OKLAHOMA CITY, Jan. 9, 2019 /PRNewswire/ -- Chesapeake
Energy Corporation (NYSE:CHK) today reported selected financial and
operational results for the 2018 fourth quarter. Highlights
include:
- Estimated average 2018 fourth quarter production range of
approximately 462,000 to 464,000 barrels of oil equivalent (boe)
per day
- Estimated average 2018 fourth quarter oil production
range of approximately 86,000 to 87,000 barrels (bbls) of oil per
day; divested Utica oil volumes have been completely replaced by
oil volume growth in the Powder River Basin and Eagle Ford Shale in
the two months following the sale
- Achieved year-end 2018 Powder River Basin net production
exit rate of approximately 38,500 boe per day (approximately 47
percent oil)
- Estimated 2018 fourth quarter capital expenditures of
approximately $545 million, including
$50 million of capitalized interest
and Utica investments
- Utica Shale divestment and debt refinancing eliminated
approximately $2.6 billion in secured
leverage, positioning the company with ample liquidity and no
significant near-term debt maturities; debt balance as of
December 31, 2018 of approximately
$8.2 billion including $419 million drawn on revolving credit
facility
Doug Lawler, Chesapeake's
President and Chief Executive Officer, commented, "Chesapeake
continues to advance our strategic priorities of improving margins,
reducing debt and achieving sustainable cash flow neutrality. In
2018, asset divestitures generated more than $2 billion in net proceeds which facilitated the
retirement of our term loan and senior secured second lien
debt. Total debt was reduced by approximately $1.8 billion from year-end 2017. Importantly, the
divested daily oil volumes associated with the Utica sale, which
represented 10% of our third quarter oil production, were replaced
in the last two months of the year through our legacy South Texas and emerging Powder River Basin
oil engines.
"Looking forward to 2019, we are confident in our ability to
drive further competitive performance through the quality of our
investments and our capital and operating discipline. We have
secured a strong hedge position for gas and oil which provides
stability and certainty in our cash generating capability. We plan
to reduce our 2019 capital expenditures by lowering our rig count
by approximately 20 percent, expecting to average 14 rigs versus
our current rig count of 18. Further, we expect our capital
efficiency to improve in 2019 as total net capital per rig line is
projected to decrease by 15 to 20 percent compared to 2018. The
improvement in our capital efficiency, along with our focus on our
high-margin oil investments, should result in higher operating cash
flow and stronger margins in 2019 compared to 2018.
"We look forward to consummating the merger with WildHorse
Resources and further strengthening our portfolio and
competitiveness with another strong oil growth asset. We plan to
provide detailed capital guidance for the combined company later in
the 2019 first quarter, but at present we anticipate operating four
rigs on the WildHorse acreage in 2019. We look forward to further
building on our track record of performance in 2019 and are excited
to continue demonstrating our leadership and differential
competitiveness."
Operations Update
In the Powder River Basin (PRB), Chesapeake achieved a net
production exit rate of approximately 38,500 boe per day
(approximately 47 percent oil and 60 percent total liquids) in
December. Volumes are expected to accelerate during 2019, resulting
in annual net production from the basin to more than double
compared to 2018. Chesapeake is operating five rigs in the PRB, all
of which are currently drilling the Turner formation.
The Eagle Ford Shale in Texas
continues to deliver the highest margins in the company, primarily
driven by premium Gulf Coast crude oil pricing. Despite the
lingering effects of regional flooding in the area, the combination
of strong well performance, greater volumes transported via
pipeline compared to trucking and new field technologies resulted
in Eagle Ford net production averaging approximately 105,000 boe
per day (approximately 58 percent oil) for the 2018 fourth quarter,
which is better than previously expected. During the 2018 fourth
quarter, the company continued its Austin
Chalk and Upper Eagle Ford appraisal programs and
anticipates updating these results at the end of the 2019 first
quarter. The company is currently utilizing four rigs in the Eagle
Ford.
In the Marcellus Shale in Pennsylvania, Chesapeake continues to create
significant free cash flow due to higher realized in-basin gas
prices. Two new Lower Marcellus records were set in northern
Sullivan County during the 2018
fourth quarter, demonstrating that appropriate development spacing
along with longer laterals and better steering within the target
zone can deliver exceptional value. The JOEGUSWA 4HC well had a
lateral length of 13,803 feet and set a 24-hour initial production
record of 62.6 million cubic feet of gas (mmcf) per day with a
2,600 psi flowing pressure. This well performance surpassed the
current 24-hour initial production record from the McGavin well of
approximately 61.8 mmcf per day. The JOEGUSWA 5HC well with a
lateral length of 9,808 feet set a 24-hour initial production
record of 73.4 mmcf per day at a 3,000 psi flowing pressure. While
both wells had fracture stimulations using approximately 1,600
pounds of sand per foot of lateral, both wells were also bounded by
previously drilled wells that were approximately 1,300 feet away,
pointing to the advantage and opportunity that Chesapeake's acreage
position provides in its ability to properly space future drilling
locations.
Balance Sheet and Hedge Position Update
As of December 31, 2018,
Chesapeake's principal amount of debt outstanding was approximately
$8.167 billion, compared to
$9.981 billion as of December 31, 2017. Additionally, the company has
approximately $2.5 billion of
available liquidity under its senior secured revolving credit
facility.
During the 2018 fourth quarter, the company was very active in
hedging 2019 oil and gas volumes and at December 31, 2018, Chesapeake had downside
protection on approximately 590 billion cubic feet (bcf) of its
forecasted 2019 gas production at $2.85 per thousand cubic feet (mcf).
Additionally, the company has downside protection on approximately
16 million barrels (mmbbls) of its forecasted 2019 oil production
at $58.61 per barrel and oil basis
protection on approximately 7 mmbbls of its forecasted 2019 Eagle
Ford oil production at a premium to WTI of more than $6.00 per barrel.
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 an oil and natural gas
marketing business.
Forward-Looking Statements
This communication may contain certain forward-looking
statements, including certain plans, expectations, goals,
projections, and statements about the benefits of the proposed
business combination transaction (the "Transaction") between
WildHorse Resource Development Corporation ("WildHorse") and
Chesapeake Energy Corporation ("Chesapeake"), WildHorse's and
Chesapeake's plans, objectives, expectations and intentions, the
expected timing of completion of the Transaction, capital
expenditures, future operating results and other statements that
are not historical facts. Such statements are subject to numerous
assumptions, risks, and uncertainties. Statements that do not
describe historical or current facts, including statements about
beliefs and expectations, are forward-looking statements.
Forward-looking statements may be identified by words such as
expect, anticipate, believe, intend, estimate, plan, target, goal,
or similar expressions, or future or conditional verbs such as
will, may, might, should, would, could, or similar variations. The
forward-looking statements are intended to be subject to the safe
harbor provided by Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934, and the Private
Securities Litigation Reform Act of 1995. They include
statements that give our current expectations, management's outlook
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, anticipated timing of wells
to be placed into production, general and administrative expenses,
capital expenditures, the timing of anticipated asset sales and
proceeds to be received therefrom, the expected use of proceeds of
anticipated asset sales, 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.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements: the
possibility that the Transaction does not close when expected or at
all because required regulatory, shareholder or other approvals are
not received or other conditions to the closing are not satisfied
on a timely basis or at all; the risk that regulatory approvals
required for the Transaction are not obtained or are obtained
subject to conditions that are not anticipated; potential adverse
reactions or changes to business or employee relationships,
including those resulting from the announcement or completion of
the Transaction; uncertainties as to the timing of the Transaction;
competitive responses to the Transaction; the possibility that the
anticipated benefits of the Transaction are not realized when
expected or at all, including as a result of the impact of, or
problems arising from, the integration of the two companies; the
possibility that the Transaction may be more expensive to complete
than anticipated, including as a result of unexpected factors or
events; diversion of management's attention from ongoing business
operations and opportunities; the ability of Chesapeake to complete
the acquisition and integration of WildHorse successfully;
litigation relating to the Transaction; and other factors that may
affect future results of WildHorse and Chesapeake.
Additional factors that could cause results to differ
materially from those described above can be found in WildHorse's
Annual Report on Form 10-K for the year ended December 31, 2017 and in its subsequent Quarterly
Reports on Form 10-Q, each of which is on file with the SEC and
available in the "Investor Relations" section of WildHorse's
website, http://www.wildhorserd.com/, under the subsection "SEC
Filings" and in other documents WildHorse files with the SEC, and
in Chesapeake's Annual Report on Form 10-K for the year ended
December 31, 2017 and in its
subsequent Quarterly Reports on Form 10-Q, each of which is on file
with the SEC and available in the "Investors" section of
Chesapeake's website, https://www.chk.com/, under the heading "SEC
Filings" and in other documents Chesapeake files with the
SEC.
These risk factors include the volatility of oil, natural gas
and NGL prices; the limitations our level of indebtedness may have
on our financial flexibility; our inability to access the capital
markets on favorable terms; the availability of cash flows from
operations and other funds to finance reserve replacement costs or
satisfy our debt obligations; downgrade in our credit rating
requiring us to post more collateral under certain commercial
arrangements; write-downs of our oil and natural gas asset carrying
values due to low commodity prices; our ability to replace reserves
and sustain production; uncertainties inherent in estimating
quantities of oil, natural gas and NGL reserves and projecting
future rates of production and the amount and timing of development
expenditures; our ability to generate profits or achieve targeted
results in drilling and well operations; leasehold terms expiring
before production can be established; commodity derivative
activities resulting in lower prices realized on oil, natural gas
and NGL sales; the need to secure derivative liabilities and the
inability of counterparties to satisfy their obligations; adverse
developments or losses from pending or future litigation and
regulatory proceedings, including royalty claims; charges incurred
in response to market conditions and in connection with our ongoing
actions to reduce financial leverage and complexity; drilling and
operating risks and resulting liabilities; effects of environmental
protection laws and regulation on our business; legislative and
regulatory initiatives further regulating hydraulic fracturing; our
need to secure adequate supplies of water for our drilling
operations and to dispose of or recycle the water used; impacts of
potential legislative and regulatory actions addressing climate
change; federal and state tax proposals affecting our industry;
potential OTC derivatives regulation limiting our ability to hedge
against commodity price fluctuations; competition in the oil and
gas exploration and production industry; a deterioration in general
economic, business or industry conditions; negative public
perceptions of our industry; limited control over properties we do
not operate; pipeline and gathering system capacity constraints and
transportation interruptions; terrorist activities and
cyber-attacks adversely impacting our operations; an interruption
in operations at our headquarters due to a catastrophic event;
certain anti-takeover provisions that affect shareholder rights;
and our inability to increase or maintain our liquidity through
debt repurchases, capital exchanges, asset sales, joint ventures,
farmouts or other means.
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
and the Transaction may not be completed in the time frame
anticipated or at all.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither WildHorse nor Chesapeake assumes any obligation to update
forward-looking statements to reflect circumstances or events that
occur after the date the forward-looking statements were made or to
reflect the occurrence of unanticipated events except as required
by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
Important Additional Information
This communication is for informational purposes only and
does not constitute an offer to sell or the solicitation of an
offer to buy any securities or a solicitation of any vote or
approval, in any jurisdiction, pursuant to the Transaction or
otherwise, nor shall there be any sale, issuance, exchange or
transfer of the securities referred to in this document in any
jurisdiction in contravention of applicable law.
In connection with the Transaction, Chesapeake has filed with
the SEC a registration statement on Form S-4 that includes a joint
proxy statement of Chesapeake and WildHorse and a prospectus of
Chesapeake, as well as other relevant documents concerning the
Transaction. The registration statement was declared effective by
the SEC on December 21, 2018 and
WildHorse and Chesapeake commenced mailing the definitive joint
proxy statement/prospectus to WildHorse's stockholders and
Chesapeake's shareholders, respectively, for their consideration on
or about December 26, 2018.
STOCKHOLDERS OF WILDHORSE AND SHAREHOLDERS OF CHESAPEAKE ARE URGED
TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Investors will be able to
obtain a free copy of the registration statement and the joint
proxy statement/prospectus, as well as other filings containing
information about WildHorse and Chesapeake, without charge, at the
SEC's website (http://www.sec.gov). Copies of the documents filed
with the SEC can also be obtained, without charge, by directing a
request to Investor Relations, WildHorse, P.O. Box 79588,
Houston, Texas 77279, Tel. No.
(713) 255-9327 or to Investor Relations, Chesapeake, 6100 North
Western Avenue, Oklahoma City,
Oklahoma, 73118, Tel. No. (405) 848-8000.
Participants in the Solicitation
WildHorse, Chesapeake and certain of their respective
directors, executive officers and employees may be deemed to be
participants in the solicitation of proxies in respect of the
Transaction. Information regarding WildHorse's directors and
executive officers is available in its definitive proxy statement,
which was filed with the SEC on April 2,
2018, and certain of its Current Reports on Form 8-K.
Information regarding Chesapeake's directors and executive officers
is available in its definitive proxy statement, which was filed
with the SEC on April 6, 2018, and
certain of its Current Reports on Form 8-K. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, is contained in the definitive joint proxy
statement/prospectus and other relevant materials filed with the
SEC. Free copies of this document may be obtained as described in
the preceding paragraph.
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
Brad Sylvester,
CFA
|
Gordon
Pennoyer
|
(405)
935-8870
|
(405)
935-8878
|
ir@chk.com
|
media@chk.com
|
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SOURCE Chesapeake Energy Corporation