37.74
|
|
Natural gas ($ per
mcf)
|
|
$
|
3.02
|
|
|
$
|
2.29
|
|
NGL ($ per
bbl)
|
|
$
|
24.04
|
|
|
$
|
11.44
|
|
Oil equivalent ($ per
boe)
|
|
$
|
24.06
|
|
|
$
|
16.93
|
|
|
|
|
|
|
Interest Expense
($ in millions):
|
|
|
|
|
Interest
expense(b)
|
|
$
|
94
|
|
|
$
|
62
|
|
Interest rate
derivatives – realized (gains) losses(c)
|
|
(1)
|
|
|
(3)
|
|
Interest rate
derivatives – unrealized (gains) losses(c)
|
|
2
|
|
|
3
|
|
Total Interest
Expense
|
|
$
|
95
|
|
|
$
|
62
|
|
|
|
(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:
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
Beginning
cash
|
|
$
|
882
|
|
|
$
|
825
|
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
|
99
|
|
|
(421)
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(433)
|
|
|
(265)
|
|
Acquisitions of
proved and unproved properties(b)
|
|
(95)
|
|
|
(67)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
892
|
|
|
62
|
|
Additions to other
property and equipment(c)
|
|
(3)
|
|
|
(10)
|
|
Proceeds from sales
of other property and equipment
|
|
19
|
|
|
9
|
|
Other
|
|
—
|
|
|
(2)
|
|
Net cash provided
by (used in) investing activities
|
|
380
|
|
|
(273)
|
|
|
|
|
|
|
Net cash used in
financing activities
|
|
(1,112)
|
|
|
(115)
|
|
Change in cash and
cash equivalents
|
|
(633)
|
|
|
(809)
|
|
Ending
cash
|
|
$
|
249
|
|
|
$
|
16
|
|
|
|
(a)
|
Includes capitalized
interest of $2 million and $2 million for the three months ended
March 31, 2017 and 2016, respectively.
|
(b)
|
Includes capitalized
interest of $49 million and $64 million for the three months ended
March 31, 2017 and 2016, respectively.
|
(c)
|
Includes capitalized
interest of a nominal amount and $1 million for the three months
ended March 31, 2017 and 2016, 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,
2017
|
|
$
|
|
Shares(a)
|
|
$/Share(c)
(d)
|
Net income
available to common stockholders
|
$
|
75
|
|
|
907
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized gains on
commodity derivatives
|
(326)
|
|
|
|
|
(0.36)
|
|
Provision for legal
contingencies
|
(2)
|
|
|
|
|
—
|
|
Impairments of fixed
assets and other
|
391
|
|
|
|
|
0.43
|
|
Losses on purchases
or exchanges of debt
|
7
|
|
|
|
|
0.01
|
|
Loss on exchange of
preferred stock
|
41
|
|
|
|
|
0.05
|
|
Income tax expense
(benefit)(b)
|
—
|
|
|
|
|
—
|
|
Other
|
2
|
|
|
|
|
—
|
|
Adjusted net
income available to common stockholders(c)
(Non-GAAP)
|
188
|
|
|
907
|
|
|
0.21
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
23
|
|
|
|
|
0.02
|
|
Earnings allocated to
participating securities
|
1
|
|
|
|
|
—
|
|
Total adjusted net
income attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
212
|
|
|
907
|
|
|
$
|
0.23
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding for GAAP and
non-GAAP purposes do not include 208 million shares that were
considered antidilutive for calculating earnings per share in
accordance with GAAP.
|
(b)
|
Due to our valuation
allowance position, no income tax effect from the adjustments has
been included in determining adjusted net income.
|
(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)
|
Our presentation of
diluted adjusted net income (loss) per share excludes shares
considered antidilutive when calculating diluted 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:
|
March 31,
2016
|
|
$
|
|
Shares(a)
|
|
$/Share(b)
(c)
|
Net loss available
to common stockholders
|
$
|
(1,111)
|
|
|
668
|
|
|
$
|
(1.66)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
42
|
|
|
|
|
0.06
|
|
Unrealized gains on
supply contract derivatives
|
(20)
|
|
|
|
|
(0.03)
|
|
Provision for legal
contingencies
|
33
|
|
|
|
|
0.05
|
|
Impairment of oil and
natural gas properties
|
997
|
|
|
|
|
1.49
|
|
Impairments of fixed
assets and other
|
38
|
|
|
|
|
0.06
|
|
Net gains on sales of
fixed assets
|
(4)
|
|
|
|
|
(0.01)
|
|
Loss on sale of
investment
|
10
|
|
|
|
|
0.01
|
|
Gains on purchases or
exchanges of debt
|
(100)
|
|
|
|
|
(0.14)
|
|
Income tax expense
(benefit)(b)
|
—
|
|
|
|
|
—
|
|
Other
|
3
|
|
|
|
|
—
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
(112)
|
|
|
668
|
|
|
(0.17)
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
43
|
|
|
|
|
0.06
|
|
Total adjusted net
loss attributable to Chesapeake(c) (d)
(Non-GAAP)
|
$
|
(69)
|
|
|
668
|
|
|
$
|
(0.11)
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding for GAAP and
non-GAAP purposes do not include 113 million shares that were
considered antidilutive for calculating earnings per share in
accordance with GAAP.
|
(b)
|
Due to our valuation
allowance position, no income tax effect from the adjustments has
been included in determining adjusted net income.
|
(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)
|
Our presentation of
diluted adjusted net income (loss) per share excludes shares
considered antidilutive when calculating diluted 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,
2017
|
|
March 31,
2016
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
99
|
|
|
$
|
(421)
|
|
Changes in assets and
liabilities
|
|
(113)
|
|
|
684
|
|
OPERATING CASH
FLOW(a)
|
|
$
|
(14)
|
|
|
$
|
263
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
NET INCOME
(LOSS)
|
|
$
|
141
|
|
|
$
|
(1,068)
|
|
Interest
expense
|
|
95
|
|
|
62
|
|
Income tax
expense
|
|
1
|
|
|
—
|
|
Depreciation and
amortization of other assets
|
|
21
|
|
|
29
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
|
197
|
|
|
263
|
|
EBITDA(b)
|
|
$
|
455
|
|
|
$
|
(714)
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
|
$
|
99
|
|
|
$
|
(421)
|
|
Changes in assets and
liabilities
|
|
(113)
|
|
|
684
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
|
93
|
|
|
59
|
|
Gains (losses) on
commodity derivatives, net
|
|
322
|
|
|
181
|
|
Gains on supply
contract derivatives, net
|
|
—
|
|
|
20
|
|
Cash (receipts)
payments on commodity and supply contract derivative settlements,
net
|
|
34
|
|
|
(267)
|
|
Stock-based
compensation
|
|
(11)
|
|
|
(12)
|
|
Provision for legal
contingencies
|
|
2
|
|
|
(33)
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
(997)
|
|
Impairments of fixed
assets and other
|
|
3
|
|
|
(33)
|
|
Net gains on sales of
fixed assets
|
|
—
|
|
|
4
|
|
Investment
activity
|
|
—
|
|
|
(10)
|
|
Gains (losses) on
purchases or exchanges of debt
|
|
(6)
|
|
|
100
|
|
Other
items
|
|
32
|
|
|
11
|
|
EBITDA(b)
|
|
$
|
455
|
|
|
$
|
(714)
|
|
|
|
(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 activities as an indicator
of cash flows, or as a measure of liquidity. Operating cash flow
for the three months ended March 31, 2017 includes $290 million
paid to assign an oil transportation agreement to a third party and
$103 million paid to terminate future natural gas transportation
commitments.
|
|
|
(b)
|
Ebitda represents net
income before interest expense, income taxes, and depreciation,
depletion and amortization expense. Ebitda is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that it provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. This measure is
widely used by investors and rating agencies in the valuation,
comparison, rating and investment recommendations of
companies. Ebitda is also a financial measurement that, with
certain negotiated adjustments, is reported to our lenders pursuant
to our bank credit agreements and is used in the financial
covenants in our bank credit agreements. Ebitda is not a measure of
financial performance under GAAP. Accordingly, it should not be
considered as a substitute for net income, income from operations
or cash flow provided by operating activities prepared in
accordance with GAAP.
|
CHESAPEAKE ENERGY
CORPORATION
|
RECONCILIATION OF
ADJUSTED EBITDA
|
($ in
millions)
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
EBITDA
|
|
$
|
455
|
|
|
$
|
(714)
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized gains on
commodity derivatives
|
|
(326)
|
|
|
42
|
|
Unrealized gains on
supply contract derivatives
|
|
—
|
|
|
(20)
|
|
Provision for legal
contingencies
|
|
(2)
|
|
|
33
|
|
Impairment of oil and
natural gas properties
|
|
—
|
|
|
997
|
|
Impairments of fixed
assets and other
|
|
391
|
|
|
38
|
|
Net (gains) losses on
sales of fixed assets
|
|
—
|
|
|
(4)
|
|
Loss on sale of
investment
|
|
—
|
|
|
10
|
|
(Gains) losses on
purchases or exchanges of debt
|
|
7
|
|
|
(100)
|
|
Net income
attributable to noncontrolling interests
|
|
(1)
|
|
|
—
|
|
Other
|
|
1
|
|
|
—
|
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
|
$
|
525
|
|
|
$
|
282
|
|
|
|
|
(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, 2016 and for the interim period
ended March 31, 2017. Management
believes that PV-9 provides useful information to investors
regarding the company's collateral position and that PV-10 provides
useful information to investors because it is widely used by
professional analysts and sophisticated investors in evaluating oil
and natural gas companies. Because there are many unique factors
that can impact an individual company when estimating the amount of
future income taxes to be paid, management believes the use of a
pre-tax measure is valuable for evaluating the company. Neither
PV-9 nor PV-10 should be considered as an alternative to the
standardized measure of discounted future net cash flows as
computed under GAAP. With respect to PV-9 and PV-10 calculated as
of an interim date, it is not practical to calculate taxes for the
related interim period because GAAP does not provide for disclosure
of standardized measure on an interim basis.
PV-9 – March 31, 2017
@ NYMEX Strip
|
$
|
9,237
|
|
Less: Change in
discount factor from 9 to 10
|
(503)
|
|
PV-10 – March 31,
2017 @ NYMEX Strip
|
8,734
|
|
Less: Change in
pricing assumption from NYMEX Strip to SEC
|
(2,281)
|
|
PV-10 – March 31,
2017 @ SEC
|
6,453
|
|
Less: Change in PV-10
from 12/31/16 to 3/31/2017
|
(2,048)
|
|
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 MAY 3, 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)
|
0% to
4%
|
Absolute
Production
|
|
Liquids -
mmbbls
|
52.5 -
55.0
|
Oil -
mmbbls
|
33.5 -
35.0
|
NGL -
mmbbls
|
19.0 -
20.0
|
Natural gas -
bcf
|
870 -
900
|
Total absolute
production - mmboe
|
197.5 -
205.0
|
Absolute daily rate -
mboe
|
541 -
562
|
Estimated Realized
Hedging Effects(b) (based on 5/1/17 strip
prices):
|
|
Oil -
$/bbl
|
$2.51
|
Natural gas -
$/mcf
|
($0.16)
|
NGL -
$/bbl
|
$0.10
|
Estimated Basis to
NYMEX Prices:
|
|
Oil -
$/bbl
|
$1.35 -
$1.55
|
Natural gas -
$/mcf
|
$0.30 -
$0.40
|
NGL -
$/bbl
|
$3.75 -
$4.15
|
Operating Costs per
Boe of Projected Production:
|
|
Production
expense
|
$2.50 -
$2.70
|
Gathering, processing
and transportation expenses
|
$7.00 -
$7.50
|
Oil -
$/bbl
|
$4.05 -
$4.25
|
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)
|
$1,900 -
$2,300
|
Capitalized Interest
($ in millions)
|
$200
|
Total Capital
Expenditures ($ in millions)
|
$2,100 -
$2,500
|
|
|
(a)
|
Based on 2016
production of 537 mboe per day, adjusted for 2016 and 2017
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)
|
Excludes non-cash
amortization of approximately $22 million related to the buydown of
a transportation agreement.
|
(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 May 1, 2017, the company had
downside protection, through open swaps, on a portion of its
remaining 2017 oil production at an average price of $50.25 per bbl. The company had downside price
protection, through open swaps and two-way collars, on a portion of
its remaining 2017 natural gas production at an average price of
$3.05 per mcf. Chesapeake also
had downside price protection, through open swaps, on a portion of
its remaining 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 $3.12 per mcf and a portion of its 2018 oil
production at an average price of $51.43 per bbl.
The company's crude oil hedging positions as of May 1, 2017 were as follows:
Open Crude Oil
Swaps; Gains (Losses) from Closed
|
Crude Oil
Trades
|
|
|
|
|
|
|
|
Open Swaps
(mbbls)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total Gains from
Closed Trades
($ in
millions)
|
Q2 2017
|
5,915
|
|
$
|
50.12
|
|
|
$
|
23
|
|
Q3 2017
|
5,612
|
|
$
|
50.27
|
|
|
23
|
|
Q4 2017
|
5,612
|
|
$
|
50.36
|
|
|
23
|
|
Total 2017
|
17,139
|
|
$
|
50.25
|
|
|
$
|
69
|
|
Total 2018 –
2022
|
1,825
|
|
$
|
51.43
|
|
|
$
|
(13)
|
|
Crude Oil Net
Written Call Options
|
|
|
|
|
Call
Options
(mbbls)
|
Avg. NYMEX
Strike
Price
|
Q2 2017
|
1,320
|
$
|
83.50
|
|
Q3 2017
|
1,334
|
$
|
83.50
|
|
Q4 2017
|
1,334
|
$
|
83.50
|
|
Total 2017
|
3,988
|
$
|
83.50
|
|
The company's natural gas hedging positions as of May 1, 2017 were as follows:
Open Natural Gas
Swaps; Losses from Closed
|
Natural Gas
Trades
|
|
|
|
|
|
|
|
Open Swaps
(bcf)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total
Losses
from Closed
Trades
($ in millions)
|
Q2 2017
|
157
|
|
$
|
2.96
|
|
|
$
|
(1)
|
|
Q3 2017
|
158
|
|
$
|
3.00
|
|
|
(2)
|
|
Q4 2017
|
164
|
|
$
|
3.16
|
|
|
(3)
|
|
Total 2017
|
479
|
|
$
|
3.04
|
|
|
$
|
(6)
|
|
Total 2018 –
2022
|
191
|
|
$
|
3.15
|
|
|
$
|
(69)
|
|
Natural Gas
Two-Way Collars
|
|
|
|
|
|
Open
Collars (bcf)
|
Avg.
NYMEX
Bought Put
Price
|
Avg.
NYMEX
Sold Call
Price
|
Q4 2017
|
24
|
$
|
3.25
|
|
$
|
3.68
|
|
Total 2017
|
24
|
$
|
3.25
|
|
$
|
3.68
|
|
Total 2018
|
47
|
$
|
3.00
|
|
$
|
3.25
|
|
Natural Gas Net
Written Call Options
|
|
|
|
|
Call
Options
(bcf)
|
Avg. NYMEX
Strike
Price
|
Q2 2017
|
12
|
$
|
9.43
|
|
Q3 2017
|
12
|
$
|
9.43
|
|
Q4 2017
|
12
|
$
|
9.43
|
|
Total 2017
|
36
|
$
|
9.43
|
|
Total 2018 –
2020
|
66
|
$
|
12.00
|
|
Natural Gas Basis
Protection Swaps
|
|
|
|
|
Volume
(bcf)
|
Avg. NYMEX
plus/(minus)
|
Q2 2017
|
5
|
$
|
(0.46)
|
|
Q3 2017
|
6
|
$
|
(0.46)
|
|
Q4 2017
|
6
|
$
|
(0.46)
|
|
Total 2017
|
17
|
$
|
(0.46)
|
|
Total 2018
|
1
|
$
|
(1.03)
|
|
The company's natural gas liquids hedging positions as of
May 1, 2017 were as follows:
Open Ethane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
Q2 2017
|
27
|
$
|
0.28
|
|
Total 2017
|
27
|
$
|
0.28
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2017-first-quarter-financial-and-operational-results-300451273.html
SOURCE Chesapeake Energy Corporation