OKLAHOMA
CITY, Aug. 2, 2022 /PRNewswire/ -- Chesapeake
Energy Corporation (NASDAQ: CHK) today reported 2022 second quarter
financial and operating results and announced the company is taking
actions to solidify its strategic focus on its core Marcellus and
Haynesville positions.
- Net cash provided by operating activities of $909 million
- Delivered adjusted EBITDAX(1) of $1,269 million and $494
million in adjusted free cash
flow(1)
- Net income totaled $1,237
million, or $8.27 per diluted
share; adjusted net income(1) of $729 million, or $4.87 per diluted share
- Increased annual base dividend by 10% to $2.20 per share; total quarterly dividend of
$2.32 per common share
- Retired approximately $670
million, or approximately 7.6 million common shares through
July 31; $2
billion common stock and warrant repurchase program remains
active
- Positioning Haynesville assets for future growth while
reducing activity in Eagle Ford position which the company now
views as non-core to its future capital allocation
strategy
- Entered into gas supply agreement with Golden Pass LNG
facilities
- Achieved Grade "A" MiQ and EO100™ certification for
responsible energy production in legacy Marcellus
operations
(1) A Non-GAAP
measure as defined in the supplemental financial tables available
on the company's website at www.chk.com.
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Nick Dell'Osso, Chesapeake's
President and Chief Executive Officer, commented, "We continue to
execute our business and deliver on our leading capital return
program. Over the last two months we have doubled our share and
warrant repurchase authorization to $2
billion, retired over $580
million in common shares, and increased our base dividend by
10%.
"We are pleased to also announce that we are solidifying our
strategic focus on the two premier North American shale gas plays,"
added Dell'Osso. "Our acreage positions in the Marcellus and
Haynesville are truly differentiated with industry leading capital
efficiency, deep runways of low breakeven inventory, strong
operating margins, and advantaged emissions profiles. Given we now
view our Eagle Ford assets as non-core to our future capital
allocation strategy, we are increasing our capital allocation to
the Haynesville in the second half of the year and into 2023 to
position the asset for returns-driven growth. Simply put, we are
tightening our strategic focus around our best rock, best
operations and lowest emissions footprint to generate the most
attractive and sustainable capital returns in the industry and be
the leader in answering the call for delivering the affordable,
reliable, lower carbon energy the world needs."
Shareholder Return Update
During the second quarter of 2022, Chesapeake generated
$909 million of operating cash flow
and had $17 million of cash on hand
at quarter-end. As a result of its significant free cash flow,
Chesapeake is raising its base dividend by 10% to $2.20 per share. Consistent with the company's
cash return framework, Chesapeake plans to pay its base and
variable dividend on September 1,
2022 to shareholders of record at the close of business on
August 17, 2022. The total common
stock dividend, including the variable and base components, is
calculated as follows:
($ and shares in
millions, except per share amounts)
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2Q
2022
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Net cash provided by
operating activities
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$
909
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Less cash capital
expenditures
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415
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Add back cash paid for
acquisition costs
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—
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Adjusted free cash
flow
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494
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Less cash paid for
common base dividends
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67
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50% of adjusted free
cash flow available for common variable dividends
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$
214
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Common shares
outstanding at 7/29/22(1)
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121
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Variable dividend
payable per common share in September 2022
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$
1.77
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Base dividend payable
per common share in September 2022
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$
0.55
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Total dividend payable
per common share in September 2022
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$
2.32
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(1) Basic common
shares outstanding as of the declaration date of 8/2/2022. Assumes
no exercise of warrants between dividend declaration date and
dividend record date.
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In June 2022, the company doubled
its previously announced repurchase program authorization from
$1 billion to up to $2 billion in aggregate value of its common stock
and/or warrants through year-end 2023. Through July 31, 2022, Chesapeake has repurchased
approximately 7.6 million shares of its common stock for
approximately $670 million.
Operations and Marketing Update
Chesapeake's net production in the second quarter of 2022 was
approximately 4,125 MMcfe per day (approximately 91% natural gas
and 9% total liquids), utilizing an average of 16 rigs to drill 63
wells and placed 57 wells on production. Chesapeake is currently
operating 16 rigs including five in the Marcellus, five in the
Eagle Ford and six in the Haynesville, with the sixth rig just
added in the last week. The company expects to drill 60 to 70 wells
and place 40 to 50 wells on production in the third quarter of
2022.
To position the company for additional returns-driven growth
from the Haynesville, the company is reallocating capital to the
Haynesville and increasing its capital investment program by 15% to
$1.75–$1.95 billion (previous
guidance was $1.5–$1.8 billion). The
move reflects industry-wide inflation as well as the addition of
two operated Haynesville rigs with the sixth rig added in early
August and a seventh rig before year-end. Chesapeake intends to
reduce planned activities and investments in the Eagle Ford which
includes dropping to three rigs by the end of August and exiting
the year with two rigs.
Chesapeake is also working with midstream partners to increase
our gas gathering and treating capacity in the Haynesville. The
company expects to have incremental capacity available beginning in
first quarter of 2023, growing through the end of 2023 to
correspond with the volume growth generated by the projected
increased rig activity.
Additionally, Chesapeake has entered into a term gas supply
agreement (GSA) with Golden Pass LNG Terminal LLC ("Golden Pass") to deliver 300 mmcf per day of
Responsibly Sourced, independently certified gas, from the
Haynesville to Golden Pass's
liquefied natural gas terminal on the Gulf Coast near Sabine Pass, Texas. The GSA is expected to
begin in 2024 with a 36 month term at a NYMEX based price less a
fixed differential. For more information on each of its operating
areas, including projections for activity, well statistics and
pricing, Chesapeake has posted slides on its website at
www.chk.com.
ESG Update
Chesapeake achieved certification of its legacy Marcellus
operations under the MiQ methane standard and the EO100™ Standard
for Responsible Energy Development, which cover a broad range of
environmental, social and governance (ESG) criteria. The company
previously announced the certification of its Haynesville
operations in December 2021, and is
the first company to achieve Grade "A" ratings (the highest rating
a company can earn) from MiQ across two major shale basins. The
company anticipates its recently acquired position in the Marcellus
from Chief E&D Holdings, LP and affiliates of Tug Hill, Inc.
will achieve certification by year end, resulting in 100%
independent certification for produced and marketed volumes across
Chesapeake's two industry leading gas plays.
In 2021 and through June 30, 2022,
Chesapeake has installed more than 2,000 continuous methane
emission monitoring devices and retrofitted 15,000 pneumatic
devices across its operations. As part of that effort, all operated
new facility construction is engineered today to be 100% vent free
using electric device technology, instrument air and vent capture
systems. In addition, the company has executed an agreement
beginning in the third quarter of 2022 to implement aerial Gas
Mapping LiDAR scans to detect and quantify emissions multiple times
per year across the entirety of its assets. Finally, the company
joined Veritas, a GTI Differentiated Gas Measurement and
Verification Initiative designed to accelerate actions that reduce
methane leakage from natural gas systems.
Conference Call Information
Chesapeake plans to host a conference call to discuss recent
results on Wednesday, August 3, 2022
at 9:00 am EDT. The telephone number
to access the conference call is 877-344-7529 or 412-317-0088 for
international callers. The passcode for the call is 6061361.
Financial Statements, Non-GAAP Financial Measures and 2022
Guidance and Outlook Projections
The company's 2022 second quarter financial and operational
results, along with non-GAAP measures that adjust for items that
are typically excluded by securities analysts, are available on the
company's website. Such non-GAAP measures should be not considered
as an alternative to GAAP measures. Reconciliations of these
non-GAAP measures and other disclosures are provided with the
supplemental financial tables available on the company's website at
www.chk.com. Management's updated guidance for 2022 can be found on
the company's website at www.chk.com.
Headquartered in Oklahoma
City, Chesapeake Energy Corporation is powered by dedicated
and innovative employees who are focused on discovering and
responsibly developing our leading positions in top U.S. oil and
gas plays. With a goal to achieve net-zero direct GHG emissions by
2035, Chesapeake is committed to safely answering the call for
affordable, reliable, lower carbon
energy.
Forward-Looking Statements
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, expected natural gas and oil growth
trajectory, projected cash flow and liquidity, our ability to
enhance our cash flow and financial flexibility, dividend plans,
future production and commodity mix, plans and objectives for
future operations, ESG initiatives, 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 our
forward-looking statements are reasonable, they are inherently
subject to numerous risks and uncertainties, most of which are
difficult to predict and many of which are beyond our control. No
assurance can be given that such forward-looking statements will be
correct or achieved or that the assumptions are accurate or will
not change over time.
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 ability to execute on our business strategy following
emergence from bankruptcy; the impact of inflation and commodity
price volatility resulting from Russia's invasion of Ukraine, COVID-19 and related supply chain
constraints, along with the effect on our business, financial
condition, employees, contractors and vendors, and on the global
demand for oil and natural gas and U.S. and world financial
markets; the acquisitions of Vine Energy Inc. ("Vine") and Chief
E&D Holdings, LP and affiliates of Tug Hill, Inc. (together,
"Chief"), including our ability to successfully integrate the
businesses of Vine and Chief into the Company and achieve the
expected synergies from these acquisitions within the expected
timeframes; effects of purchase price adjustments and indemnity
obligations; the volatility of oil, natural gas and NGL prices; the
limitations our level of indebtedness may have on our financial
flexibility; our ability to comply with the covenants under our
credit facility and other indebtedness; our inability to access the
capital markets on favorable terms; the availability of cash flows
from operations and other funds to fund cash dividends, repurchases
of equity, to finance reserve replacement costs and/or satisfy our
debt obligations; 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; drilling and
operating risks and resulting liabilities; effects of environmental
protection laws and regulations on our business and legislative,
regulatory and environmental, social and governance ("ESG")
initiatives, addressing environmental concerns, including
initiatives addressing the impact of global climate change or
further regulating hydraulic fracturing, methane emissions, flaring
or water disposal; our ability to achieve and maintain ESG goals
and certifications; 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 or cyber-attacks adversely impacting our
operations; and an interruption in operations at our headquarters
due to a catastrophic event.
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. We caution you not to
place undue reliance on our forward-looking statements that speak
only as of the date of this news release, and we undertake no
obligation to update any of the information provided in this
release, except as required by applicable law. In addition, this
news release contains time-sensitive information that reflects
management's best judgment only as of the date of this news
release.
INVESTOR CONTACT:
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MEDIA CONTACT:
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Brad Sylvester,
CFA
(405)
935-8870
ir@chk.com
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Gordon
Pennoyer
(405)
935-8878
media@chk.com
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SOURCE Chesapeake Energy Corporation