CHESAPEAKE ENERGY CORPORATION | |||||||
(Exact name of Registrant as specified in its Charter) | |||||||
Oklahoma | 1-13726 | 73-1395733 | |||||
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification No.) | |||||
6100 North Western Avenue, Oklahoma City, Oklahoma | 73118 | ||||||
(Address of principal executive offices) | (Zip Code) | ||||||
(405) 848-8000 | |||||||
(Registrant’s telephone number, including area code) |
* | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
* | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
* | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
* | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Document Description | |
99.1 | Chesapeake Energy Corporation press release dated February 25, 2015 | |
CHESAPEAKE ENERGY CORPORATION | |
By: | /s/ JAMES R. WEBB |
James R. Webb | |
Executive Vice President - General Counsel and Corporate Secretary |
Exhibit No. | Document Description | |
99.1 | Chesapeake Energy Corporation press release dated February 25, 2015 | |
Exhibit 99.1 | ||
News Release | ||
• | 2014 adjusted net income of $1.49 per fully diluted share and 2014 adjusted ebitda of $4.945 billion |
• | Average 2014 production of approximately 706,000 boe per day, an increase of 9% year over year, adjusted for asset sales |
• | Planned 2015 total capital expenditures ranging from $4.0 to $4.5 billion |
• | Projected 2015 production growth of 3 – 5%, adjusted for asset sales |
INVESTOR CONTACT: | MEDIA CONTACT: | CHESAPEAKE ENERGY CORPORATION |
Brad Sylvester, CFA (405) 935-8870 ir@chk.com | Gordon Pennoyer (405) 935-8878 media@chk.com | 6100 North Western Avenue P.O. Box 18496 Oklahoma City, OK 73154 |
2015E D&C Capex Allocation | 2014 D&C Capex Allocation | 2015E Avg. Operated Rigs | 2014 Avg. Operated Rigs | |
Eagle Ford | 35% | 40% | 12 – 14 | 20 |
Utica | 25% | 10% | 3 – 5 | 8 |
Haynesville | 13% | 8% | 7 – 8 | 8 |
Powder River Basin: Niobrara & Upper Cretaceous | 10% | 5% | 3 – 4 | 4 |
Mid-Continent North: Mississippian Lime | 5% | 7% | 7 – 8 | 9 |
Mid-Continent South | 5% | 8% | 1 – 2 | 5 |
Marcellus | 5% | 11% | 1 – 2 | 5 |
Other(a) | 2% | 11% | 1 – 2 | 5 |
Totals | 100% | 100% | 35 – 45 | 64 |
(a) | For 2014, includes Marcellus South, Barnett Shale and exploration wells. |
$ in millions | 2013 | 2014 | 2015 | ||||||||||
Type of Cost | Q4 | FY | Q4 | FY | Outlook | ||||||||
Drilling and completion costs | $ | 1,151 | $ | 5,466 | $ | 1,370 | $ | 4,470 | |||||
Other exploration and development costs and PP&E | 478 | 1,231 | 252 | 669 | |||||||||
Subtotal planned capital spending | $ | 1,629 | $ | 6,697 | $ | 1,622 | $ | 5,139 | $ 3,500 – 4,000 | ||||
Capitalized interest | 182 | 815 | 134 | 637 | 500 | ||||||||
PRB property exchange | — | — | — | 450 | |||||||||
Sale leasebacks | 262 | 266 | 25 | 499 | |||||||||
Total capital spending | $ | 2,073 | $ | 7,778 | $ | 1,781 | $ | 6,725 | $ 4,000 – 4,500 |
Three Months Ended | Full Year Ended | |||||||||||||
12/31/14 | 09/30/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||
Oil equivalent production (in mmboe) | 67.1 | 66.8 | 61.2 | 257.8 | 244.4 | |||||||||
Oil production (in mmbbls) | 11.2 | 10.9 | 10.2 | 42.3 | 41.1 | |||||||||
Average realized oil price ($/bbl)(a) | 76.40 | 84.81 | 89.58 | 82.76 | 92.53 | |||||||||
Oil as % of total production | 17 | 16 | 17 | 16 | 17 | |||||||||
NGL production (in mmbbls) | 9.0 | 8.8 | 5.9 | 33.1 | 20.9 | |||||||||
Average realized NGL price ($/bbl)(a) | 13.11 | 22.95 | 31.76 | 21.27 | 27.87 | |||||||||
NGL as % of total production | 13 | 13 | 9 | 13 | 8 | |||||||||
Natural gas production (in bcf) | 281.6 | 282.0 | 270.5 | 1,095.0 | 1,094.6 | |||||||||
Average realized natural gas price ($/mcf)(a) | 1.72 | 2.09 | 1.90 | 2.36 | 2.23 | |||||||||
Natural gas as % of total production | 70 | 71 | 74 | 71 | 75 | |||||||||
Production expenses ($/boe) | (5.07 | ) | (4.47 | ) | (4.62 | ) | (4.69 | ) | (4.74 | ) | ||||
Production taxes ($/boe) | (0.70 | ) | (0.94 | ) | (0.91 | ) | (0.90 | ) | (0.94 | ) | ||||
General and administrative costs ($/boe)(b) | (1.23 | ) | (0.72 | ) | (1.79 | ) | (1.07 | ) | (1.62 | ) | ||||
Stock-based compensation ($/boe) | (0.15 | ) | (0.18 | ) | (0.19 | ) | (0.18 | ) | (0.24 | ) | ||||
DD&A of natural gas and liquids properties ($/boe) | (10.53 | ) | (10.31 | ) | (10.53 | ) | (10.41 | ) | (10.59 | ) | ||||
DD&A of other assets ($/boe) | (0.56 | ) | (0.55 | ) | (1.32 | ) | (0.90 | ) | (1.28 | ) | ||||
Interest expense ($/boe)(a) | (0.56 | ) | (0.16 | ) | (0.86 | ) | (0.63 | ) | (0.65 | ) | ||||
Marketing, gathering and compression net margin ($ in millions)(c) | (39 | ) | (7 | ) | 9 | (11 | ) | 98 | ||||||
Oilfield services net margin ($ in millions)(c) | — | — | 52 | 115 | 159 | |||||||||
Operating cash flow ($ in millions)(d) | 873 | 1,293 | 995 | 5,026 | 4,958 | |||||||||
Operating cash flow ($/boe) | 13.01 | 19.37 | 16.27 | 19.50 | 20.26 | |||||||||
Adjusted ebitda ($ in millions)(e) | 916 | 1,236 | 1,132 | 4,945 | 5,016 | |||||||||
Adjusted ebitda ($/boe) | 13.66 | 18.52 | 18.51 | 19.18 | 20.52 | |||||||||
Net income available to common stockholders ($ in millions) | 586 | 169 | (159 | ) | 1,273 | 474 | ||||||||
Earnings per share – diluted ($) | 0.81 | 0.26 | (0.24 | ) | 1.87 | 0.73 | ||||||||
Adjusted net income available to common stockholders ($ in millions)(f) | 34 | 251 | 161 | 957 | 965 | |||||||||
Adjusted earnings per share – diluted ($) | 0.11 | 0.38 | 0.27 | 1.49 | 1.50 |
(a) | Includes the effects of realized gains (losses) from hedging, but excludes the effects of unrealized gains (losses) from hedging. |
(b) | Excludes expenses associated with stock-based compensation and restructuring and other termination costs. |
(c) | Includes revenue and operating expenses and excludes depreciation and amortization of other assets. |
(d) | Defined as cash flow provided by operating activities before changes in assets and liabilities. |
(e) | Defined as net income before interest expense, income taxes and depreciation, depletion and amortization expense, as adjusted to remove the effects of certain items detailed on Page 17. |
(f) | Defined as net income available to common stockholders, as adjusted to remove the effects of certain items detailed on Page 14. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
REVENUES: | ||||||||||||||||
Oil, natural gas and NGL | $ | 2,369 | $ | 1,608 | $ | 8,180 | $ | 7,052 | ||||||||
Marketing, gathering and compression | 2,681 | 2,689 | 12,225 | 9,559 | ||||||||||||
Oilfield services | — | 244 | 546 | 895 | ||||||||||||
Total Revenues | 5,050 | 4,541 | 20,951 | 17,506 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Oil, natural gas and NGL production | 340 | 282 | 1,208 | 1,159 | ||||||||||||
Production taxes | 47 | 56 | 232 | 229 | ||||||||||||
Marketing, gathering and compression | 2,720 | 2,680 | 12,236 | 9,461 | ||||||||||||
Oilfield services | — | 193 | 431 | 736 | ||||||||||||
General and administrative | 93 | 121 | 322 | 457 | ||||||||||||
Restructuring and other termination costs | (5 | ) | 45 | 7 | 248 | |||||||||||
Provision for legal contingencies | 134 | — | 234 | — | ||||||||||||
Oil, natural gas and NGL depreciation, depletion and amortization | 706 | 644 | 2,683 | 2,589 | ||||||||||||
Depreciation and amortization of other assets | 38 | 80 | 232 | 314 | ||||||||||||
Impairments of fixed assets and other | 14 | 203 | 88 | 546 | ||||||||||||
Net (gains) losses on sales of fixed assets | 3 | (12 | ) | (199 | ) | (302 | ) | |||||||||
Total Operating Expenses | 4,090 | 4,292 | 17,474 | 15,437 | ||||||||||||
INCOME FROM OPERATIONS | 960 | 249 | 3,477 | 2,069 | ||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest expense | (7 | ) | (63 | ) | (89 | ) | (227 | ) | ||||||||
Losses on investments | (7 | ) | (189 | ) | (80 | ) | (226 | ) | ||||||||
Net gain (loss) on sales of investments | — | — | 67 | (7 | ) | |||||||||||
Losses on purchases of debt | (2 | ) | (123 | ) | (197 | ) | (193 | ) | ||||||||
Other income | 10 | 7 | 22 | 26 | ||||||||||||
Total Other Expense | (6 | ) | (368 | ) | (277 | ) | (627 | ) | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 954 | (119 | ) | 3,200 | 1,442 | |||||||||||
INCOME TAX EXPENSE (BENEFIT): | ||||||||||||||||
Current income taxes | 13 | 13 | 47 | 22 | ||||||||||||
Deferred income taxes | 273 | (58 | ) | 1,097 | 526 | |||||||||||
Total Income Tax Expense (Benefit) | 286 | (45 | ) | 1,144 | 548 | |||||||||||
NET INCOME (LOSS) | 668 | (74 | ) | 2,056 | 894 | |||||||||||
Net income attributable to noncontrolling interests | (29 | ) | (42 | ) | (139 | ) | (170 | ) | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | 639 | (116 | ) | 1,917 | 724 | |||||||||||
Preferred stock dividends | (43 | ) | (43 | ) | (171 | ) | (171 | ) | ||||||||
Redemption of preferred shares of a subsidiary | — | — | (447 | ) | (69 | ) | ||||||||||
Earnings allocated to participating securities | (10 | ) | — | (26 | ) | (10 | ) | |||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | $ | 586 | $ | (159 | ) | $ | 1,273 | $ | 474 | |||||||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||||||
Basic | $ | 0.89 | $ | (0.24 | ) | $ | 1.93 | $ | 0.73 | |||||||
Diluted | $ | 0.81 | $ | (0.24 | ) | $ | 1.87 | $ | 0.73 | |||||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): | ||||||||||||||||
Basic | 660 | 656 | 659 | 653 | ||||||||||||
Diluted | 773 | 656 | 772 | 653 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
December 31, 2014 | December 31, 2013 | |||||||
Cash and cash equivalents | $ | 4,108 | $ | 837 | ||||
Other current assets | 3,360 | 2,819 | ||||||
Total Current Assets | 7,468 | 3,656 | ||||||
Property and equipment, (net) | 32,515 | 37,134 | ||||||
Other assets | 768 | 992 | ||||||
Total Assets | $ | 40,751 | $ | 41,782 | ||||
Current liabilities | $ | 5,863 | $ | 5,515 | ||||
Long-term debt, net of discounts | 11,154 | 12,886 | ||||||
Other long-term liabilities | 1,344 | 1,834 | ||||||
Deferred income tax liabilities | 4,185 | 3,407 | ||||||
Total Liabilities | 22,546 | 23,642 | ||||||
Preferred stock | 3,062 | 3,062 | ||||||
Noncontrolling interests | 1,302 | 2,145 | ||||||
Common stock and other stockholders’ equity | 13,841 | 12,933 | ||||||
Total Equity | 18,205 | 18,140 | ||||||
Total Liabilities and Equity | $ | 40,751 | $ | 41,782 | ||||
Common Shares Outstanding (in millions) | 663 | 664 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CAPITALIZATION | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
December 31, 2014 | December 31, 2013 | |||||||
Total debt, net of unrestricted cash | $ | 7,427 | $ | 12,049 | ||||
Preferred stock | 3,062 | 3,062 | ||||||
Noncontrolling interests(a) | 1,302 | 2,145 | ||||||
Common stock and other stockholders’ equity | 13,841 | 12,933 | ||||||
Total | $ | 25,632 | $ | 30,189 | ||||
Total net debt to capitalization ratio | 29 | % | 40 | % |
(a) | Includes third-party ownership as follows: |
CHK Cleveland Tonkawa, L.L.C. | $ | 1,015 | $ | 1,015 | |||||
Chesapeake Granite Wash Trust | 287 | 314 | |||||||
CHK Utica, L.L.C. | — | 807 | |||||||
Other | — | 9 | |||||||
Total | $ | 1,302 | $ | 2,145 |
CHESAPEAKE ENERGY CORPORATION ROLL-FORWARD OF PROVED RESERVES 12 MONTHS ENDED DECEMBER 31, 2014 (unaudited) | ||||
Mmboe(a) | ||||
Beginning balance, December 31, 2013 | 2,678 | |||
Production | (258 | ) | ||
Acquisitions | 14 | |||
Divestitures | (362 | ) | ||
Revisions - changes to previous estimates | (78 | ) | ||
Revisions - price | 27 | |||
Extensions and discoveries | 448 | |||
Ending balance, December 31, 2014 | 2,469 | |||
Proved reserves growth rate before acquisitions and divestitures | 5 | % | ||
Proved reserves growth rate after acquisitions and divestitures | (8 | )% | ||
Proved developed reserves | 1,864 | |||
Proved developed reserves percentage | 75 | % | ||
PV-10 ($ in millions)(a) | $ | 22,012 |
(a) | Reserve volumes and PV-10 value 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, 2014 of $4.35 per mcf of natural gas and $94.98 per bbl of oil, before field differential adjustments. |
CHESAPEAKE ENERGY CORPORATION RECONCILIATION OF PV-10 ($ in millions) (unaudited) | |||||||
December 31, 2014 | December 31, 2013 | ||||||
Standardized measure of discounted future net cash flows | $ | 17,133 | $ | 17,390 | |||
Discounted future cash flows for income taxes | 4,879 | 4,286 | |||||
Discounted future net cash flows before income taxes (PV-10) | $ | 22,012 | $ | 21,676 |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||||||
SUPPLEMENTAL DATA - OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND INTEREST EXPENSE | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net Production: | ||||||||||||||||
Oil (mmbbl) | 11.2 | 10.2 | 42.3 | 41.1 | ||||||||||||
Natural gas (bcf) | 281.6 | 270.5 | 1,095.0 | 1,094.6 | ||||||||||||
NGL (mmbbl) | 9.0 | 5.9 | 33.1 | 20.9 | ||||||||||||
Oil equivalent (mmboe) | 67.1 | 61.2 | 257.8 | 244.4 | ||||||||||||
Oil, natural gas and NGL Sales ($ in millions): | ||||||||||||||||
Oil sales | $ | 749 | $ | 937 | $ | 3,682 | $ | 3,911 | ||||||||
Oil derivatives – realized gains (losses)(a) | 103 | (19 | ) | (185 | ) | (108 | ) | |||||||||
Oil derivatives – unrealized gains (losses)(a) | 505 | 116 | 859 | 280 | ||||||||||||
Total Oil Sales | 1,357 | 1,034 | 4,356 | 4,083 | ||||||||||||
Natural gas sales | 453 | 498 | 2,777 | 2,430 | ||||||||||||
Natural gas derivatives – realized gains (losses)(a) | 30 | 17 | (191 | ) | 9 | |||||||||||
Natural gas derivatives – unrealized gains (losses)(a) | 411 | (127 | ) | 535 | (52 | ) | ||||||||||
Total Natural Gas Sales | 894 | 388 | 3,121 | 2,387 | ||||||||||||
NGL sales | 118 | 186 | 703 | 582 | ||||||||||||
Total NGL Sales | 118 | 186 | 703 | 582 | ||||||||||||
Total Oil, Natural Gas and NGL Sales | $ | 2,369 | $ | 1,608 | $ | 8,180 | $ | 7,052 | ||||||||
Average Sales Price – excluding gains (losses) on derivatives: | ||||||||||||||||
Oil ($ per bbl) | $ | 67.16 | $ | 91.46 | $ | 87.13 | $ | 95.17 | ||||||||
Natural gas ($ per mcf) | $ | 1.61 | $ | 1.84 | $ | 2.54 | $ | 2.22 | ||||||||
NGL ($ per bbl) | $ | 13.11 | $ | 31.76 | $ | 21.27 | $ | 27.87 | ||||||||
Oil equivalent ($ per boe) | $ | 19.68 | $ | 26.49 | $ | 27.78 | $ | 28.33 | ||||||||
Average Sales Price – including realized gains (losses) on derivatives: | ||||||||||||||||
Oil ($ per bbl) | $ | 76.40 | $ | 89.58 | $ | 82.76 | $ | 92.53 | ||||||||
Natural gas ($ per mcf) | $ | 1.72 | $ | 1.90 | $ | 2.36 | $ | 2.23 | ||||||||
NGL ($ per bbl) | $ | 13.11 | $ | 31.76 | $ | 21.27 | $ | 27.87 | ||||||||
Oil equivalent ($ per boe) | $ | 21.67 | $ | 26.44 | $ | 26.32 | $ | 27.92 | ||||||||
Interest Expense ($ in millions): | ||||||||||||||||
Interest(b) | $ | 40 | $ | 56 | $ | 173 | $ | 169 | ||||||||
Derivatives – realized (gains) losses(c) | (2 | ) | (3 | ) | (12 | ) | (9 | ) | ||||||||
Derivatives – unrealized (gains) losses(c) | (31 | ) | 10 | (72 | ) | 67 | ||||||||||
Total Interest Expense | $ | 7 | $ | 63 | $ | 89 | $ | 227 |
(a) | Realized gains and losses include the following items: (i) settlements of nondesignated derivatives related to current period production revenues, (ii) prior period settlements for option premiums and for early-terminated derivatives originally scheduled to settle against current period production revenues, and (iii) gains and losses related to de-designated cash flow hedges originally designated to settle against current period production revenues. Unrealized gains and losses include the change in fair value of open derivatives scheduled to settle against future period production revenues offset by amounts reclassified as realized gains and losses during the period. Although we no longer designate our derivatives as cash flow hedges for accounting purposes, we believe these definitions are useful to management and investors in determining the effectiveness of our price risk management program. |
(b) | Net of amounts capitalized. |
(c) | Realized (gains) losses include settlements related to the current period interest accrual and the effect of (gains) losses on early termination trades. Unrealized (gains) losses include changes in the fair value of open interest rate derivatives offset by amounts reclassified to realized (gains) losses during the period. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED CASH FLOW DATA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
Beginning cash | $ | 90 | $ | 987 | ||||
Cash provided by operating activities | 829 | 1,028 | ||||||
Cash flows from investing activities: | ||||||||
Drilling and completion costs on proved and unproved properties(a) | (1,367 | ) | (1,117 | ) | ||||
Acquisition of proved and unproved properties(b) | (280 | ) | (211 | ) | ||||
Sales of proved and unproved properties | 5,082 | 668 | ||||||
Geological and geophysical costs | (29 | ) | (17 | ) | ||||
Cash paid to purchase leased rigs and compressors | (25 | ) | (262 | ) | ||||
Additions to other property and equipment | (26 | ) | (71 | ) | ||||
Proceeds from sales of other assets | 39 | 126 | ||||||
Additions to investments | (3 | ) | (36 | ) | ||||
Other | 1 | — | ||||||
Total cash provided by (used in) investing activities | 3,392 | (920 | ) | |||||
Cash used in financing activities | (203 | ) | (258 | ) | ||||
Change in cash and cash equivalents | 4,018 | (150 | ) | |||||
Ending cash | $ | 4,108 | $ | 837 |
(a) | Includes capitalized interest of $9 million and $15 million for the three months ended December 31, 2014 and 2013, respectively. |
(b) | Includes capitalized interest of $120 million and $163 million for the three months ended December 31, 2014 and 2013, respectively. |
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
Beginning cash | $ | 837 | $ | 287 | ||||
Cash provided by operating activities | 4,634 | 4,614 | ||||||
Cash flows from investing activities: | ||||||||
Drilling and completion costs on proved and unproved properties(a) | (4,534 | ) | (5,552 | ) | ||||
Acquisition of proved and unproved properties(b) | (1,279 | ) | (974 | ) | ||||
Sales of proved and unproved properties | 5,781 | 3,409 | ||||||
Geological and geophysical costs | (47 | ) | (52 | ) | ||||
Cash paid to purchase leased rigs and compressors | (499 | ) | (266 | ) | ||||
Additions to other property and equipment | (227 | ) | (706 | ) | ||||
Proceeds from sales of other assets | 1,003 | 922 | ||||||
Additions to investments | (17 | ) | — | |||||
Proceeds from sales of investments | 239 | 71 | ||||||
Decrease in restricted cash | 37 | — | ||||||
Other | (3 | ) | 181 | |||||
Total cash provided by (used in) investing activities | 454 | (2,967 | ) | |||||
Cash used in financing activities | (1,817 | ) | (1,097 | ) | ||||
Change in cash and cash equivalents | 3,271 | 550 | ||||||
Ending cash | $ | 4,108 | $ | 837 |
(a) | Includes capitalized interest of $39 million and $62 million for the twelve months ended December 31, 2014 and 2013, respectively. |
(b) | Includes capitalized interest of $553 million and $734 million for the twelve months ended December 31, 2014 and 2013, respectively. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||
RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | ||||||||||||
($ in millions, except per share data) | ||||||||||||
(unaudited) | ||||||||||||
THREE MONTHS ENDED: | December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
Net income available to common stockholders | $ | 586 | $ | 169 | $ | (159 | ) | |||||
Adjustments, net of tax(a): | ||||||||||||
Unrealized (gains) losses on derivatives | (663 | ) | (378 | ) | 13 | |||||||
Restructuring and other termination costs | (3 | ) | (9 | ) | 28 | |||||||
Impairments of fixed assets and other | 10 | 9 | 126 | |||||||||
Net (gains) losses on sales of fixed assets | 2 | (53 | ) | (7 | ) | |||||||
Losses on purchases of debt and extinguishment of other financing | 2 | — | 76 | |||||||||
Losses on investments | — | — | 84 | |||||||||
Provision for legal contingencies | 94 | 61 | — | |||||||||
Other | 6 | 5 | — | |||||||||
Redemption of preferred shares of a subsidiary(a) | — | 447 | — | |||||||||
Adjusted net income available to common stockholders(b) | $ | 34 | $ | 251 | $ | 161 | ||||||
Preferred stock dividends | 43 | 43 | 43 | |||||||||
Earnings allocated to participating securities | 10 | 3 | — | |||||||||
Total adjusted net income attributable to Chesapeake | $ | 87 | $ | 297 | $ | 204 | ||||||
Weighted average fully diluted shares outstanding (in millions)(c) | 775 | 776 | 767 | |||||||||
Adjusted earnings per share assuming dilution(b) | $ | 0.11 | $ | 0.38 | $ | 0.27 |
(a) | All adjustments to net income available to common stockholders reflected net of tax other than the redemption of preferred shares of a subsidiary. |
(b) | Adjusted net income and adjusted earnings per share assuming dilution are not measures of financial performance under GAAP, and should not be considered as an alternative to net income available to common stockholders or diluted earnings per share. Adjusted net income available to common stockholders and adjusted earnings per share assuming dilution 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 accounting principles generally accepted in the United States (GAAP) because: |
(i) | Management uses adjusted net income available to common stockholders to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted net income available to common stockholders is more comparable to earnings estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
(c) | Weighted average fully diluted shares outstanding include shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | ||||||||
($ in millions, except per share data) | ||||||||
(unaudited) | ||||||||
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
Net income available to common stockholders | $ | 1,273 | $ | 474 | ||||
Adjustments, net of tax(a): | ||||||||
Unrealized gains on derivatives | (941 | ) | (100 | ) | ||||
Restructuring and other termination costs | 4 | 154 | ||||||
Impairments of fixed assets and other | 57 | 341 | ||||||
Net gains on sales of fixed assets | (128 | ) | (187 | ) | ||||
Impairments of investments | 3 | 6 | ||||||
Net (gain) loss on sales of investments | (43 | ) | 5 | |||||
Losses on purchases of debt and extinguishment of other financing | 126 | 120 | ||||||
Losses on investments | — | 84 | ||||||
Provision for legal contingencies | 150 | — | ||||||
Other | 9 | (1 | ) | |||||
Redemption of preferred shares of a subsidiary(a) | 447 | 69 | ||||||
Adjusted net income available to common stockholders(b) | $ | 957 | $ | 965 | ||||
Preferred stock dividends | 171 | 171 | ||||||
Earnings allocated to participating securities | 26 | 10 | ||||||
Total adjusted net income attributable to Chesapeake | $ | 1,154 | $ | 1,146 | ||||
Weighted average fully diluted shares outstanding (in millions)(c) | 776 | 765 | ||||||
Adjusted earnings per share assuming dilution(b) | $ | 1.49 | $ | 1.50 |
(a) | All adjustments to net income available to common stockholders reflected net of tax other than the redemption of preferred shares of a subsidiary. |
(i) | Management uses adjusted net income available to common stockholders to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted net income available to common stockholders is more comparable to earnings estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
(c) | Weighted average fully diluted shares outstanding include shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||
RECONCILIATION OF OPERATING CASH FLOW AND EBITDA | ||||||||||||
($ in millions) | ||||||||||||
(unaudited) | ||||||||||||
THREE MONTHS ENDED: | December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
CASH PROVIDED BY OPERATING ACTIVITIES | $ | 829 | $ | 1,184 | $ | 1,028 | ||||||
Changes in assets and liabilities | 44 | 109 | (33 | ) | ||||||||
OPERATING CASH FLOW(a) | $ | 873 | $ | 1,293 | $ | 995 |
THREE MONTHS ENDED: | December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
NET INCOME | $ | 668 | $ | 692 | $ | (74 | ) | |||||
Interest expense | 7 | 17 | 63 | |||||||||
Income tax expense (benefit) | 286 | 437 | (45 | ) | ||||||||
Depreciation and amortization of other assets | 38 | 37 | 80 | |||||||||
Oil, natural gas and NGL depreciation, depletion and amortization | 706 | 688 | 644 | |||||||||
EBITDA(b) | $ | 1,705 | $ | 1,871 | $ | 668 |
THREE MONTHS ENDED: | December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
CASH PROVIDED BY OPERATING ACTIVITIES | $ | 829 | $ | 1,184 | $ | 1,028 | ||||||
Changes in assets and liabilities | 44 | 109 | (33 | ) | ||||||||
Interest expense, net of unrealized gains (losses) on derivatives | 38 | 11 | 53 | |||||||||
Oil, natural gas and NGL derivative gains (losses), net | 1,049 | 564 | (13 | ) | ||||||||
Cash receipts (payments) on oil, natural gas and NGL derivative settlements, net | (88 | ) | 34 | 30 | ||||||||
Stock-based compensation | — | (19 | ) | (20 | ) | |||||||
Restructuring and other termination costs | (3 | ) | 42 | (11 | ) | |||||||
Impairments of fixed assets and other | (14 | ) | (15 | ) | (166 | ) | ||||||
Net gains (losses) on sales of fixed assets | (2 | ) | 86 | 12 | ||||||||
Losses on investments | (7 | ) | (27 | ) | (189 | ) | ||||||
Provision for legal contingencies | (134 | ) | (100 | ) | — | |||||||
Losses on purchases of debt and extinguishment of other financing | (2 | ) | — | (3 | ) | |||||||
Other items | (5 | ) | 2 | (20 | ) | |||||||
EBITDA(b) | $ | 1,705 | $ | 1,871 | $ | 668 |
(a) | Operating cash flow represents net cash provided by operating activities before changes in assets and liabilities. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Operating cash flow is widely accepted as a financial indicator of an oil and natural gas company's ability to generate cash that is used to internally fund exploration and development activities and to service debt. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Operating cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities as an indicator of cash flows, or as a measure of liquidity. |
(b) | Ebitda represents net income before interest expense, income taxes, and depreciation, depletion and amortization expense. Ebitda is presented as a supplemental financial measurement in the evaluation of our business. We believe that it provides additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Ebitda is also a financial measurement that, with certain negotiated adjustments, is reported to our lenders pursuant to our bank credit agreements and is used in the financial covenants in our bank credit agreements. Ebitda is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations or cash flow provided by operating activities prepared in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
RECONCILIATION OF OPERATING CASH FLOW AND EBITDA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES | $ | 4,634 | $ | 4,614 | ||||
Changes in assets and liabilities | 392 | 344 | ||||||
OPERATING CASH FLOW(a) | $ | 5,026 | $ | 4,958 |
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
NET INCOME | $ | 2,056 | $ | 894 | ||||
Interest expense | 89 | 227 | ||||||
Income tax expense | 1,144 | 548 | ||||||
Depreciation and amortization of other assets | 232 | 314 | ||||||
Oil, natural gas and NGL depreciation, depletion and amortization | 2,683 | 2,589 | ||||||
EBITDA(b) | $ | 6,204 | $ | 4,572 |
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES | $ | 4,634 | $ | 4,614 | ||||
Changes in assets and liabilities | 392 | 344 | ||||||
Interest expense, net of unrealized gains (losses) on derivatives | 161 | 159 | ||||||
Oil, natural gas and NGL derivative gains (losses), net | 1,018 | 129 | ||||||
Cash receipts on oil, natural gas and NGL derivative settlements, net | 264 | 91 | ||||||
Stock-based compensation | (59 | ) | (98 | ) | ||||
Restructuring and other termination costs | 15 | (175 | ) | |||||
Impairments of fixed assets and other | (58 | ) | (483 | ) | ||||
Net gains on sales of fixed assets | 199 | 302 | ||||||
Provision for legal contingencies | (234 | ) | — | |||||
Losses on investments | (80 | ) | (229 | ) | ||||
Net gain (loss) on sales of investments | 67 | (7 | ) | |||||
Losses on purchases of debt and extinguishment of other financing | (63 | ) | (40 | ) | ||||
Other items | (52 | ) | (35 | ) | ||||
EBITDA(b) | $ | 6,204 | $ | 4,572 |
(a) | Operating cash flow represents net cash provided by operating activities before changes in assets and liabilities. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Operating cash flow is widely accepted as a financial indicator of an oil and natural gas company's ability to generate cash which is used to internally fund exploration and development activities and to service debt. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Operating cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities as an indicator of cash flows, or as a measure of liquidity. |
(b) | Ebitda represents net income before interest expense, income taxes, and depreciation, depletion and amortization expense. Ebitda is presented as a supplemental financial measurement in the evaluation of our business. We believe that it provides additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Ebitda is also a financial measurement that, with certain negotiated adjustments, is reported to our lenders pursuant to our bank credit agreements and is used in the financial covenants in our bank credit agreements. Ebitda is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations or cash flow provided by operating activities prepared in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||
RECONCILIATION OF ADJUSTED EBITDA | ||||||||||||
($ in millions) | ||||||||||||
(unaudited) | ||||||||||||
THREE MONTHS ENDED: | December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
EBITDA | $ | 1,705 | $ | 1,871 | $ | 668 | ||||||
Adjustments: | ||||||||||||
Unrealized (gains) losses on oil, natural gas and NGL derivatives | (916 | ) | (622 | ) | 11 | |||||||
Restructuring and other termination costs | (5 | ) | (14 | ) | 45 | |||||||
Impairments of fixed assets and other | 14 | 15 | 203 | |||||||||
Net (gains) losses on sales of fixed assets | 3 | (86 | ) | (12 | ) | |||||||
Net loss on sales of investments | — | — | 136 | |||||||||
Losses on purchases of debt and extinguishment of other financing | 2 | — | 123 | |||||||||
Provision for legal contingencies | 134 | 100 | — | |||||||||
Net income attributable to noncontrolling interests | (29 | ) | (30 | ) | (42 | ) | ||||||
Other | 8 | 2 | — | |||||||||
Adjusted EBITDA(a) | $ | 916 | $ | 1,236 | $ | 1,132 |
TWELVE MONTHS ENDED: | December 31, 2014 | December 31, 2013 | ||||||
EBITDA | $ | 6,204 | $ | 4,572 | ||||
Adjustments: | ||||||||
Unrealized gains on oil, natural gas and NGL derivatives | (1,394 | ) | (228 | ) | ||||
Restructuring and other termination costs | 7 | 248 | ||||||
Impairments of fixed assets and other | 88 | 550 | ||||||
Net gains on sales of fixed assets | (199 | ) | (302 | ) | ||||
Losses on investments | 5 | 146 | ||||||
Net (gain) loss on sales of investments | (67 | ) | 7 | |||||
Losses on purchases of debt and extinguishment of other financing | 197 | 193 | ||||||
Provision for legal contingencies | 234 | — | ||||||
Net income attributable to noncontrolling interests | (139 | ) | (170 | ) | ||||
Other | 9 | — | ||||||
Adjusted EBITDA(a) | $ | 4,945 | $ | 5,016 |
(a) | Adjusted ebitda excludes certain items that management believes affect the comparability of operating results. The company believes these non-GAAP financial measures are a useful adjunct to ebitda because: |
(i) | Management uses adjusted ebitda to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted ebitda is more comparable to estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
Year Ending 12/31/2015 | |
Adjusted Production Growth(a) | 3% - 5% |
Absolute Production | |
Liquids - mbbls | 62 – 64 |
Oil - mbbls | 39 – 40 |
NGL(b) - mbbls | 23 – 24 |
Natural gas - bcf | 1,035 – 1,055 |
Total absolute production - mmboe | 235 – 240 |
Absolute daily rate - mboe | 645 – 655 |
Estimated Realized Hedging Effects(c) (based on 2/23/15 strip prices): | |
Oil - $/bbl | $19.94 |
Natural gas - $/mcf | $0.31 |
Estimated Basis/Gathering/Marketing/Transportation Differentials to NYMEX Prices: | |
Oil - $/bbl | $7.00 – 9.00 |
NGL - $/bbl | $48.00 – 52.00 |
Natural gas - $/mcf | $1.70 – 1.90 |
Fourth quarter MVC estimate ($ in millions) | ($180) – (200) |
Operating Costs per Boe of Projected Production: | |
Production expense | $4.50 – 5.00 |
Production taxes | $0.45 – 0.55 |
General and administrative(d) | $1.45 – 1.55 |
Stock-based compensation (noncash) | $0.20 – 0.25 |
DD&A of natural gas and liquids assets | $10.50 – 11.50 |
Depreciation of other assets | $0.60 – 0.70 |
Interest expense(e) | $1.00 – 1.10 |
Other ($ millions): | |
Marketing, gathering and compression net margin(f) | ($40 – 60) |
Net income attributable to noncontrolling interests and other(g) | ($30 – 50) |
Book Tax Rate | 37% |
Capital Expenditures ($ in millions)(h) | $3,500 – 4,000 |
Capitalized Interest ($ in millions) | $500 |
Total Capital Expenditures ($ in millions) | $4,000 – 4,500 |
(a) | Based on 2014 production of 622 mboe/day adjusted for 2014 sales and the potential sale of Cleveland Tonkawa assets in 2015. |
(b) | Assumes ethane recovery in the Utica to fulfill Chesapeake’s pipeline commitments, no ethane recovery in the Powder River Basin and partial ethane recovery in the Mid-Continent and Eagle Ford. |
(c) | Includes expected settlements for commodity derivatives adjusted for option premiums. For derivatives closed early, settlements are reflected in the period of original contract expiration. |
(d) | Excludes expenses associated with stock-based compensation. |
(e) | Excludes unrealized gains (losses) on interest rate derivatives. |
(f) | Includes revenue and operating expenses and excludes depreciation and amortization of other assets |
(g) | Net income attributable to noncontrolling interests of Chesapeake Granite Wash Trust and CHK Cleveland Tonkawa L.L.C. |
(h) | Includes capital expenditures for drilling and completion, acquisition of unproved properties, geological and geophysical costs and other property and plant and equipment |
Open Crude Oil Swaps; Gains (Losses) from Closed | |||||||||
Crude Oil Trades and Call Option Premiums | |||||||||
Open Swaps (mbbls) | Avg. NYMEX Price of Open Swaps | Total Gains from Closed Trades and Premiums for Call Options ($ in millions) | |||||||
Q1 2015 | 3,834 | $ | 94.07 | $ | 50 | ||||
Q2 2015 | 3,041 | 94.49 | 61 | ||||||
Q3 2015 | 2,868 | 94.82 | 62 | ||||||
Q4 2015 | 2,714 | 95.15 | 63 | ||||||
Total 2015 | 12,457 | $ | 94.58 | $ | 236 | ||||
Total 2016 – 2022 | — | — | $ | 117 |
Crude Oil Three-Way Collars | ||||||||||
Open Collars (mbbls) | Avg. NYMEX Sold Put Price | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | |||||||
Q1 2015 | 1,080 | $ | 80.00 | $ | 90.00 | $ | 98.94 | |||
Q2 2015 | 1,092 | 80.00 | 90.00 | 98.94 | ||||||
Q3 2015 | 1,104 | 80.00 | 90.00 | 98.94 | ||||||
Q4 2015 | 1,104 | 80.00 | 90.00 | 98.94 | ||||||
Total 2015 | 4,380 | $ | 80.00 | $ | 90.00 | $ | 98.94 |
Crude Oil Net Written Call Options | ||||
Call Options (mbbls) | Avg. NYMEX Strike Price | |||
Q1 2015 | 1,485 | $ | 100.00 | |
Q2 2015 | 3,349 | 91.89 | ||
Q3 2015 | 3,386 | 91.89 | ||
Q4 2015 | 3,386 | 91.89 | ||
Total 2015 | 11,606 | $ | 92.93 | |
Total 2016 – 2017 | 24,220 | $ | 100.07 |
Open Natural Gas Swaps; Gains (Losses) from Closed | |||||||||
Natural Gas Trades and Call Option Premiums | |||||||||
Open Swaps (bcf) | Avg. NYMEX Price of Open Swaps | Total Gains (Losses) from Closed Trades and Premiums for Call Options ($ in millions) | |||||||
Q1 2015 | 81 | $ | 4.53 | $ | (39 | ) | |||
Q2 2015 | 53 | 3.95 | (30 | ) | |||||
Q3 2015 | 52 | 3.94 | (31 | ) | |||||
Q4 2015 | 52 | 3.94 | (31 | ) | |||||
Total 2015 | 238 | $ | 4.14 | $ | (131 | ) | |||
Total 2016 – 2022 | 37 | $ | 3.95 | $ | (187 | ) |
Natural Gas Three-Way Collars | ||||||||||
Open Collars (bcf) | Avg. NYMEX Sold Put Price | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | |||||||
Q1 2015 | 100 | $ | 3.36 | $ | 4.42 | $ | 4.65 | |||
Q2 2015 | 35 | 3.38 | 4.17 | 4.37 | ||||||
Q3 2015 | 36 | 3.38 | 4.17 | 4.37 | ||||||
Q4 2015 | 36 | 3.38 | 4.17 | 4.37 | ||||||
Total 2015 | 207 | $ | 3.37 | $ | 4.29 | $ | 4.51 |
Natural Gas Net Written Call Options | ||||
Call Options (bcf) | Avg. NYMEX Strike Price | |||
Total 2016 – 2020 | 193 | $ | 9.92 |
Natural Gas Basis Protection Swaps | ||||
Volume (bcf) | Avg. NYMEX plus/(minus) | |||
Q1 2015 | 28 | $ | 1.28 | |
Q2 2015 | 8 | (0.34 | ) | |
Q3 2015 | 8 | (0.33 | ) | |
Q4 2015 | 8 | (0.33 | ) | |
Total 2015 | 52 | $ | 0.55 | |
Total 2016 - 2022 | 8 | $ | (1.02 | ) |