OKLAHOMA CITY, Feb. 26, 2020 /PRNewswire/ -- Chesapeake Energy
Corporation (NYSE:CHK) today reported financial and operational
results for the 2019 full year and fourth quarter and released its
annual guidance. Highlights from Chesapeake's projected 2020 program
include:
- Targeting Free Cash Flow
- Reducing Capital Expenditure Budget by Approximately 30%,
Maintaining Relatively Flat Oil Production and Decreasing Gas
Production Year Over Year
- Lowering Projected Production and General and
Administrative (G&A) Expenses by Over 10% Year Over
Year
- Continuing to Recognize Capital Efficiency Improvements
Across All Basins
- Funding 2020 Maturities and Enhancing Liquidity Through
$300 to $500
Million in Expected Non-Core Asset Sales
Doug Lawler, Chesapeake's President and Chief Executive
Officer, commented, "We are pleased to highlight our strong 2019
operational performance, delivering fourth quarter oil production
of 126,000 barrels (bbls) of oil per day and increasing our oil mix
to 26% of total production, the highest percentage in company
history. These results, combined with certain lower cash costs,
yielded adjusted EBITDAX growth of 19%, or 15% per barrel of oil
equivalent (boe), compared to the 2018 fourth quarter, when we had
significantly higher commodity prices. Our focus on shifting our
portfolio composition and capital allocation to more oil and our
commitment to cost leadership are resulting in improved financial
performance, even at lower prices. We also made additional progress
improving our balance sheet during the quarter, eliminating
approximately $900 million in debt
through capital markets transactions, and consolidating our
$1.5 billion Brazos Valley
unrestricted subsidiary.
"Our performance in 2019 positions us to target free cash flow
in 2020. We plan to allocate approximately 80% of our projected
2020 capital expenditure program of $1.3 to $1.6
billion to our highest-margin oil opportunities. We expect
oil production will remain relatively flat year over year, while
total production is projected to decrease as gas volumes decline.
In addition to cutting our 2020 capital program by approximately
30% compared to 2019, we expect to further improve our cost
structure by reducing production and G&A expenses by over 10%
year over year. We also plan to further enhance our liquidity by
funding our 2020 maturities with $300
to $500 million in proceeds from
expected non-core asset sales. We remain fully committed to
strengthening our company in 2020 by achieving free cash flow,
improving well productivity and capturing further cash costs
savings."
2019 Full Year Results
For the 2019 full year, Chesapeake reported a net loss of $308 million and a net loss available to common
stockholders of $416 million, or
$0.25 per diluted share,
compared to net income of $228
million and net income available to common stockholders of
$133 million, or $0.15 per diluted share, in 2018. Adjusting
for items that are typically excluded by securities analysts, the
2019 full year adjusted net loss attributable to Chesapeake was $454
million, or $0.27 per diluted
share, compared to an adjusted net loss attributable to
Chesapeake of $140 million, or $0.15 per diluted share in 2018, while the
company's adjusted EBITDAX was $2.530
billion, compared to $2.380
billion in 2018. Reconciliations of financial measures
calculated in accordance with GAAP to non-GAAP measures are
provided on pages 13 - 17 of this release.
Average daily production for 2019 was approximately 484,000 boe
and consisted of approximately 118,000 bbls of oil, 1.995 billion
cubic feet (bcf) of natural gas and 33,000 bbls of natural gas
liquids (NGL). Average daily production for 2018 was approximately
521,000 boe and consisted of approximately 90,000 bbls of oil,
2.278 bcf of natural gas and 52,000 bbls of NGL. The increase in
oil production of approximately 30% during 2019 was primarily
driven by the WildHorse acquisition, while our legacy oil portfolio
contributed 6% growth excluding acquisitions and divestitures.
In 2019, gathering, processing and transportation (GP&T)
expenses were $6.13 per boe compared
to $7.35 per boe in 2018. Production
expenses in 2019 were $2.94 per boe
compared to $2.50 per boe in 2018.
This decrease in GP&T and increase in production expenses were
primarily driven by the divestiture of the company's Utica Shale
properties in Ohio in 2018 and the
2019 acquisition of WildHorse, respectively. On a per boe basis,
these combined expense categories decreased 8% year over year.
G&A expenses (including stock-based compensation) were
$1.78 per boe in 2019, compared to
$1.76 per boe in 2018.
2019 Fourth Quarter Results
For the 2019 fourth quarter, Chesapeake reported a net loss of $324 million and a net loss available to common
stockholders of $346 million, or
$0.18 per diluted share, compared to
net income of $605 million and net
income available to common stockholders of $576 million, or $0.57 per diluted share, for the fourth quarter
2018. Adjusting for items typically excluded by securities
analysts, the 2019 fourth quarter adjusted net loss attributable to
Chesapeake was $80 million, or $0.04 per share, while adjusted EBITDAX was
$665 million. For the 2018
fourth quarter, adjusted net income attributable to Chesapeake was $32
million, while adjusted EBITDAX was $561 million. Reconciliations of financial
measures calculated in accordance with GAAP to non-GAAP measures
are provided on pages 13 - 17 of this release.
Average daily production for the 2019 fourth quarter was
approximately 477,000 boe and consisted of approximately 126,000
bbls of oil, 1.935 bcf of natural gas and 29,000 bbls of NGL.
Average daily production for the 2018 fourth quarter was
approximately 464,000 boe and consisted of approximately 87,000
bbls of oil, 2.009 bcf of natural gas and 42,000 bbls of NGL.
Overall, fourth quarter oil production grew approximately 45% from
the 2018 fourth quarter, and represented approximately 26% of the
company's total production, the highest oil mix in Chesapeake's history, compared to 19% in the
2018 fourth quarter.
Despite lower average prices for its oil, natural gas and NGL
production, Chesapeake's operating
margin increased in the 2019 fourth quarter compared to the 2018
fourth quarter, due to an increase in oil production mix and a
decrease in certain cash costs. GP&T and G&A expenses
decreased by $76 million, or
approximately $2.00 per boe, while
production expense increased $21
million, or $0.38 per boe, as
compared to the same quarter in 2018.
Capital Spending Overview
Chesapeake invested total
capital expenditures of approximately $487
million during the 2019 fourth quarter, including
capitalized interest of $6 million,
compared to approximately $476
million in the 2018 fourth quarter. For 2020, the company's
projected capital expenditure program is $1.3 to $1.6
billion, compared to $2.245
billion in 2019, with approximately 80% expected to be
allocated to higher-margin oil opportunities. See tables below for
a summary of 2019 fourth quarter and full year activity and
expenditures.
|
|
Three Months
Ended
December
31,
|
|
|
2019
|
|
2018
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
Operated activity
comparison
|
|
|
|
|
|
|
|
|
Average rig
count
|
|
15
|
|
10
|
|
18
|
|
11
|
Wells spud
|
|
75
|
|
50
|
|
82
|
|
52
|
Wells
completed
|
|
78
|
|
60
|
|
107
|
|
66
|
Wells
connected
|
|
89
|
|
65
|
|
119
|
|
71
|
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
Operated activity
comparison
|
|
|
|
|
|
|
|
|
Average rig
count
|
|
18
|
|
12
|
|
17
|
|
11
|
Wells spud
|
|
333
|
|
233
|
|
322
|
|
210
|
Wells
completed
|
|
370
|
|
273
|
|
351
|
|
239
|
Wells
connected
|
|
375
|
|
273
|
|
347
|
|
231
|
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
Type of cost ($ in
millions)
|
|
|
|
|
|
|
|
|
Drilling and
completion capital expenditures
|
|
$
|
467
|
|
|
$
|
455
|
|
|
$
|
2,148
|
|
|
$
|
2,021
|
|
Leasehold and
additions to other PP&E
|
|
14
|
|
|
18
|
|
|
73
|
|
|
63
|
|
Subtotal capital
expenditures
|
|
$
|
481
|
|
|
$
|
473
|
|
|
$
|
2,221
|
|
|
$
|
2,084
|
|
Capitalized
interest
|
|
6
|
|
|
3
|
|
|
24
|
|
|
16
|
|
Total capital
expenditures
|
|
$
|
487
|
|
|
$
|
476
|
|
|
$
|
2,245
|
|
|
$
|
2,100
|
|
|
*
|
Financial information
for 2018 has been recast to reflect the retrospective application
of the successful efforts method of accounting.
|
Balance Sheet and Liquidity
As of December 31, 2019,
Chesapeake's principal amount of
debt outstanding was approximately $8.916
billion, compared to $8.168
billion as of December 31,
2018. As of December 31, 2019,
the company had borrowed $1.590
billion under the $3.0 billion
Chesapeake credit facility,
utilized approximately $59 million
for various letters of credit and had additional borrowing capacity
of approximately $1.351 billion. The
borrowing base of the Chesapeake
credit facility was re-affirmed in November
2019.
In December 2019, Chesapeake entered into a secured 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 eliminated essentially all
Brazos Valley unrestricted subsidiary debt and approximately
$900 million in principal amount of
debt from the company's balance sheet.
As of February 26, 2020, including
January and February derivative contracts that have settled,
approximately 70% of the company's 2020 forecasted oil, natural gas
and NGL production revenue was hedged. The company had
approximately 76% downside oil price protection through swaps and
collars at an average price of $59.90
per bbl. The company had 39% downside gas price protection through
swaps at $2.76 per mcf and 14% under
put spread arrangements based on an average bought put NYMEX price
of $2.05 per mcf and exposure below
an average sold put NYMEX price of $1.80 per mcf.
Operations Update and Highlights
The following tables show average daily production and average
sales prices received (excluding gains/losses on derivatives) by
the company's operating areas for the 2019 and 2018 fourth
quarters.
|
|
Three Months Ended
December 31, 2019
|
|
|
Oil
|
|
Natural
Gas
|
|
NGL
|
|
Total
|
|
|
mbbl
per
day
|
|
$/bbl
|
|
mmcf
per
day
|
|
$/mcf
|
|
mbbl
per
day
|
|
$/bbl
|
|
mboe
per
day
|
|
%
|
|
$/boe
|
Marcellus
|
|
—
|
|
|
—
|
|
|
980
|
|
|
2.21
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|
34
|
|
|
13.27
|
|
Haynesville
|
|
—
|
|
|
—
|
|
|
605
|
|
|
2.25
|
|
|
—
|
|
|
—
|
|
|
101
|
|
|
21
|
|
|
13.50
|
|
Eagle Ford
|
|
60
|
|
|
59.17
|
|
|
153
|
|
|
2.59
|
|
|
19
|
|
|
17.92
|
|
|
104
|
|
|
22
|
|
|
41.07
|
|
Brazos
Valley
|
|
40
|
|
|
56.74
|
|
|
56
|
|
|
1.77
|
|
|
7
|
|
|
6.09
|
|
|
56
|
|
|
12
|
|
|
43.11
|
|
Powder River
Basin
|
|
19
|
|
|
54.27
|
|
|
86
|
|
|
2.37
|
|
|
5
|
|
|
19.74
|
|
|
38
|
|
|
8
|
|
|
34.83
|
|
Mid-Continent
|
|
7
|
|
|
56.13
|
|
|
54
|
|
|
2.01
|
|
|
(2)
|
|
|
7.87
|
|
|
14
|
|
|
3
|
|
|
33.12
|
|
Retained
assets(a)
|
|
126
|
|
|
57.48
|
|
|
1,934
|
|
|
2.24
|
|
|
29
|
|
|
16.05
|
|
|
477
|
|
|
100
|
|
|
25.17
|
|
Divested
assets
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
126
|
|
|
57.48
|
|
|
1,935
|
|
|
2.24
|
|
|
29
|
|
|
16.05
|
|
|
477
|
|
|
100
|
%
|
|
25.17
|
|
|
|
|
|
|
Three Months Ended
December 31, 2018
|
|
|
Oil
|
|
Natural
Gas
|
|
NGL
|
|
Total
|
|
|
mbbl
per
day
|
|
$/bbl
|
|
mmcf
per
day
|
|
$/mcf
|
|
mbbl
per
day
|
|
$/bbl
|
|
mboe
per
day
|
|
%
|
|
$/boe
|
Marcellus
|
|
—
|
|
|
—
|
|
|
821
|
|
|
3.68
|
|
|
—
|
|
|
—
|
|
|
137
|
|
|
29
|
|
|
22.09
|
|
Haynesville
|
|
—
|
|
|
—
|
|
|
724
|
|
|
3.50
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|
26
|
|
|
21.03
|
|
Eagle Ford
|
|
61
|
|
|
65.17
|
|
|
141
|
|
|
4.03
|
|
|
20
|
|
|
21.86
|
|
|
105
|
|
|
23
|
|
|
47.51
|
|
Powder River
Basin
|
|
14
|
|
|
56.00
|
|
|
78
|
|
|
3.86
|
|
|
4
|
|
|
23.82
|
|
|
31
|
|
|
7
|
|
|
37.89
|
|
Mid-Continent
|
|
9
|
|
|
58.13
|
|
|
62
|
|
|
3.51
|
|
|
5
|
|
|
26.17
|
|
|
24
|
|
|
5
|
|
|
36.12
|
|
Retained
assets(a)
|
|
84
|
|
|
62.89
|
|
|
1,826
|
|
|
3.64
|
|
|
29
|
|
|
22.83
|
|
|
418
|
|
|
90
|
|
|
30.14
|
|
Divested
assets
|
|
3
|
|
|
65.41
|
|
|
183
|
|
|
3.13
|
|
|
13
|
|
|
30.19
|
|
|
46
|
|
|
10
|
|
|
25.14
|
|
Total
|
|
87
|
|
|
62.98
|
|
|
2,009
|
|
|
3.59
|
|
|
42
|
|
|
25.11
|
|
|
464
|
|
|
100
|
%
|
|
29.64
|
|
|
(a) Includes
assets retained as of December 31, 2019.
|
In Chesapeake's Brazos Valley
area in central Texas, the company
placed 81 wells on production during 2019 while utilizing four rigs
after the company closed the WildHorse acquisition on February 1, 2019. Currently, the company is
operating three drilling rigs and expects to utilize two to three
rigs throughout the year, resulting in 55 to 65 wells expected to
be placed on production in 2020.
In the company's South Texas Eagle Ford asset, the company
placed 141 wells on production in 2019 while utilizing four rigs.
The company is currently operating four drilling rigs and expects
to utilize three to four rigs throughout the year, resulting in 110
to 120 wells expected to be placed on production in 2020.
In the Powder River Basin in Wyoming, the company placed 72 wells on
production in 2019 while utilizing an average of five rigs. The
company is currently operating three drilling rigs and expects to
move to two rigs in the area in the 2020 first quarter, resulting
in 25 to 30 wells expected to be placed on production.
In the Marcellus Shale in northeast Pennsylvania, the company placed 44 wells on
production in 2019 while utilizing an average of two rigs. The
company is currently operating three drilling rigs and expects to
utilize two to three rigs throughout the year, resulting in 50 to
55 wells expected to be placed on production.
In the Haynesville Shale in Louisiana, Chesapeake placed 24 wells on production
during 2019 utilizing an average of one rig. The company is
currently operating one rig in the area and expects to utilize that
rig through the end of the 2020 first quarter, with five to ten
wells projected to be placed on production during 2020. In the
Mid-Continent area in Oklahoma,
the company placed 13 wells on production during 2019 and expects
10 to 15 wells targeting the Oswego formation to be placed on
production in 2020. Overall, while Chesapeake intends to focus the vast majority
of its 2020 capital on its highest-margin opportunities, the
breadth and depth of its diverse portfolio affords the company the
opportunity to react to changing market conditions while staying
within the framework of its proposed $1.3 to $1.6
billion capital program.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and operational
results during the 2019 fourth quarter and full year as compared to
results in prior periods. The year ended December 31, 2019 includes Brazos Valley
operations. The year ended December 31,
2018 does not include Brazos Valley operations.
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
Barrels of oil
equivalent production (in mboe)
|
|
43,865
|
|
|
42,711
|
|
|
176,620
|
|
|
190,266
|
|
Barrels of oil
equivalent production (mboe/d)
|
|
477
|
|
|
464
|
|
|
484
|
|
|
521
|
|
Oil production (in
mbbl/d)
|
|
126
|
|
|
87
|
|
|
118
|
|
|
90
|
|
Average realized oil
price ($/bbl)(a)
|
|
58.97
|
|
|
56.86
|
|
|
60.00
|
|
|
57.42
|
|
Natural gas
production (in mmcf/d)
|
|
1,935
|
|
|
2,009
|
|
|
1,995
|
|
|
2,278
|
|
Average realized
natural gas price ($/mcf)(a)
|
|
2.48
|
|
|
3.19
|
|
|
2.60
|
|
|
3.00
|
|
NGL production (in
mbbl/d)
|
|
29
|
|
|
42
|
|
|
33
|
|
|
52
|
|
Average realized NGL
price ($/bbl)(a)
|
|
16.05
|
|
|
25.36
|
|
|
15.62
|
|
|
25.84
|
|
Production expenses
($/boe)
|
|
2.86
|
|
|
2.48
|
|
|
2.94
|
|
|
2.50
|
|
Gathering, processing
and transportation expenses ($/boe)
|
|
6.09
|
|
|
7.92
|
|
|
6.13
|
|
|
7.35
|
|
Oil -
($/bbl)
|
|
3.41
|
|
|
6.02
|
|
|
3.20
|
|
|
4.30
|
|
Natural Gas -
($/mcf)
|
|
1.20
|
|
|
1.41
|
|
|
1.21
|
|
|
1.32
|
|
NGL -
($/bbl)
|
|
5.50
|
|
|
7.40
|
|
|
5.32
|
|
|
8.37
|
|
Severance and ad
valorem taxes ($/boe)
|
|
1.29
|
|
|
1.17
|
|
|
1.27
|
|
|
0.99
|
|
Exploration expenses
($ in millions)
|
|
28
|
|
|
39
|
|
|
84
|
|
|
162
|
|
General and
administrative expenses ($/boe)(b)
|
|
1.17
|
|
|
1.30
|
|
|
1.63
|
|
|
1.60
|
|
General and
administrative expenses (stock-based compensation) (non-cash)
($/boe)
|
|
0.12
|
|
|
0.16
|
|
|
0.15
|
|
|
0.16
|
|
Depreciation,
depletion, and amortization ($/boe)
|
|
13.50
|
|
|
9.41
|
|
|
12.82
|
|
|
9.13
|
|
Interest expense
($/boe)
|
|
3.14
|
|
|
3.53
|
|
|
3.68
|
|
|
3.33
|
|
Marketing net margin
($ in millions)(c)
|
|
(3)
|
|
|
(18)
|
|
|
(27)
|
|
|
(63)
|
|
Net cash provided by
operating activities ($ in millions)
|
|
441
|
|
|
335
|
|
|
1,623
|
|
|
1,730
|
|
Net cash provided by
operating activities ($/boe)
|
|
10.05
|
|
|
7.84
|
|
|
9.19
|
|
|
9.09
|
|
Net income (loss) ($
in millions)
|
|
(324)
|
|
|
605
|
|
|
(308)
|
|
|
228
|
|
Net income (loss)
available to common stockholders ($ in millions)
|
|
(346)
|
|
|
576
|
|
|
(416)
|
|
|
133
|
|
Net income (loss) per
share available to common stockholders – diluted ($)
|
|
(0.18)
|
|
|
0.57
|
|
|
(0.25)
|
|
|
0.15
|
|
Adjusted EBITDAX ($
in millions)(d)
|
|
665
|
|
|
561
|
|
|
2,530
|
|
|
2,380
|
|
Adjusted EBITDAX
($/boe)
|
|
15.16
|
|
|
13.13
|
|
|
14.32
|
|
|
12.51
|
|
Adjusted net income
(loss) attributable to Chesapeake ($ in
millions)(e)
|
|
(80)
|
|
|
32
|
|
|
(454)
|
|
|
(140)
|
|
Adjusted net income
(loss) attributable to Chesapeake per share - diluted
($)(f)
|
|
(0.04)
|
|
|
0.03
|
|
|
(0.27)
|
|
|
(0.15)
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(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, which are recorded in
general and administrative expenses in Chesapeake's Condensed
Consolidated Statement of Operations.
|
|
|
(c)
|
Marketing net margin
is marketing margin of ($2) million and ($23) million for the three
months ended December 31, 2019 and 2018, excluding non-cash
amortization of ($1) million and $5 million, respectively.
Marketing net margin is marketing margin of ($36) million and ($82)
million for the years ended December 31, 2019 and 2018, excluding
non-cash amortization of $9 million and $19 million, respectively.
Non-cash amortization is related to the buy down of a
transportation agreement.
|
|
|
(d)
|
Defined as net income
(loss) before interest expense, income taxes, depreciation,
depletion and amortization expense, and exploration expense, as
adjusted to remove the effects of certain items detailed in the
Reconciliation of Net Income (Loss) to Adjusted EBITDAX. This
is a non-GAAP measure.
|
|
|
(e)
|
Defined as net income
(loss) attributable to Chesapeake, as adjusted to remove the
effects of certain items detailed in the Reconciliation of Adjusted
Net Income (Loss) Attributable to Chesapeake. This is a non-GAAP
measure.
|
|
|
(f)
|
Our presentation of
diluted adjusted net income (loss) attributable to Chesapeake per
share excludes 183 million and 1 million shares for the three
months ended December 31, 2019 and 2018, respectively, and 183
million and 207 million shares for the years ended December 31,
2019 and 2018, which are considered antidilutive when calculating
diluted earnings per share.
|
2019 Fourth Quarter and Year End Results Conference Call
Information
The conference call to discuss the company's financial and
operational results has been scheduled on Wednesday, February 26, 2020 at 9:00 am EST. The telephone number to access the
conference call is 888-317-6003 or 412-317-6061 for international
callers. The passcode for the call is 7266124. The conference call
will be webcast and can be found at www.chk.com in the "Investors"
section of the company's website.
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 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, management's outlook guidance
or forecasts of future events, cost-cutting measures, reductions in
expenditures, proposed refinancing transactions, capital exchange
transactions, asset divestitures, reductions in capital
expenditures, operational efficiencies, 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, anticipated timing and number of wells to be placed into
production, expected oil growth trajectory, projected 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.
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 our ability to comply with the covenants under our
revolving credit facilities and other indebtedness, 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.
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.
CHESAPEAKE ENERGY
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions
except per share data)
(unaudited)
|
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
REVENUES AND
OTHER:
|
|
|
|
|
|
|
|
|
Oil, natural gas and
NGL(a)
|
|
$
|
969
|
|
|
$
|
1,731
|
|
|
$
|
4,522
|
|
|
$
|
5,155
|
|
Marketing
|
|
929
|
|
|
1,338
|
|
|
3,967
|
|
|
5,076
|
|
Total
Revenues
|
|
1,898
|
|
|
3,069
|
|
|
8,489
|
|
|
10,231
|
|
Other
|
|
18
|
|
|
15
|
|
|
63
|
|
|
63
|
|
Gains (losses) on
sales of assets
|
|
10
|
|
|
(291)
|
|
|
43
|
|
|
(264)
|
|
Total Revenues and
Other
|
|
1,926
|
|
|
2,793
|
|
|
8,595
|
|
|
10,030
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Oil, natural gas and
NGL production
|
|
126
|
|
|
105
|
|
|
520
|
|
|
474
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
|
267
|
|
|
338
|
|
|
1,082
|
|
|
1,398
|
|
Severance and ad
valorem taxes
|
|
56
|
|
|
50
|
|
|
224
|
|
|
189
|
|
Exploration
|
|
28
|
|
|
39
|
|
|
84
|
|
|
162
|
|
Marketing
|
|
932
|
|
|
1,360
|
|
|
4,003
|
|
|
5,158
|
|
General and
administrative
|
|
57
|
|
|
62
|
|
|
315
|
|
|
335
|
|
Restructuring and
other termination costs
|
|
12
|
|
|
—
|
|
|
12
|
|
|
38
|
|
Provision for legal
contingencies, net
|
|
16
|
|
|
9
|
|
|
19
|
|
|
26
|
|
Depreciation,
depletion and amortization
|
|
592
|
|
|
402
|
|
|
2,264
|
|
|
1,737
|
|
Impairments
|
|
—
|
|
|
9
|
|
|
11
|
|
|
131
|
|
Other operating
expense
|
|
13
|
|
|
1
|
|
|
92
|
|
|
—
|
|
Total Operating
Expenses
|
|
2,099
|
|
|
2,375
|
|
|
8,626
|
|
|
9,648
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
(173)
|
|
|
418
|
|
|
(31)
|
|
|
382
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(138)
|
|
|
(151)
|
|
|
(651)
|
|
|
(633)
|
|
Gains (losses) on
investments
|
|
(43)
|
|
|
—
|
|
|
(71)
|
|
|
139
|
|
Gains on purchases or
exchanges of debt
|
|
5
|
|
|
331
|
|
|
75
|
|
|
263
|
|
Other
income
|
|
9
|
|
|
5
|
|
|
39
|
|
|
67
|
|
Total Other Income
(Expense)
|
|
(167)
|
|
|
185
|
|
|
(608)
|
|
|
(164)
|
|
INCOME (LOSS)
BEFORE INCOME TAXES
|
|
(340)
|
|
|
603
|
|
|
(639)
|
|
|
218
|
|
Income tax
benefit
|
|
(16)
|
|
|
(2)
|
|
|
(331)
|
|
|
(10)
|
|
NET INCOME
(LOSS)
|
|
(324)
|
|
|
605
|
|
|
(308)
|
|
|
228
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
NET INCOME (LOSS)
ATTRIBUTABLE TO CHESAPEAKE
|
|
(324)
|
|
|
604
|
|
|
(308)
|
|
|
226
|
|
Preferred stock
dividends
|
|
(22)
|
|
|
(23)
|
|
|
(91)
|
|
|
(92)
|
|
Loss on exchange of
preferred stock
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
Earnings allocated to
participating securities
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(1)
|
|
NET INCOME (LOSS)
AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
(346)
|
|
|
$
|
576
|
|
|
$
|
(416)
|
|
|
$
|
133
|
|
EARNINGS (LOSS)
PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.18)
|
|
|
$
|
0.63
|
|
|
$
|
(0.25)
|
|
|
$
|
0.15
|
|
Diluted
|
|
$
|
(0.18)
|
|
|
$
|
0.57
|
|
|
$
|
(0.25)
|
|
|
$
|
0.15
|
|
WEIGHTED AVERAGE
COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in
millions):
|
|
|
|
|
|
|
|
|
Basic
|
|
1,948
|
|
|
910
|
|
|
1,665
|
|
|
909
|
|
Diluted
|
|
1,948
|
|
|
1,116
|
|
|
1,665
|
|
|
909
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(a)
|
See Supplemental Data
- Oil, Natural Gas and NGL Production and Sales Prices for a
reconciliation of oil, natural gas and NGL revenue before and after
the effect of financial derivatives.
|
CHESAPEAKE ENERGY
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
($ in
millions)
(unaudited)
|
|
|
December 31,
2019
|
|
December 31,
2018*
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6
|
|
|
$
|
4
|
|
Other current
assets
|
|
1,245
|
|
|
1,594
|
|
Total Current
Assets
|
|
1,251
|
|
|
1,598
|
|
|
|
|
|
|
Property and
equipment, net
|
|
14,756
|
|
|
10,818
|
|
Other long-term
assets
|
|
186
|
|
|
319
|
|
Total
Assets
|
|
$
|
16,193
|
|
|
$
|
12,735
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
2,392
|
|
|
$
|
2,887
|
|
Long-term debt,
net
|
|
9,073
|
|
|
7,341
|
|
Other long-term
liabilities
|
|
327
|
|
|
374
|
|
Total
Liabilities
|
|
11,792
|
|
|
10,602
|
|
|
|
|
|
|
Preferred
stock
|
|
1,631
|
|
|
1,671
|
|
Noncontrolling
interests
|
|
37
|
|
|
41
|
|
Common stock and
other stockholders' equity
|
|
2,733
|
|
|
421
|
|
Total
Equity
|
|
4,401
|
|
|
2,133
|
|
|
|
|
|
|
Total Liabilities
and Equity
|
|
$
|
16,193
|
|
|
$
|
12,735
|
|
|
|
|
|
|
|
*
|
Financial information
for 2018 has been recast to reflect the retrospective application
of the successful efforts method of accounting.
|
CHESAPEAKE ENERGY
CORPORATION
CONDENSED
CONSOLIDATED CASH FLOW DATA
($ in
millions)
(unaudited)
|
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
|
|
|
|
|
|
|
|
|
Beginning cash and
cash equivalents
|
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
by operating activities
|
|
441
|
|
|
335
|
|
|
1,623
|
|
|
1,730
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Drilling and
completion costs(a)
|
|
(540)
|
|
|
(441)
|
|
|
(2,180)
|
|
|
(1,848)
|
|
Business combination,
net
|
|
—
|
|
|
—
|
|
|
(353)
|
|
|
—
|
|
Acquisitions of
proved and unproved properties
|
|
(4)
|
|
|
(10)
|
|
|
(35)
|
|
|
(128)
|
|
Proceeds from
divestitures of proved and unproved properties
|
|
20
|
|
|
1,836
|
|
|
130
|
|
|
2,231
|
|
Additions to other
property and equipment
|
|
(21)
|
|
|
(10)
|
|
|
(48)
|
|
|
(21)
|
|
Proceeds from sales
of other property and equipment
|
|
—
|
|
|
72
|
|
|
6
|
|
|
147
|
|
Proceeds from sales
of investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
Net cash provided
by (used in) investing activities
|
|
(545)
|
|
|
1,447
|
|
|
(2,480)
|
|
|
455
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
by (used in) financing activities
|
|
96
|
|
|
(1,782)
|
|
|
859
|
|
|
(2,186)
|
|
Change in cash and
cash equivalents
|
|
(8)
|
|
|
—
|
|
|
2
|
|
|
(1)
|
|
Ending cash and
cash equivalents
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(a)
|
Includes capitalized
interest of $6 million and $3 million for the three months ended
December 31, 2019 and 2018, respectively, and includes
capitalized interest of $24 million and $16 million for the years
ended December 31, 2019 and 2018, respectively.
|
CHESAPEAKE ENERGY
CORPORATION
SUPPLEMENTAL DATA
– OIL, NATURAL GAS AND NGL PRODUCTION AND SALES
PRICES
(unaudited)
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
Production:
|
|
|
|
|
|
|
|
Oil
(mmbbl)
|
12
|
|
|
8
|
|
|
43
|
|
|
33
|
|
Natural gas
(bcf)
|
178
|
|
|
185
|
|
|
728
|
|
|
832
|
|
NGL
(mmbbl)
|
3
|
|
|
4
|
|
|
12
|
|
|
19
|
|
Oil equivalent
(mmboe)
|
44
|
|
|
43
|
|
|
177
|
|
|
190
|
|
Average daily
production (mboe)
|
477
|
|
|
464
|
|
|
484
|
|
|
521
|
|
Oil, Natural Gas
and NGL Sales ($ in millions):
|
|
|
|
|
|
|
|
Oil sales
|
$
|
664
|
|
|
$
|
503
|
|
|
$
|
2,543
|
|
|
$
|
2,201
|
|
Natural gas
sales
|
398
|
|
|
664
|
|
|
1,782
|
|
|
2,486
|
|
NGL sales
|
43
|
|
|
98
|
|
|
192
|
|
|
502
|
|
Total oil, natural
gas and NGL sales
|
$
|
1,105
|
|
|
$
|
1,265
|
|
|
$
|
4,517
|
|
|
$
|
5,189
|
|
|
|
|
|
|
|
|
|
Financial
Derivatives:
|
|
|
|
|
|
|
|
Oil derivatives –
realized gains (losses)(a)
|
$
|
18
|
|
|
$
|
(48)
|
|
|
$
|
36
|
|
|
$
|
(321)
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
43
|
|
|
(76)
|
|
|
114
|
|
|
7
|
|
NGL derivatives –
realized gains (losses)(a)
|
—
|
|
|
1
|
|
|
—
|
|
|
(13)
|
|
Total realized gains
(losses) on financial derivatives
|
$
|
61
|
|
|
$
|
(123)
|
|
|
$
|
150
|
|
|
$
|
(327)
|
|
|
|
|
|
|
|
|
|
Oil derivatives –
unrealized gains (losses)(b)
|
$
|
(181)
|
|
|
$
|
560
|
|
|
$
|
(248)
|
|
|
$
|
445
|
|
Natural gas
derivatives – unrealized gains (losses)(b)
|
(16)
|
|
|
14
|
|
|
103
|
|
|
(154)
|
|
NGL derivatives –
unrealized gains(b)
|
—
|
|
|
15
|
|
|
—
|
|
|
2
|
|
Total unrealized
gains (losses) on financial derivatives
|
$
|
(197)
|
|
|
$
|
589
|
|
|
$
|
(145)
|
|
|
$
|
293
|
|
|
|
|
|
|
|
|
|
Total financial
derivatives
|
$
|
(136)
|
|
|
$
|
466
|
|
|
$
|
5
|
|
|
$
|
(34)
|
|
|
|
|
|
|
|
|
|
Total oil, natural
gas and NGL sales
|
$
|
969
|
|
|
$
|
1,731
|
|
|
$
|
4,522
|
|
|
$
|
5,155
|
|
Average Sales
Price (excluding gains (losses) on derivatives):
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
$
|
57.48
|
|
|
$
|
62.98
|
|
|
$
|
59.16
|
|
|
$
|
67.25
|
|
Natural gas ($ per
mcf)
|
$
|
2.24
|
|
|
$
|
3.59
|
|
|
$
|
2.45
|
|
|
$
|
2.99
|
|
NGL ($ per
bbl)
|
$
|
16.05
|
|
|
$
|
25.11
|
|
|
$
|
15.62
|
|
|
$
|
26.50
|
|
Oil equivalent ($ per
boe)
|
$
|
25.17
|
|
|
$
|
29.64
|
|
|
$
|
25.57
|
|
|
$
|
27.27
|
|
Average Sales
Price (excluding unrealized gains (losses) on
derivatives):
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
$
|
58.97
|
|
|
$
|
56.86
|
|
|
$
|
60.00
|
|
|
$
|
57.42
|
|
Natural gas ($ per
mcf)
|
$
|
2.48
|
|
|
$
|
3.19
|
|
|
$
|
2.60
|
|
|
$
|
3.00
|
|
NGL ($ per
bbl)
|
$
|
16.05
|
|
|
$
|
25.36
|
|
|
$
|
15.62
|
|
|
$
|
25.84
|
|
Oil equivalent ($ per
boe)
|
$
|
26.57
|
|
|
$
|
26.75
|
|
|
$
|
26.42
|
|
|
$
|
25.56
|
|
|
|
(a)
|
Realized gains
(losses) include the following items: (i) settlements and accruals
for settlements of undesignated 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 (losses) related to de-designated cash flow hedges
originally designated to settle against current period production
revenues. 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)
|
Unrealized gains
(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 (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.
|
CHESAPEAKE ENERGY
CORPORATION
RECONCILIATION OF
ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO
CHESAPEAKE
($ in
millions)
(unaudited)
|
|
|
Three Months Ended
December 31,
|
|
|
2019
|
|
2018*
|
|
|
$
|
|
$/Share
|
|
$
|
|
$/Share
|
Net income (loss)
available to common stockholders (GAAP)
|
|
$
|
(346)
|
|
|
$
|
(0.18)
|
|
|
$
|
576
|
|
|
$
|
0.63
|
|
Effect of dilutive
securities
|
|
—
|
|
|
|
|
59
|
|
|
|
Diluted net income
(loss) available to common stockholders(a)
(GAAP)
|
|
$
|
(346)
|
|
|
$
|
(0.18)
|
|
|
$
|
635
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Unrealized (gains)
losses on oil, natural gas and NGL derivatives
|
|
197
|
|
|
0.10
|
|
|
(596)
|
|
|
(0.54)
|
|
Restructuring and
other termination costs
|
|
12
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
Provision for legal
contingencies, net
|
|
16
|
|
|
0.01
|
|
|
9
|
|
|
0.01
|
|
(Gains) losses on
sales of assets
|
|
(10)
|
|
|
(0.01)
|
|
|
291
|
|
|
0.26
|
|
Other operating
expense
|
|
11
|
|
|
0.01
|
|
|
1
|
|
|
—
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
9
|
|
|
0.01
|
|
Losses on
investments
|
|
43
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
|
(5)
|
|
|
—
|
|
|
(331)
|
|
|
(0.30)
|
|
Other
revenue
|
|
(14)
|
|
|
(0.01)
|
|
|
(15)
|
|
|
(0.01)
|
|
Other
|
|
(1)
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Tax effect of
adjustments(b)
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted net
income (loss) available to common stockholders(c)
(Non-GAAP)
|
|
(102)
|
|
|
(0.05)
|
|
|
4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
|
22
|
|
|
0.01
|
|
|
23
|
|
|
0.02
|
|
Earnings allocated to
participating securities
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0.01
|
|
Total adjusted net
income (loss) attributable to Chesapeake(a)(c)
(Non-GAAP)
|
|
$
|
(80)
|
|
|
$
|
(0.04)
|
|
|
$
|
32
|
|
|
$
|
0.03
|
|
|
*
|
Financial information
for 2018 has been recast to reflect the retrospective application
of the successful efforts method of accounting.
|
CHESAPEAKE ENERGY
CORPORATION
RECONCILIATION OF
ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO
CHESAPEAKE
($ in
millions)
(unaudited)
|
|
|
Years Ended
December 31,
|
|
|
2019
|
|
2018*
|
|
|
$
|
|
$/Share
|
|
$
|
|
$/Share
|
Net income (loss)
available to common stockholders (GAAP)
|
|
$
|
(416)
|
|
|
$
|
(0.25)
|
|
|
$
|
133
|
|
|
$
|
0.15
|
|
Effect of dilutive
securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Diluted net income
(loss) available to common stockholders(a)
(GAAP)
|
|
$
|
(416)
|
|
|
$
|
(0.25)
|
|
|
$
|
133
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Unrealized (gains)
losses on oil, natural gas and NGL derivatives
|
|
152
|
|
|
0.09
|
|
|
(300)
|
|
|
(0.33)
|
|
Restructuring and
other termination costs
|
|
12
|
|
|
0.01
|
|
|
38
|
|
|
0.04
|
|
Provision for legal
contingencies, net
|
|
19
|
|
|
0.01
|
|
|
26
|
|
|
0.03
|
|
(Gains) losses on
sales of assets
|
|
(43)
|
|
|
(0.03)
|
|
|
264
|
|
|
0.29
|
|
Other operating
expense(d)
|
|
90
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
Impairments
|
|
11
|
|
|
0.01
|
|
|
131
|
|
|
0.14
|
|
(Gains) losses on
investments
|
|
71
|
|
|
0.04
|
|
|
(139)
|
|
|
(0.15)
|
|
Gains on purchases or
exchanges of debt
|
|
(75)
|
|
|
(0.04)
|
|
|
(263)
|
|
|
(0.29)
|
|
Loss on exchange of
preferred stock
|
|
17
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
Other
revenue
|
|
(59)
|
|
|
(0.04)
|
|
|
(63)
|
|
|
(0.07)
|
|
Other
|
|
(5)
|
|
|
—
|
|
|
(60)
|
|
|
(0.06)
|
|
Income tax
benefit(e)
|
|
(314)
|
|
|
(0.19)
|
|
|
—
|
|
|
—
|
|
Tax effect of
adjustments(b)
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted net loss
available to common stockholders(c)
(Non-GAAP)
|
|
(545)
|
|
|
(0.33)
|
|
|
(233)
|
|
|
(0.25)
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
|
91
|
|
|
0.06
|
|
|
92
|
|
|
0.10
|
|
Earnings allocated to
participating securities
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Total adjusted net
loss attributable to Chesapeake(a)(c)
(Non-GAAP)
|
|
$
|
(454)
|
|
|
$
|
(0.27)
|
|
|
$
|
(140)
|
|
|
$
|
(0.15)
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(a)
|
Our presentation of
diluted net income (loss) available to common stockholders per
share and total adjusted net income (loss) attributable to
Chesapeake per share excludes 183 million and 1 million shares
considered antidilutive for the three months ended December 31,
2019 and 2018, respectively. Our presentation of diluted net income
(loss) available to common stockholders per share and total
adjusted net loss attributable to Chesapeake per share excludes 183
million and 207 million shares, respectively, considered
antidilutive for the years ended December 31, 2019 and 2018. The
number of shares used for the non-GAAP calculation was determined
in a manner consistent with GAAP.
|
|
|
(b)
|
Tax effect is
computed by applying an effective tax rate of 2.5% for the year
ended December 31, 2019 to the pre-tax amount of adjustments. This
effective tax rate is computed without regard to the separately
itemized discrete tax benefit of $314 million associated with the
Wildhorse acquisition. No income tax effect from adjustments is
included in determining adjusted net income for the year ended
December 31, 2018 as our effective tax rate was 0% due to our
valuation allowance position.
|
|
|
(c)
|
Adjusted net income
(loss) available to common stockholders and total adjusted net
income (loss) attributable to Chesapeake, both in the aggregate and
per dilutive share, are not measures of financial performance under
GAAP, and should not be considered as an alternative to, or more
meaningful than, net income (loss) available to common stockholders
or earnings (loss) per share. Adjusted net income (loss) available
to common stockholders and adjusted earnings (loss) 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 (loss) 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
(loss) 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.
|
|
|
|
Because adjusted net
income (loss) available to common stockholders and total adjusted
net income (loss) attributable to Chesapeake exclude some, but not
all, items that affect net income (loss) available to common
stockholders our calculations of adjusted net income (loss)
available to common stockholders and total adjusted net income
(loss) attributable to Chesapeake may not be comparable to
similarly titled measures of other companies.
|
|
|
(d)
|
The year ended
December 31, 2019 includes $37 million in integration and
acquisition costs as a result of Chesapeake's merger with WildHorse
Resource Development Corporation (WRD). Additionally, most WRD
executives and employees were terminated and entitled to severance
benefits of approximately $38 million in accordance with certain
provisions of existing employment agreements that were triggered by
the change in control.
|
|
|
(e)
|
For the year ended
December 31, 2019, we recorded a net deferred tax liability of $314
million associated with the acquisition of WildHorse Resource
Development Corporation. As a result of recording this net
deferred tax liability through business combination accounting, we
released a corresponding amount of the valuation allowance that we
maintain against our net deferred tax asset position. This
release resulted in an income tax benefit of $314
million.
|
CHESAPEAKE ENERGY
CORPORATION
RECONCILIATION OF
CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED
EBITDAX
($ in
millions)
(unaudited)
|
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
CASH PROVIDED BY
OPERATING ACTIVITIES (GAAP)
|
|
$
|
441
|
|
|
$
|
335
|
|
|
$
|
1,623
|
|
|
$
|
1,730
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Changes in assets and
liabilities
|
|
40
|
|
|
(22)
|
|
|
254
|
|
|
(91)
|
|
Other
revenue
|
|
(14)
|
|
|
(15)
|
|
|
(59)
|
|
|
(63)
|
|
Interest
expense
|
|
138
|
|
|
151
|
|
|
651
|
|
|
633
|
|
Exploration
|
|
14
|
|
|
24
|
|
|
35
|
|
|
66
|
|
Income tax
benefit
|
|
(25)
|
|
|
(2)
|
|
|
(26)
|
|
|
—
|
|
Stock-based
compensation
|
|
(6)
|
|
|
(7)
|
|
|
(30)
|
|
|
(32)
|
|
Restructuring and
other termination costs
|
|
12
|
|
|
—
|
|
|
12
|
|
|
38
|
|
Losses on
investments
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Losses on purchases
or exchanges of debt
|
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
Other
items
|
|
60
|
|
|
98
|
|
|
58
|
|
|
101
|
|
Adjusted
EBITDAX(a) (Non-GAAP)
|
|
$
|
665
|
|
|
$
|
561
|
|
|
$
|
2,530
|
|
|
$
|
2,380
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(a)
|
Adjusted EBITDAX is
not a measure of financial performance under GAAP, and should not
be considered as an alternative to, or more meaningful than, cash
flow provided by operating activities prepared in accordance with
GAAP. Adjusted EBITDAX excludes certain items that management
believes affect the comparability of operating results. The company
believes this non-GAAP financial measure is a useful adjunct to
cash flow provided by operating activities because:
|
|
|
|
|
(i)
|
Management uses
adjusted EBITDAX to evaluate the company's operational trends and
performance relative to other oil and natural gas producing
companies.
|
|
|
|
|
(ii)
|
Adjusted EBITDAX 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.
|
|
|
|
Because adjusted
EBITDAX excludes some, but not all, items that affect net income
(loss), our calculations of adjusted EBITDAX may not be comparable
to similarly titled measures of other companies.
|
CHESAPEAKE ENERGY
CORPORATION
RECONCILIATION OF
NET INCOME (LOSS) TO ADJUSTED EBITDAX
($ in
millions)
(unaudited)
|
|
|
Three Months
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018*
|
|
2019
|
|
2018*
|
NET INCOME (LOSS)
(GAAP)
|
|
$
|
(324)
|
|
|
$
|
605
|
|
|
$
|
(308)
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
138
|
|
|
151
|
|
|
651
|
|
|
633
|
|
Income tax
benefit
|
|
(16)
|
|
|
(2)
|
|
|
(331)
|
|
|
(10)
|
|
Depreciation,
depletion and amortization
|
|
592
|
|
|
402
|
|
|
2,264
|
|
|
1,737
|
|
Exploration
|
|
28
|
|
|
39
|
|
|
84
|
|
|
162
|
|
Unrealized (gains)
losses on derivatives
|
|
197
|
|
|
(596)
|
|
|
152
|
|
|
(300)
|
|
Restructuring and
other termination costs
|
|
12
|
|
|
—
|
|
|
12
|
|
|
38
|
|
Provision for legal
contingencies, net
|
|
16
|
|
|
9
|
|
|
19
|
|
|
26
|
|
(Gains) losses on
sales of assets
|
|
(10)
|
|
|
291
|
|
|
(43)
|
|
|
264
|
|
Other operating
expense
|
|
11
|
|
|
1
|
|
|
90
|
|
|
—
|
|
Impairments
|
|
—
|
|
|
9
|
|
|
11
|
|
|
131
|
|
(Gains) losses on
investments
|
|
43
|
|
|
—
|
|
|
71
|
|
|
(139)
|
|
Gains on purchases or
exchanges of debt
|
|
(5)
|
|
|
(331)
|
|
|
(75)
|
|
|
(263)
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
Other
revenue
|
|
(14)
|
|
|
(15)
|
|
|
(59)
|
|
|
(63)
|
|
Other
|
|
(3)
|
|
|
(1)
|
|
|
(8)
|
|
|
(62)
|
|
Adjusted
EBITDAX(a) (Non-GAAP)
|
|
$
|
665
|
|
|
$
|
561
|
|
|
$
|
2,530
|
|
|
$
|
2,380
|
|
|
* Financial
information for 2018 has been recast to reflect the retrospective
application of the successful efforts method of
accounting.
|
|
|
(a)
|
Adjusted EBITDAX is
not a measure of financial performance under GAAP, and should not
be considered as an alternative to, or more meaningful than, net
income (loss) prepared in accordance with GAAP. Adjusted EBITDAX
excludes certain items that management believes affect the
comparability of operating results. The company believes this
non-GAAP financial measure is a useful adjunct to net income (loss)
because:
|
|
|
|
|
(i)
|
Management uses
adjusted EBITDAX to evaluate the company's operational trends and
performance relative to other oil and natural gas producing
companies.
|
|
|
|
|
(ii)
|
Adjusted EBITDAX 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.
|
|
|
|
Because adjusted
EBITDAX excludes some, but not all, items that affect net income
(loss), our calculations of adjusted EBITDAX may not be comparable
to similarly titled measures of other companies.
|
CHESAPEAKE ENERGY
CORPORATION
ROLL-FORWARD OF
PROVED RESERVES
YEAR ENDED
DECEMBER 31, 2019
(unaudited)
|
|
|
Mmboe(a)
|
|
|
|
Beginning balance,
December 31, 2018
|
|
1,448
|
|
Production
|
|
(177)
|
|
Extensions,
discoveries and other additions
|
|
216
|
|
Revisions of previous
estimates
|
|
(143)
|
|
Sale of reserves
in-place
|
|
(7)
|
|
Purchase of reserves
in-place
|
|
235
|
|
Ending balance,
December 31, 2019
|
|
1,572
|
|
|
|
|
Proved reserves
growth rate before acquisitions and divestitures
|
|
(7)
|
%
|
Proved reserves
growth rate after acquisitions and divestitures
|
|
9
|
%
|
|
|
|
Proved developed
reserves
|
|
846
|
|
Proved developed
reserves percentage
|
|
54
|
%
|
|
|
|
Standardized measure
of discounted future net cash flows ($ in millions)
(GAAP)
|
|
$
|
9,000
|
|
Add: Present value of
future income taxes discounted at 10% per
annum(a)
|
|
15
|
|
PV-10 ($ in
millions)(a) (Non-GAAP)
|
|
$
|
9,015
|
|
|
|
(a)
|
Reserve volumes and
PV-10 value are estimated using SEC reserve recognition standards
and pricing assumptions based on the trailing 12-month average
first-day-of-the-month prices as of December 31, 2019 of $55.69 per
bbl of oil and $2.58 per mcf of natural gas, before basis
differential adjustments. 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 table
above shows the reconciliation of 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,
2019. Future income taxes in the calculation of the standardized
measure of discounted future net cash flows were $15 million as of
December 31, 2019.
|
CHESAPEAKE ENERGY
CORPORATION
|
MANAGEMENT'S
OUTLOOK AS OF FEBRUARY 26, 2020
|
|
Chesapeake
periodically provides guidance on certain factors that affect the
company's future financial performance.
|
|
|
Year
Ending
12/31/2020
|
Absolute
Production:
|
|
Oil -
mmbbls
|
41.5 -
43.5
|
NGL -
mmbbls
|
11.0 -
13.0
|
Natural gas -
bcf
|
650 - 700
|
Total absolute
production - mmboe
|
161 - 173
|
Absolute daily rate -
mboe per day
|
439 - 473
|
Estimated Realized
Hedging Effects(a) (based on 2/21/20 strip
prices)
|
|
Oil -
$/bbl
|
$4.54
|
Natural gas -
$/mcf
|
$0.24
|
Estimated Basis to
NYMEX Prices:
|
|
Oil -
$/bbl
|
$0.20 -
$0.60
|
Natural gas -
$/mcf
|
($0.20) -
($0.30)
|
NGL - realizations as
a % of WTI
|
30% - 33%
|
Operating Costs per
boe of Projected Production:
|
|
Production
expense
|
$2.55 -
$2.75
|
Gathering, processing
and transportation expenses
|
$6.30 -
$6.75
|
Oil -
$/bbl
|
$3.40 -
$3.60
|
Natural Gas -
$/mcf
|
$1.25 -
$1.35
|
Severance and ad
valorem taxes
|
$1.25 -
$1.35
|
General and
administrative(b)
|
$1.25 -
$1.35
|
Stock-based
compensation (non-cash)
|
$0.05 -
$0.15
|
Marketing Net Margin
and Other ($ in millions)
|
($10) -
$10
|
Adjusted EBITDAX,
based on 2/21/20 strip prices ($ in
millions)(c)
|
$2,000 -
$2,200
|
Depreciation,
depletion and amortization expense
|
$12.00 -
$13.00
|
Interest
expense
|
$3.30 -
$3.50
|
Exploration expense
($ in millions, cash only)
|
$25 - $35
|
Book Tax
Rate
|
0%
|
Capital Expenditures
($ in millions)(d)
|
$1,300 -
$1,600
|
Capitalized Interest
($ in millions)
|
$25
|
Total Capital
Expenditures ($ in millions)
|
$1,325 -
$1,625
|
|
|
(a)
|
Includes expected
settlements for oil, natural gas and NGL derivatives adjusted for
option premiums. For derivatives closed early, settlements are
reflected in the period of original contract expiration.
|
|
|
(b)
|
Excludes expenses
associated with stock-based compensation, which are recorded in
general and administrative expenses in Chesapeake's Condensed
Consolidated Statement of Operations.
|
|
|
(c)
|
Adjusted EBITDAX is a
non-GAAP measure used by management to evaluate the company's
operational trends and performance relative to other oil and
natural gas producing companies. Adjusted EBITDAX excludes certain
items that management believes affect the comparability of
operating results. The most directly comparable GAAP measure is net
income (loss) but, it is not possible, without unreasonable
efforts, to identify the amount or significance of events or
transactions that may be included in future GAAP net income (loss)
but that management does not believe to be representative of
underlying business performance. The company further believes that
providing estimates of the amounts that would be required to
reconcile forecasted adjusted EBITDAX to forecasted GAAP net income
(loss) would imply a degree of precision that may be confusing or
misleading to investors. Items excluded from net income to arrive
at adjusted EBITDAX include interest expense, income taxes, and
depreciation, depletion and amortization expense, exploration
expense as well as one-time items or items whose timing or amount
cannot be reasonably estimated.
|
|
|
(d)
|
Includes capital
expenditures for drilling and completion, leasehold, developmental
geological and geophysical costs, and other property, plant and
equipment. Excludes any additional proved property acquisitions and
expenditures classified as exploration expense.
|
Oil, Natural Gas and Natural Gas Liquids Hedging
Activities
Chesapeake enters into oil,
natural gas and NGL derivative transactions in order to mitigate a
portion of its exposure to adverse changes in market prices. Please
see the quarterly reports on Form 10-Q and annual reports on Form
10-K filed by Chesapeake with the
SEC for detailed information about derivative instruments the
company uses, its quarter-end derivative positions and accounting
for oil, natural gas and natural gas liquids derivatives.
As of February 19, 2020, including
January and February derivative contracts that have settled,
approximately 70% of the company's 2020 forecasted oil, natural gas
and NGL production revenue was hedged. The company had
approximately 76% downside oil price protection through swaps and
collars at an average price of $59.90
per bbl. The company had 39% downside gas price protection through
swaps at $2.76 per mcf and 14% under
put spread arrangements based on an average bought put NYMEX price
of $2.05 per mcf and exposure below
an average sold put NYMEX price of $1.80 per mcf.
The company's crude oil hedging positions were as follows:
Open Crude Oil
Swaps
|
|
Volume
(mmbbls)
|
|
Avg.
NYMEX
Price of
Swaps
|
|
|
|
|
Q1 2020
|
9
|
|
$
|
59.50
|
|
Q2 2020
|
9
|
|
$
|
59.54
|
|
Q3 2020
|
6
|
|
$
|
59.67
|
|
Q4 2020
|
6
|
|
$
|
59.72
|
|
Total 2020
|
30
|
|
$
|
59.59
|
|
Oil Two-Way
Collars
|
|
Volume
(mmbbls)
|
|
Avg. NYMEX
Bought Put Price
|
|
Avg. NYMEX
Sold Call Price
|
|
|
|
|
|
|
Q1 2020
|
0.5
|
|
$
|
65.00
|
|
|
$
|
83.25
|
|
Q2 2020
|
0.5
|
|
$
|
65.00
|
|
|
$
|
83.25
|
|
Q3 2020
|
0.5
|
|
$
|
65.00
|
|
|
$
|
83.25
|
|
Q4 2020
|
0.5
|
|
$
|
65.00
|
|
|
$
|
83.25
|
|
Total 2020
|
2
|
|
$
|
65.00
|
|
|
$
|
83.25
|
|
Oil
Calls
|
|
Volume
(mmbbls)
|
|
Avg.
NYMEX
Strike
Price
|
|
|
|
|
Total 2021
|
4
|
|
$
|
61.58
|
|
|
|
|
|
Total 2022
|
4
|
|
$
|
61.58
|
|
Oil Basis
Protection Swaps
|
|
Volume
(mmbbls)
|
|
Avg.
NYMEX
plus/(minus)
|
|
|
|
|
Q1 2020
|
3
|
|
$
|
2.55
|
|
Q2 2020
|
3
|
|
$
|
2.58
|
|
Q3 2020
|
3
|
|
$
|
2.58
|
|
Q4 2020
|
3
|
|
$
|
2.58
|
|
Total 2020
|
12
|
|
$
|
2.57
|
|
The company's natural gas hedging positions were as follows:
Open Natural Gas
Swaps
|
|
Volume
(bcf)
|
|
Avg.
NYMEX
Price of
Swaps
|
|
|
|
|
Q1 2020
|
66
|
|
$
|
2.76
|
|
Q2 2020
|
66
|
|
$
|
2.76
|
|
Q3 2020
|
67
|
|
$
|
2.76
|
|
Q4 2020
|
66
|
|
$
|
2.76
|
|
Total 2020
|
265
|
|
$
|
2.76
|
|
Natural Gas Put
Spread
|
|
Volume
(bcf)
|
|
Avg. NYMEX
Sold Put Price
|
|
Avg. NYMEX
Bought Put Price
|
|
|
|
|
|
|
Q2 2020
|
40
|
|
$
|
1.71
|
|
|
$
|
1.96
|
|
Q3 2020
|
40
|
|
$
|
1.86
|
|
|
$
|
2.11
|
|
Q4 2020
|
14
|
|
$
|
1.90
|
|
|
$
|
2.15
|
|
Total 2020
|
94
|
|
$
|
1.80
|
|
|
$
|
2.05
|
|
Natural Gas Net
Written Call Options
|
|
Volume
(bcf)
|
|
Avg.
NYMEX
Strike
Price
|
|
|
|
|
Q1 2020
|
5
|
|
$
|
12.00
|
|
Q2 2020
|
5
|
|
$
|
12.00
|
|
Q3 2020
|
6
|
|
$
|
12.00
|
|
Q4 2020
|
6
|
|
$
|
12.00
|
|
Total 2020
|
22
|
|
$
|
12.00
|
|
|
|
|
|
Total 2021
|
96
|
|
$
|
2.75
|
|
Natural Gas Net
Written Call Swaptions
|
|
Volume
(bcf)
|
|
Avg.
NYMEX
Strike
Price
|
|
|
|
|
Total 2021
|
15
|
|
$
|
2.80
|
|
|
|
|
|
Total 2022
|
15
|
|
$
|
2.80
|
|
Natural Gas Basis
Protection Swaps
|
|
Volume
(bcf)
|
|
Avg. NYMEX
plus/(minus)
|
|
|
|
|
Q1 2020
|
30
|
|
$
|
0.07
|
|
Q2 2020
|
10
|
|
$
|
(0.03)
|
|
Q3 2020
|
10
|
|
$
|
(0.03)
|
|
Q4 2020
|
3
|
|
$
|
(0.03)
|
|
Total 2020
|
53
|
|
$
|
0.03
|
|
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
Brad Sylvester,
CFA
|
Gordon
Pennoyer
|
(405)
935-8870
|
(405)
935-8878
|
ir@chk.com
|
media@chk.com
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2019-full-year-and-fourth-quarter-financial-and-operational-results-and-releases-2020-guidance-301011413.html
SOURCE Chesapeake Energy Corporation