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) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). | ||
Emerging growth company | o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | o |
CHESAPEAKE ENERGY CORPORATION | |
By: | /s/ JAMES R. WEBB |
James R. Webb | |
Executive Vice President - General Counsel and Corporate Secretary |
Exhibit No. | Document Description | |
Chesapeake Energy Corporation press release dated May 4, 2017 | ||
Exhibit 99.1 | |
N E W S R E L E A S E | ![]() |
• | Average 2017 first quarter production of 528,000 boe per day, above midpoint of guidance of 515,000 to 535,000 boe per day |
• | Oil production expected to reach 100,000 barrels per day by year-end 2017; average 2017 first quarter oil production of 83,700 barrels per day, above midpoint of guidance of 80,000 to 85,000 barrels per day |
• | Combined production and G&A expenses per boe down 2% quarter over quarter |
• | Gathering, processing and transportation expenses per boe down 6% quarter over quarter |
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 |
2017 | 2016 | 2016 | |||||||
Operated activity comparison | Q1 | Q4 | Q1 | ||||||
Average rig count | 16 | 12 | 8 | ||||||
Gross wells spud | 87 | 60 | 41 | ||||||
Gross wells completed | 99 | 82 | 57 | ||||||
Gross wells connected | 76 | 110 | 80 | ||||||
Type of cost ($ in millions) | |||||||||
Drilling and completion costs | $ | 506 | $ | 365 | $ | 281 | |||
Exploration costs, leasehold and additions to other PP&E | 19 | 38 | 16 | ||||||
Subtotal capital expenditures | $ | 525 | $ | 403 | $ | 297 | |||
Capitalized interest | 51 | 60 | 68 | ||||||
Total capital expenditures | $ | 576 | $ | 463 | $ | 365 |
2017 | 2016 | 2016 | |
Operating area net production (mboe/day) | Q1 | Q4 | Q1 |
Eagle Ford | 96 | 104 | 91 |
Haynesville (1) | 121 | 135 | 112 |
Marcellus | 146 | 134 | 144 |
Utica | 96 | 108 | 138 |
Mid-Continent | 57 | 53 | 93 |
Powder River Basin | 12 | 12 | 17 |
Barnett | — | 19 | 69 |
Other | — | 10 | 8 |
Total production | 528 | 575 | 672 |
Three Months Ended | |||||||||
03/31/17 | 12/31/16 | 03/31/16 | |||||||
Oil equivalent production (in mmboe) | 48 | 53 | 61 | ||||||
Oil production (in mmbbls) | 8 | 8 | 9 | ||||||
Average realized oil price ($/bbl)(a) | 51.72 | 47.37 | 37.74 | ||||||
Natural gas production (in bcf) | 211 | 236 | 276 | ||||||
Average realized natural gas price ($/mcf)(a) | 3.02 | 2.41 | 2.29 | ||||||
NGL production (in mmbbls) | 5 | 5 | 6 | ||||||
Average realized NGL price ($/bbl)(a) | 24.04 | 20.90 | 11.44 | ||||||
Production expenses ($/boe) | (2.84 | ) | (2.98 | ) | (3.36 | ) | |||
Gathering, processing and transportation expenses ($/boe) | (7.47 | ) | (7.92 | ) | (7.88 | ) | |||
Oil - ($/bbl) | (3.85 | ) | (3.87 | ) | (3.29 | ) | |||
Natural Gas - ($/mcf) | (1.35 | ) | (1.46 | ) | (1.46 | ) | |||
NGL - ($/bbl) | (8.47 | ) | (8.05 | ) | (7.59 | ) | |||
Production taxes ($/boe) | (0.47 | ) | (0.38 | ) | (0.30 | ) | |||
General and administrative expenses ($/boe)(b) | (1.18 | ) | (1.11 | ) | (0.66 | ) | |||
Stock-based compensation ($/boe) | (0.17 | ) | (0.17 | ) | (0.13 | ) | |||
DD&A of oil and natural gas properties ($/boe) | (4.15 | ) | (4.03 | ) | (4.30 | ) | |||
DD&A of other assets ($/boe) | (0.44 | ) | (0.40 | ) | (0.48 | ) | |||
Interest expense ($/boe)(a) | (1.97 | ) | (1.61 | ) | (0.98 | ) | |||
Marketing, gathering and compression net margin ($ in millions)(c) | (44 | ) | (25 | ) | 18 | ||||
Net cash provided by (used in) operating activities ($ in millions) | 99 | (254 | ) | (421 | ) | ||||
Net cash provided by (used in) operating activities ($/boe) | 2.06 | (4.79 | ) | (6.90 | ) | ||||
Operating cash flow ($ in millions)(d) | (14 | ) | (120 | ) | 263 | ||||
Operating cash flow ($/boe) | (0.29 | ) | (2.27 | ) | 4.29 | ||||
Adjusted ebitda ($ in millions)(e) | 525 | 385 | 282 | ||||||
Adjusted ebitda ($/boe) | 11.05 | 7.28 | 4.61 | ||||||
Net income (loss) available to common stockholders ($ in millions) | 75 | (740 | ) | (1,111 | ) | ||||
Income (loss) per share – diluted ($) | 0.08 | (0.83 | ) | (1.66 | ) | ||||
Adjusted net income (loss) attributable to Chesapeake ($ in millions)(f) | 212 | 64 | (69 | ) | |||||
Adjusted income (loss) per share ($)(g) | 0.23 | 0.07 | (0.11 | ) |
(a) | Includes the effects of realized gains (losses) from hedging, but excludes the effects of unrealized gains (losses) from hedging. |
(b) | Excludes expenses associated with stock-based compensation and restructuring and other termination costs. |
(c) | Includes revenue, operating expenses and for the three months ended March 31, 2016, unrealized gains (losses) on supply contract derivatives, but excludes depreciation and amortization of other assets. For the three months ended March 31, 2016, unrealized gains were $20 million. No other period had such gains (losses). |
(d) | Defined as cash flow provided by operating activities before changes in assets and liabilities. Operating cash flow for the three months ended March 31, 2017 includes $290 million paid to assign an oil transportation agreement to a third party and $103 million paid to terminate future natural gas transportation commitments. |
(e) | Defined as net income before interest expense, income taxes and depreciation, depletion and amortization expense, as adjusted to remove the effects of certain items detailed on page 14. |
(f) | Defined as net income (loss) attributable to Chesapeake, as adjusted to remove the effects of certain items detailed on pages 11 - 12. |
(g) | Our presentation of diluted adjusted net income (loss) per share excludes shares considered antidilutive when calculating diluted earnings per share in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
($ in millions, except per share data) | ||||||||
(unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
REVENUES: | ||||||||
Oil, natural gas and NGL | $ | 1,469 | $ | 993 | ||||
Marketing, gathering and compression | 1,284 | 960 | ||||||
Total Revenues | 2,753 | 1,953 | ||||||
OPERATING EXPENSES: | ||||||||
Oil, natural gas and NGL production | 135 | 206 | ||||||
Oil, natural gas and NGL gathering, processing and transportation | 355 | 482 | ||||||
Production taxes | 22 | 18 | ||||||
Marketing, gathering and compression | 1,328 | 942 | ||||||
General and administrative | 65 | 48 | ||||||
Provision for legal contingencies | (2 | ) | 33 | |||||
Oil, natural gas and NGL depreciation, depletion and amortization | 197 | 263 | ||||||
Depreciation and amortization of other assets | 21 | 29 | ||||||
Impairment of oil and natural gas properties | — | 997 | ||||||
Impairments of fixed assets and other | 391 | 38 | ||||||
Net gains on sales of fixed assets | — | (4 | ) | |||||
Total Operating Expenses | 2,512 | 3,052 | ||||||
INCOME (LOSS) FROM OPERATIONS | 241 | (1,099 | ) | |||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense | (95 | ) | (62 | ) | ||||
Loss on sale of investment | — | (10 | ) | |||||
Gains (losses) on purchases or exchanges of debt | (7 | ) | 100 | |||||
Other income | 3 | 3 | ||||||
Total Other Income (Expense) | (99 | ) | 31 | |||||
INCOME (LOSS) BEFORE INCOME TAXES | 142 | (1,068 | ) | |||||
Income Tax Expense | 1 | — | ||||||
NET INCOME (LOSS) | 141 | (1,068 | ) | |||||
Net income attributable to noncontrolling interests | (1 | ) | — | |||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | 140 | (1,068 | ) | |||||
Preferred stock dividends | (23 | ) | (43 | ) | ||||
Loss on exchange of preferred stock | (41 | ) | — | |||||
Earnings allocated to participating securities | (1 | ) | — | |||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | $ | 75 | $ | (1,111 | ) | |||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||
Basic | $ | 0.08 | $ | (1.66 | ) | |||
Diluted | $ | 0.08 | $ | (1.66 | ) | |||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): | ||||||||
Basic | 906 | 668 | ||||||
Diluted | 907 | 668 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
March 31, 2017 | December 31, 2016 | |||||||
Cash and cash equivalents | $ | 249 | $ | 882 | ||||
Other current assets | 1,111 | 1,260 | ||||||
Total Current Assets | 1,360 | 2,142 | ||||||
Property and equipment, (net) | 10,081 | 10,609 | ||||||
Other assets | 258 | 277 | ||||||
Total Assets | $ | 11,699 | $ | 13,028 | ||||
Current liabilities | $ | 2,788 | $ | 3,648 | ||||
Long-term debt, net | 9,509 | 9,938 | ||||||
Other long-term liabilities | 605 | 645 | ||||||
Total Liabilities | 12,902 | 14,231 | ||||||
Preferred stock | 1,671 | 1,771 | ||||||
Noncontrolling interests | 256 | 257 | ||||||
Common stock and other stockholders’ equity | (3,130 | ) | (3,231 | ) | ||||
Total Equity (Deficit) | (1,203 | ) | (1,203 | ) | ||||
Total Liabilities and Equity | $ | 11,699 | $ | 13,028 | ||||
Common shares outstanding (in millions) | 908 | 896 | ||||||
Principal amount of debt outstanding | $ | 9,081 | $ | 9,989 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
SUPPLEMENTAL DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND INTEREST EXPENSE | ||||||||
(unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Net Production: | ||||||||
Oil (mmbbl) | 8 | 9 | ||||||
Natural gas (bcf) | 211 | 276 | ||||||
NGL (mmbbl) | 5 | 6 | ||||||
Oil equivalent (mmboe) | 48 | 61 | ||||||
Oil, natural gas and NGL Sales ($ in millions): | ||||||||
Oil sales | $ | 378 | $ | 255 | ||||
Oil derivatives – realized gains (losses)(a) | 11 | 73 | ||||||
Oil derivatives – unrealized gains (losses)(a) | 94 | (72 | ) | |||||
Total oil sales | 483 | 256 | ||||||
Natural gas sales | 653 | 483 | ||||||
Natural gas derivatives – realized gains (losses)(a) | (16 | ) | 150 | |||||
Natural gas derivatives – unrealized gains (losses)(a) | 231 | 30 | ||||||
Total natural gas sales | 868 | 663 | ||||||
NGL sales | 116 | 74 | ||||||
NGL derivatives – realized gains (losses)(a) | 1 | — | ||||||
NGL derivatives – unrealized gains (losses)(a) | 1 | — | ||||||
Total NGL sales | 118 | 74 | ||||||
Total oil, natural gas and NGL sales | $ | 1,469 | $ | 993 | ||||
Average Sales Price – excluding gains (losses) on derivatives: | ||||||||
Oil ($ per bbl) | $ | 50.24 | $ | 29.34 | ||||
Natural gas ($ per mcf) | $ | 3.10 | $ | 1.75 | ||||
NGL ($ per bbl) | $ | 23.78 | $ | 11.44 | ||||
Oil equivalent ($ per boe) | $ | 24.13 | $ | 13.28 | ||||
Average Sales Price – including realized gains (losses) on derivatives: | ||||||||
Oil ($ per bbl) | $ | 51.72 | $ | 37.74 | ||||
Natural gas ($ per mcf) | $ | 3.02 | $ | 2.29 | ||||
NGL ($ per bbl) | $ | 24.04 | $ | 11.44 | ||||
Oil equivalent ($ per boe) | $ | 24.06 | $ | 16.93 | ||||
Interest Expense ($ in millions): | ||||||||
Interest expense(b) | $ | 94 | $ | 62 | ||||
Interest rate derivatives – realized (gains) losses(c) | (1 | ) | (3 | ) | ||||
Interest rate derivatives – unrealized (gains) losses(c) | 2 | 3 | ||||||
Total Interest Expense | $ | 95 | $ | 62 |
(a) | Realized gains and losses include the following items: (i) settlements and accruals for settlements of nondesignated derivatives related to current period production revenues, (ii) prior period settlements for option premiums and for early-terminated derivatives originally scheduled to settle against current period production revenues, and (iii) gains and losses related to de-designated cash flow hedges originally designated to settle against current period production revenues. Unrealized gains and losses include the change in fair value of open derivatives scheduled to settle against future period production revenues offset by amounts reclassified as realized gains and losses during the period. Although we no longer designate our derivatives as cash flow hedges for accounting purposes, we believe these definitions are useful to management and investors in determining the effectiveness of our price risk management program. |
(b) | Net of amounts capitalized. |
(c) | Realized (gains) losses include settlements related to the current period interest accrual and the effect of (gains) losses on early termination trades. Unrealized (gains) losses include changes in the fair value of open interest rate derivatives offset by amounts reclassified to realized (gains) losses during the period. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED CASH FLOW DATA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED: | March 31, 2017 | March 31, 2016 | ||||||
Beginning cash | $ | 882 | $ | 825 | ||||
Net cash provided by (used in) operating activities | 99 | (421 | ) | |||||
Cash flows from investing activities: | ||||||||
Drilling and completion costs(a) | (433 | ) | (265 | ) | ||||
Acquisitions of proved and unproved properties(b) | (95 | ) | (67 | ) | ||||
Proceeds from divestitures of proved and unproved properties | 892 | 62 | ||||||
Additions to other property and equipment(c) | (3 | ) | (10 | ) | ||||
Proceeds from sales of other property and equipment | 19 | 9 | ||||||
Other | — | (2 | ) | |||||
Net cash provided by (used in) investing activities | 380 | (273 | ) | |||||
Net cash used in financing activities | (1,112 | ) | (115 | ) | ||||
Change in cash and cash equivalents | (633 | ) | (809 | ) | ||||
Ending cash | $ | 249 | $ | 16 |
(a) | Includes capitalized interest of $2 million and $2 million for the three months ended March 31, 2017 and 2016, respectively. |
(b) | Includes capitalized interest of $49 million and $64 million for the three months ended March 31, 2017 and 2016, respectively. |
(c) | Includes capitalized interest of a nominal amount and $1 million for the three months ended March 31, 2017 and 2016, respectively. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||
RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | ||||||||||
(in millions, except per share data) | ||||||||||
(unaudited) | ||||||||||
THREE MONTHS ENDED: | March 31, 2017 | |||||||||
$ | Shares(a) | $/Share(c) (d) | ||||||||
Net income available to common stockholders | $ | 75 | 907 | $ | 0.08 | |||||
Adjustments: | ||||||||||
Unrealized gains on commodity derivatives | (326 | ) | (0.36 | ) | ||||||
Provision for legal contingencies | (2 | ) | — | |||||||
Impairments of fixed assets and other | 391 | 0.43 | ||||||||
Losses on purchases or exchanges of debt | 7 | 0.01 | ||||||||
Loss on exchange of preferred stock | 41 | 0.05 | ||||||||
Income tax expense (benefit)(b) | — | — | ||||||||
Other | 2 | — | ||||||||
Adjusted net income available to common stockholders(c) (Non-GAAP) | 188 | 907 | 0.21 | |||||||
Preferred stock dividends | 23 | 0.02 | ||||||||
Earnings allocated to participating securities | 1 | — | ||||||||
Total adjusted net income attributable to Chesapeake(c) (d) (Non-GAAP) | $ | 212 | 907 | $ | 0.23 |
(a) | Weighted average common and common equivalent shares outstanding for GAAP and non-GAAP purposes do not include 208 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. |
(b) | Due to our valuation allowance position, no income tax effect from the adjustments has been included in determining adjusted net income. |
(c) | Adjusted net income and adjusted earnings per common share are not measures of financial performance under accounting principles generally accepted in the United States (GAAP), and should not be considered as an alternative to net income available to common stockholders or earnings per share. Adjusted net income available to common stockholders and adjusted earnings per share exclude certain items that management believes affect the comparability of operating results. The company believes these adjusted financial measures are a useful adjunct to earnings calculated in accordance with GAAP because: |
(i) | Management uses adjusted net income available to common stockholders to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted net income available to common stockholders is more comparable to earnings estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
(d) | Our presentation of diluted adjusted net income (loss) per share excludes shares considered antidilutive when calculating diluted earnings per share in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||
RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | ||||||||||
(in millions, except per share data) | ||||||||||
(unaudited) | ||||||||||
THREE MONTHS ENDED: | March 31, 2016 | |||||||||
$ | Shares(a) | $/Share(b) (c) | ||||||||
Net loss available to common stockholders | $ | (1,111 | ) | 668 | $ | (1.66 | ) | |||
Adjustments: | ||||||||||
Unrealized losses on commodity derivatives | 42 | 0.06 | ||||||||
Unrealized gains on supply contract derivatives | (20 | ) | (0.03 | ) | ||||||
Provision for legal contingencies | 33 | 0.05 | ||||||||
Impairment of oil and natural gas properties | 997 | 1.49 | ||||||||
Impairments of fixed assets and other | 38 | 0.06 | ||||||||
Net gains on sales of fixed assets | (4 | ) | (0.01 | ) | ||||||
Loss on sale of investment | 10 | 0.01 | ||||||||
Gains on purchases or exchanges of debt | (100 | ) | (0.14 | ) | ||||||
Income tax expense (benefit)(b) | — | — | ||||||||
Other | 3 | — | ||||||||
Adjusted net loss available to common stockholders(c) (Non-GAAP) | (112 | ) | 668 | (0.17 | ) | |||||
Preferred stock dividends | 43 | 0.06 | ||||||||
Total adjusted net loss attributable to Chesapeake(c) (d) (Non-GAAP) | $ | (69 | ) | 668 | $ | (0.11 | ) |
(a) | Weighted average common and common equivalent shares outstanding for GAAP and non-GAAP purposes do not include 113 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. |
(c) | Adjusted net income and adjusted earnings per common share are not measures of financial performance under accounting principles generally accepted in the United States (GAAP), and should not be considered as an alternative to net income available to common stockholders or earnings per share. Adjusted net income available to common stockholders and adjusted earnings per share exclude certain items that management believes affect the comparability of operating results. The company believes these adjusted financial measures are a useful adjunct to earnings calculated in accordance with GAAP because: |
(i) | Management uses adjusted net income available to common stockholders to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted net income available to common stockholders is more comparable to earnings estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
(d) | Our presentation of diluted adjusted net income (loss) per share excludes shares considered antidilutive when calculating diluted earnings per share in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
RECONCILIATION OF OPERATING CASH FLOW AND EBITDA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED: | March 31, 2017 | March 31, 2016 | ||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | 99 | $ | (421 | ) | |||
Changes in assets and liabilities | (113 | ) | 684 | |||||
OPERATING CASH FLOW(a) | $ | (14 | ) | $ | 263 |
THREE MONTHS ENDED: | March 31, 2017 | March 31, 2016 | ||||||
NET INCOME (LOSS) | $ | 141 | $ | (1,068 | ) | |||
Interest expense | 95 | 62 | ||||||
Income tax expense | 1 | — | ||||||
Depreciation and amortization of other assets | 21 | 29 | ||||||
Oil, natural gas and NGL depreciation, depletion and amortization | 197 | 263 | ||||||
EBITDA(b) | $ | 455 | $ | (714 | ) |
THREE MONTHS ENDED: | March 31, 2017 | March 31, 2016 | ||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | 99 | $ | (421 | ) | |||
Changes in assets and liabilities | (113 | ) | 684 | |||||
Interest expense, net of unrealized gains (losses) on derivatives | 93 | 59 | ||||||
Gains (losses) on commodity derivatives, net | 322 | 181 | ||||||
Gains on supply contract derivatives, net | — | 20 | ||||||
Cash (receipts) payments on commodity and supply contract derivative settlements, net | 34 | (267 | ) | |||||
Stock-based compensation | (11 | ) | (12 | ) | ||||
Provision for legal contingencies | 2 | (33 | ) | |||||
Impairment of oil and natural gas properties | — | (997 | ) | |||||
Impairments of fixed assets and other | 3 | (33 | ) | |||||
Net gains on sales of fixed assets | — | 4 | ||||||
Investment activity | — | (10 | ) | |||||
Gains (losses) on purchases or exchanges of debt | (6 | ) | 100 | |||||
Other items | 32 | 11 | ||||||
EBITDA(b) | $ | 455 | $ | (714 | ) |
(a) | Operating cash flow represents net cash provided by operating activities before changes in assets and liabilities. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Operating cash flow is widely accepted as a financial indicator of an oil and natural gas company's ability to generate cash that is used to internally fund exploration and development activities and to service debt. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Operating cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities as an indicator of cash flows, or as a measure of liquidity. Operating cash flow for the three months ended March 31, 2017 includes $290 million paid to assign an oil transportation agreement to a third party and $103 million paid to terminate future natural gas transportation commitments. |
(b) | Ebitda represents net income before interest expense, income taxes, and depreciation, depletion and amortization expense. Ebitda is presented as a supplemental financial measurement in the evaluation of our business. We believe that it provides additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Ebitda is also a financial measurement that, with certain negotiated adjustments, is reported to our lenders pursuant to our bank credit agreements and is used in the financial covenants in our bank credit agreements. Ebitda is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations or cash flow provided by operating activities prepared in accordance with GAAP. |
CHESAPEAKE ENERGY CORPORATION | ||||||||
RECONCILIATION OF ADJUSTED EBITDA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED: | March 31, 2017 | March 31, 2016 | ||||||
EBITDA | $ | 455 | $ | (714 | ) | |||
Adjustments: | ||||||||
Unrealized gains on commodity derivatives | (326 | ) | 42 | |||||
Unrealized gains on supply contract derivatives | — | (20 | ) | |||||
Provision for legal contingencies | (2 | ) | 33 | |||||
Impairment of oil and natural gas properties | — | 997 | ||||||
Impairments of fixed assets and other | 391 | 38 | ||||||
Net (gains) losses on sales of fixed assets | — | (4 | ) | |||||
Loss on sale of investment | — | 10 | ||||||
(Gains) losses on purchases or exchanges of debt | 7 | (100 | ) | |||||
Net income attributable to noncontrolling interests | (1 | ) | — | |||||
Other | 1 | — | ||||||
Adjusted EBITDA(a) | $ | 525 | $ | 282 |
(a) | Adjusted ebitda excludes certain items that management believes affect the comparability of operating results. The company believes these non-GAAP financial measures are a useful adjunct to ebitda because: |
(i) | Management uses adjusted ebitda to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. |
(ii) | Adjusted ebitda is more comparable to estimates provided by securities analysts. |
(iii) | Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the company generally excludes information regarding these types of items. |
CHESAPEAKE ENERGY CORPORATION | ||
RECONCILIATION OF PV-9 AND PV-10 TO STANDARDIZED MEASURE | ||
($ in millions) | ||
(unaudited) |
PV-9 – March 31, 2017 @ NYMEX Strip | $ | 9,237 | |
Less: Change in discount factor from 9 to 10 | (503 | ) | |
PV-10 – March 31, 2017 @ NYMEX Strip | 8,734 | ||
Less: Change in pricing assumption from NYMEX Strip to SEC | (2,281 | ) | |
PV-10 – March 31, 2017 @ SEC | 6,453 | ||
Less: Change in PV-10 from 12/31/16 to 3/31/2017 | (2,048 | ) | |
PV-10 – December 31, 2016 @ SEC | 4,405 | ||
Less: Present value of future income tax discounted at 10% | (26 | ) | |
Standardized measure of discounted future cash flows – December 31, 2016 | $ | 4,379 |
Year Ending 12/31/2017 | |
Adjusted Production Growth(a) | 0% to 4% |
Absolute Production | |
Liquids - mmbbls | 52.5 - 55.0 |
Oil - mmbbls | 33.5 - 35.0 |
NGL - mmbbls | 19.0 - 20.0 |
Natural gas - bcf | 870 - 900 |
Total absolute production - mmboe | 197.5 - 205.0 |
Absolute daily rate - mboe | 541 - 562 |
Estimated Realized Hedging Effects(b) (based on 5/1/17 strip prices): | |
Oil - $/bbl | $2.51 |
Natural gas - $/mcf | ($0.16) |
NGL - $/bbl | $0.10 |
Estimated Basis to NYMEX Prices: | |
Oil - $/bbl | $1.35 - $1.55 |
Natural gas - $/mcf | $0.30 - $0.40 |
NGL - $/bbl | $3.75 - $4.15 |
Operating Costs per Boe of Projected Production: | |
Production expense | $2.50 - $2.70 |
Gathering, processing and transportation expenses | $7.00 - $7.50 |
Oil - $/bbl | $4.05 - $4.25 |
Natural Gas - $/mcf | $1.25 - $1.35 |
NGL - $/bbl | $8.10 - $8.50 |
Production taxes | $0.40 - $0.50 |
General and administrative(c) | $1.20 - $1.30 |
Stock-based compensation (noncash) | $0.10 - $0.20 |
DD&A of natural gas and liquids assets | $4.00 - $5.00 |
Depreciation of other assets | $0.40 - $0.50 |
Interest expense(d) | $1.85 - $1.95 |
Marketing, gathering and compression net margin(e) | ($80) - ($60) |
Book Tax Rate | 0% |
Capital Expenditures ($ in millions)(f) | $1,900 - $2,300 |
Capitalized Interest ($ in millions) | $200 |
Total Capital Expenditures ($ in millions) | $2,100 - $2,500 |
(a) | Based on 2016 production of 537 mboe per day, adjusted for 2016 and 2017 sales. |
(b) | Includes expected settlements for commodity derivatives adjusted for option premiums. For derivatives closed early, settlements are reflected in the period of original contract expiration. |
(c) | Excludes expenses associated with stock-based compensation. |
(d) | Excludes unrealized gains (losses) on interest rate derivatives. |
(e) | Excludes non-cash amortization of approximately $22 million related to the buydown of a transportation agreement. |
(f) | Includes capital expenditures for drilling and completion, leasehold, geological and geophysical costs, rig termination payments and other property and plant and equipment. Excludes any additional proved property acquisitions. |
Open Crude Oil Swaps; Gains (Losses) from Closed | |||||||||
Crude Oil Trades | |||||||||
Open Swaps (mbbls) | Avg. NYMEX Price of Open Swaps | Total Gains from Closed Trades ($ in millions) | |||||||
Q2 2017 | 5,915 | $ | 50.12 | $ | 23 | ||||
Q3 2017 | 5,612 | $ | 50.27 | 23 | |||||
Q4 2017 | 5,612 | $ | 50.36 | 23 | |||||
Total 2017 | 17,139 | $ | 50.25 | $ | 69 | ||||
Total 2018 – 2022 | 1,825 | $ | 51.43 | $ | (13 | ) |
Crude Oil Net Written Call Options | ||||
Call Options (mbbls) | Avg. NYMEX Strike Price | |||
Q2 2017 | 1,320 | $ | 83.50 | |
Q3 2017 | 1,334 | $ | 83.50 | |
Q4 2017 | 1,334 | $ | 83.50 | |
Total 2017 | 3,988 | $ | 83.50 |
Open Natural Gas Swaps; Losses from Closed | |||||||||
Natural Gas Trades | |||||||||
Open Swaps (bcf) | Avg. NYMEX Price of Open Swaps | Total Losses from Closed Trades ($ in millions) | |||||||
Q2 2017 | 157 | $ | 2.96 | $ | (1 | ) | |||
Q3 2017 | 158 | $ | 3.00 | (2 | ) | ||||
Q4 2017 | 164 | $ | 3.16 | (3 | ) | ||||
Total 2017 | 479 | $ | 3.04 | $ | (6 | ) | |||
Total 2018 – 2022 | 191 | $ | 3.15 | $ | (69 | ) |
Natural Gas Two-Way Collars | |||||||
Open Collars (bcf) | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | |||||
Q4 2017 | 24 | $ | 3.25 | $ | 3.68 | ||
Total 2017 | 24 | $ | 3.25 | $ | 3.68 | ||
Total 2018 | 47 | $ | 3.00 | $ | 3.25 |
Natural Gas Net Written Call Options | ||||
Call Options (bcf) | Avg. NYMEX Strike Price | |||
Q2 2017 | 12 | $ | 9.43 | |
Q3 2017 | 12 | $ | 9.43 | |
Q4 2017 | 12 | $ | 9.43 | |
Total 2017 | 36 | $ | 9.43 | |
Total 2018 – 2020 | 66 | $ | 12.00 |
Natural Gas Basis Protection Swaps | ||||
Volume (bcf) | Avg. NYMEX plus/(minus) | |||
Q2 2017 | 5 | $ | (0.46 | ) |
Q3 2017 | 6 | $ | (0.46 | ) |
Q4 2017 | 6 | $ | (0.46 | ) |
Total 2017 | 17 | $ | (0.46 | ) |
Total 2018 | 1 | $ | (1.03 | ) |
Open Ethane Swaps | ||||
Volume (mmgal) | Avg. NYMEX Price of Open Swaps | |||
Q2 2017 | 27 | $ | 0.28 | |
Total 2017 | 27 | $ | 0.28 |
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