OKLAHOMA CITY, Aug. 4, 2016 /PRNewswire/ -- Chesapeake Energy
Corporation (NYSE:CHK) today reported financial and operational
results for the 2016 second quarter. Highlights include:
- Total debt reduction of more than $1.0 billion year to date
- 2016 second quarter production averaged approximately
657,100 boe per day; company increases full-year 2016 production
guidance by 3% while maintaining capital expenditure
guidance
- Cost structure improvements lead to lower full-year 2016
production expense guidance
- Company increases target of 2016 total gross proceeds
from asset divestitures by year-end to more than $2.0 billion from $1.2 to $1.7
billion; selected Haynesville Shale acreage expected to be
sold
Doug Lawler, Chesapeake's Chief
Executive Officer, commented, "In 2016, we have made substantial
progress on many fronts, including the reduction of more than
$1 billion of debt, the reduction of
complexity in our portfolio through the purchase of oil and natural
gas interests previously conveyed in certain volumetric production
payment transactions (VPPs), the continued improvement in our cash
cost structure and the optimization of our current portfolio
through non-core asset sales.
"Financial discipline remains our top priority, and we continue
to work toward additional solutions to improve our liquidity,
reduce our midstream commitments and enhance our margins. With
continued improvements in our operating expenses and the
disposition of non-core properties, we have refined our portfolio
to provide a more competitive foundation for Chesapeake. In
addition, the application of new technologies, including longer
laterals and enhanced completion techniques, to our extensive
undeveloped acreage position provides us with a robust portfolio of
development opportunities."
Lawler continued, "As a result of our portfolio's strong
performance to date in 2016, we have increased our total production
guidance for the remainder of the year. As for an initial look into
2017, we believe our oil production will be relatively flat in 2017
as compared to 2016, while total production volumes are projected
to be down approximately 5% compared to 2016 levels. With the
breadth and depth of our large acreage position, the evolution of
technologies being applied to our portfolio and the reduction in
our leverage and complexity, we believe that the next few months
will be a very exciting time for Chesapeake."
2016 Second Quarter Results
For the 2016 second quarter, Chesapeake's revenues declined by
54% year over year, primarily due to a decrease in the average
realized commodity prices received for its production, unrealized
losses from oil and natural gas derivatives and a decrease in the
average realized commodity prices received for its marketing
operations. Average daily production for the 2016 second quarter of
approximately 657,100 barrels of oil equivalent (boe) consisted of
approximately 90,500 barrels (bbls) of oil, 2.960 billion cubic
feet (bcf) of natural gas and 73,200 bbls of natural gas liquids
(NGL). As a result of the company's strong production through the
first six months of 2016, Chesapeake has raised its full-year 2016
production guidance by 3% (using midpoints) from 605,000 to 635,000
boe per day to a new range of 625,000 to 650,000 boe per day. A
summary of the company's guidance for 2016 is provided in the
Outlook dated August 4, 2016,
beginning on Page 18.
Chesapeake's cash expenses continue to decline due to its focus
on cost discipline. Average production expenses during the 2016
second quarter were $3.05 per boe.
G&A expenses (including stock-based compensation) during the
2016 second quarter were $1.02 per
boe. Combined production and G&A expenses (including
stock-based compensation) during the 2016 second quarter were
$4.07 per boe, a decrease of 25% year
over year and 2% from the 2016 first quarter.
Chesapeake reported a net loss available to common stockholders
of $1.792 billion, or $2.48 per share, while the company's ebitda for
the 2016 second quarter was $(1.394)
billion. The primary drivers of the net loss were a noncash
impairment of the carrying value of Chesapeake's oil and natural
gas properties of approximately $1.045
billion, largely resulting from decreases in the trailing
12-month average first-day-of-the-month oil and natural gas prices
as of June 30, 2016, as compared to
March 31, 2016, and unrealized
hedging losses of approximately $544
million. Adjusting for these and other items that are
typically excluded by securities analysts, the 2016 second quarter
adjusted net loss available to common stockholders was $145 million, or $0.14 per common share, while the company's
adjusted ebitda was $252 million in
the 2016 second quarter. Reconciliations of financial measures
calculated in accordance with generally accepted accounting
principles (GAAP) to non-GAAP measures are provided on pages 12 –
16 of this release.
Capital Spending Overview
Chesapeake's total capital investments were approximately
$456 million during the 2016 second
quarter, compared to approximately $957
million in the 2015 second quarter, as summarized in the
table below. While the company has reiterated its total capital
investments program for 2016 of approximately $1.3 to $1.8 billion, it now expects to be at the
higher end of its current guidance range due to additional drilling
and completion activity as a result of efficiency gains and an
acquisition of additional working interests in the Haynesville
Shale. A summary of the company's guidance for 2016 is provided in
the Outlook dated August 4, 2016,
beginning on Page 18.
|
2016
|
2016
|
2015
|
|
Activity
Comparison
|
Q2
|
Q1
|
Q2
|
|
Average operated rig
count
|
9
|
8
|
26
|
|
Gross wells
completed
|
131
|
57
|
121
|
|
Gross wells
spud
|
49
|
41
|
109
|
|
Gross wells
connected
|
141
|
80
|
173
|
|
|
|
|
|
Type of Cost ($ in
millions)
|
|
|
|
|
Drilling and
completion costs
|
$
|
337
|
$
|
281
|
$
|
787
|
|
Exploration costs and
additions to other PP&E
|
56
|
16
|
56
|
|
Subtotal capital
expenditures
|
$
|
393
|
$
|
297
|
$
|
843
|
|
Capitalized
interest
|
63
|
68
|
114
|
|
Total capital
expenditures
|
$
|
456
|
$
|
365
|
$
|
957
|
Balance Sheet and Liquidity
As of June 30, 2016, Chesapeake's
debt principal balance was approximately $8.7 billion, including approximately
$100 million of borrowings
outstanding on the company's $4.0
billion revolving credit facility, compared to $9.7 billion as of December 31, 2015, and $11.7 billion as of June
30, 2015. Since January 1,
2016, the company has retired at maturity, repurchased or
exchanged for equity approximately $1.0
billion of debt, $518 million
of which was due or putable to the company in 2017.
In April 2016, Chesapeake amended
its $4.0 billion revolving credit
facility maturing in 2019 to reaffirm its borrowing base,
restructure financial covenants and increase its ability to issue
secured debt. Using June 30, 2016
crude oil and natural gas strip pricing, Chesapeake estimates that
the PV-10 of its proved oil and gas reserves was approximately
$11.1 billion, compared to
approximately $3.1 billion when using
the average of commodity prices on the first day of the month over
the trailing 12-month period (see Page 17 of this release for
additional information). In addition to $100
million of borrowings under the company's revolving credit
facility, letters of credit issued under the credit facility were
approximately $813 million as of
June 30, 2016, which included a
$461 million supersedeas bond
supporting the company's appeal of the judgment issued in 2015 with
respect to the company's 2019 Notes litigation.
Asset Acquisition and Divestitures Update
Through the 2016 second quarter, the company's asset divestiture
activities have totaled $964 million
in net proceeds received to date, after post-closing adjustments.
In addition, consideration of more than $100
million was withheld subject to certain title, environmental
and other standard contingencies, the majority of which Chesapeake
expects to collect in the third quarter. In conjunction with
certain of these sales, Chesapeake repurchased oil and natural gas
interests previously sold to third parties in connection with four
of its VPP transactions for approximately $259 million. A majority of the acquired
interests were part of the asset divestitures discussed above and
the company no longer has any further commitments related to these
VPPs. With the closing of these VPP acquisitions in the 2016 second
quarter, the company has only two VPPs remaining.
The company continues to focus on select asset divestitures and
is currently planning to sell additional properties by year-end
2016, including a portion of its Haynesville Shale properties. As a
result, Chesapeake has raised its 2016 guidance for total gross
asset divestitures either closed or under signed sales agreements
to now be more than $2.0 billion,
compared to its previous range of $1.2 to
$1.7 billion.
In July 2016, Chesapeake purchased
certain operated working interests to enhance its Haynesville Shale
acreage position for approximately $87
million, increasing its average operated working interest in
the area to approximately 83% and adding to its net acreage
position by approximately 70,000 net acres. The company closed this
transaction in the 2016 third quarter.
Operations Update
Chesapeake is currently utilizing 10 drilling rigs across its
operating areas, three of which are located in the Eagle Ford
Shale, three in the Haynesville Shale, three in the Mid-Continent
area and one rig in the Utica Shale. Due to greater capital
efficiencies and lower oilfield service costs, Chesapeake is
currently planning to operate these 10 rigs throughout the
remainder of the year and, as a result, plans to drill more than
100 additional wells and place approximately 75 additional wells on
production in 2016. While the company is maintaining its 2016 total
capital expenditures guidance to be approximately $1.3 to $1.8 billion, it now expects to be at the
higher end of its current guidance range.
In July 2016, Chesapeake placed
the CA 12&13-15-15 1H horizontal well on production, targeting
the Haynesville Shale in Caddo Parish,
Louisiana. This well's results provide further confirmation
that the company's current completion optimization techniques,
along with extended laterals, are having a significant impact on
higher sustained flow rates and the increased potential for higher
rates of return in all areas of the Haynesville. With reducing cluster spacing and
increased proppant loading, this 10,000-foot lateral well reached a
maximum production rate of approximately 38.0 million cubic feet of
gas (mmcf) per day with a flowing tubing pressure of 7,400 psi. The
company's current estimate of the ultimate recovery from this well
is approximately 22 to 24 bcf with an estimated completed well cost
of approximately $9.8 million. The
PCK 1H, a 7,500-foot lateral well located in DeSoto Parish, reached a maximum production rate
of 31.0 mmcf per day with a flowing pressure of 7,600 psi using
similar completion techniques for an estimated well cost of
$8.4 million. Chesapeake believes
that leading-edge completion techniques, along with access to Gulf
Coast pricing, could increase field-wide productivity by opening up
new areas in the field that were previously economically
challenged.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and
operational results during the 2016 second quarter as compared to
results in prior periods.
|
Three Months
Ended
|
|
06/30/16
|
|
03/31/16
|
|
06/30/15
|
|
Oil equivalent
production (in mmboe)
|
60
|
|
61
|
|
64
|
|
Oil production (in
mmbbls)
|
8
|
|
9
|
|
11
|
|
Average realized oil
price ($/bbl)(a)
|
44.31
|
|
37.74
|
|
71.39
|
|
Natural gas
production (in bcf)
|
269
|
|
276
|
|
275
|
|
Average realized
natural gas price ($/mcf)(a)
|
1.97
|
|
2.29
|
|
2.35
|
|
NGL production (in
mmbbls)
|
7
|
|
6
|
|
7
|
|
Average realized NGL
price ($/bbl)(a)
|
12.88
|
|
11.44
|
|
13.02
|
|
Production expenses
($/boe)
|
(3.05)
|
|
(3.36)
|
|
(4.32)
|
|
Gathering, processing
and transportation expenses ($/boe)
|
(8.04)
|
|
(7.88)
|
|
(7.64)
|
|
Production taxes
($/boe)
|
(0.32)
|
|
(0.30)
|
|
(0.52)
|
|
General and
administrative expenses ($/boe)(b)
|
(0.86)
|
|
(0.66)
|
|
(0.89)
|
|
Stock-based
compensation ($/boe)
|
(0.16)
|
|
(0.13)
|
|
(0.19)
|
|
DD&A of oil and
natural gas properties ($/boe)
|
(4.43)
|
|
(4.43)
|
|
(9.39)
|
|
DD&A of other
assets ($/boe)
|
(0.48)
|
|
(0.48)
|
|
(0.52)
|
|
Interest expenses
($/boe)(a)
|
(1.00)
|
|
(0.98)
|
|
(1.12)
|
|
Marketing, gathering
and compression net margin ($ in millions)(c)
|
(25)
|
|
18
|
|
209
|
|
Operating cash flow
($ in millions)(d)
|
176
|
|
263
|
|
572
|
|
Operating cash flow
($/boe)
|
2.94
|
|
4.29
|
|
8.94
|
|
Adjusted ebitda ($ in
millions)(e)
|
252
|
|
282
|
|
600
|
|
Adjusted ebitda
($/boe)
|
4.21
|
|
4.61
|
|
9.37
|
|
Net loss available to
common stockholders ($ in millions)
|
(1,792)
|
|
(964)
|
|
(4,151)
|
|
Loss per share –
diluted ($)
|
(2.48)
|
|
(1.44)
|
|
(6.27)
|
|
Adjusted net loss
available to common stockholders ($ in millions)(f)
|
(145)
|
|
(120)
|
|
(126)
|
|
Adjusted loss per
share ($) (g)
|
(0.14)
|
|
(0.12)
|
|
(0.13)
|
|
|
|
(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 ($37 million), $20 million and $220 million
of unrealized gains (losses) on supply contract derivatives for the
three months ended June 30, 2016, March 31, 2016 and June 30, 2015,
respectively. 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 16.
|
|
(f)
|
Defined as net income
available to common stockholders, as adjusted to remove the effects
of certain items detailed on page 12.
|
|
(g)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
2016 Second Quarter Financial and Operational Results
Conference Call Information
A conference call to discuss this release has been scheduled on
Thursday, August 4, 2016, at
9:00 am EDT. The telephone number to
access the conference call is 866-454-4209 or international toll
913-312-9308. The passcode for the call is 4546210. The number to
access the conference call replay is 719-457-0820 or toll-free
888-203-1112 and the passcode for the replay is 4546210. The
conference call will also be webcast live at www.chk.com in
the "Investors" section of the company's website. The webcast of
the conference will be available on the website for one year.
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 oil and natural gas marketing and natural gas gathering
and compression businesses. Further information is available
at www.chk.com where Chesapeake routinely posts announcements,
updates, events, investor information, presentations and news
releases.
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 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, general
and administrative expenses, capital expenditures, the timing of
anticipated noncore asset sales and proceeds to be received
therefrom, projected cash flow and liquidity, our
ability to enhance our cash flow and financial flexibility, plans
and objectives for future operations (including our ability to
optimize base production and execute gas gathering agreements), the
ability of our employees, portfolio strength and operational
leadership to create long-term value, and the assumptions on which
such statements are based. Although we believe the expectations and
forecasts reflected in the forward-looking statements are
reasonable, we can give no assurance they will prove to have been
correct. They can be affected by inaccurate or changed assumptions
or by known or unknown risks and uncertainties.
Factors that could cause actual results to differ materially
from expected results include those described under "Risk Factors"
in Item 1A of our annual report on Form 10-K and any updates to
those factors set forth in Chesapeake's subsequent quarterly
reports on Form 10-Q or current reports on Form 8-K (available at
http://www.chk.com/investors/sec-filings). These risk factors
include 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 or at all; the availability of cash flows from
operations and other funds to finance reserve replacement costs or
satisfy our debt obligations; a further 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 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; potential challenges of our spin-off of Seventy Seven
Energy Inc. (SSE) in connection with SSE's recently completed
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code; an
interruption in operations at our headquarters due to a
catastrophic event; the continuation of suspended dividend payments
on our common stock and preferred stock; certain anti-takeover
provisions that affect shareholder rights; and our inability to
increase or maintain our liquidity through debt repurchases,
capital exchanges, asset sales, joint ventures, farmouts or other
means.
In addition, disclosures concerning the estimated
contribution of derivative contracts to our future results of
operations are based upon market information as of a specific
date. These market prices are subject to significant
volatility. Our production forecasts are also dependent upon
many assumptions, including estimates of production decline rates
from existing wells and the outcome of future drilling
activity. Expected asset sales may not be completed in the
time frame anticipated or at all. We caution you not to place
undue reliance on our forward-looking statements, which speak only
as of the date of this news release, and we undertake no obligation
to update any of the information provided in this release or the
accompanying Outlook, except as required by applicable law.
|
|
|
INVESTOR
CONTACT:
|
MEDIA
CONTACT:
|
|
Brad Sylvester,
CFA
(405)
935-8870
ir@chk.com
|
Gordon Pennoyer
(405) 935-8878
media@chk.com
|
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
($ in millions,
except per share data)
|
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
2016
|
|
2015
|
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
$
|
440
|
|
$
|
1,216
|
|
Marketing, gathering
and compression
|
1,182
|
|
2,305
|
|
Total
Revenues
|
1,622
|
|
3,521
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
182
|
|
276
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
481
|
|
488
|
|
Production
taxes
|
19
|
|
34
|
|
Marketing, gathering
and compression
|
1,207
|
|
2,096
|
|
General and
administrative
|
61
|
|
69
|
|
Restructuring and
other termination costs
|
3
|
|
(4)
|
|
Provision for legal
contingencies
|
82
|
|
334
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
265
|
|
601
|
|
Depreciation and
amortization of other assets
|
29
|
|
34
|
|
Impairment of oil and
natural gas properties
|
1,045
|
|
5,015
|
|
Impairments of fixed
assets and other
|
6
|
|
84
|
|
Net (gains) losses on
sales of fixed assets
|
(1)
|
|
1
|
|
Total Operating
Expenses
|
3,379
|
|
9,028
|
|
LOSS FROM
OPERATIONS
|
(1,757)
|
|
(5,507)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
(62)
|
|
(71)
|
|
Losses on
investments
|
(2)
|
|
(17)
|
|
Gains on purchases or
exchanges of debt
|
68
|
|
—
|
|
Other income
(expense)
|
3
|
|
(1)
|
|
Total Other Income
(Expense)
|
7
|
|
(89)
|
|
LOSS BEFORE INCOME
TAXES
|
(1,750)
|
|
(5,596)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
Current income
taxes
|
—
|
|
(6)
|
|
Deferred income
taxes
|
—
|
|
(1,500)
|
|
Total Income Tax
Benefit
|
—
|
|
(1,506)
|
|
NET
LOSS
|
(1,750)
|
|
(4,090)
|
|
Net income
attributable to noncontrolling interests
|
—
|
|
(18)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
(1,750)
|
|
(4,108)
|
|
Preferred stock
dividends
|
(42)
|
|
(43)
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
$
|
(1,792)
|
|
$
|
(4,151)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
Basic
|
$
|
(2.48)
|
|
$
|
(6.27)
|
|
Diluted
|
$
|
(2.48)
|
|
$
|
(6.27)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
724
|
|
662
|
|
Diluted
|
724
|
|
662
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
($ in millions,
except per share data)
|
|
(unaudited)
|
|
|
|
|
|
Six Months
Ended
June
30,
|
|
2016
|
|
2015
|
|
REVENUES:
|
|
|
|
|
Oil, natural gas and
NGL
|
$
|
1,433
|
|
$
|
2,759
|
|
Marketing, gathering
and compression
|
2,142
|
|
3,980
|
|
Total
Revenues
|
3,575
|
|
6,739
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Oil, natural gas and
NGL production
|
388
|
|
575
|
|
Oil, natural gas and
NGL gathering, processing and transportation
|
963
|
|
946
|
|
Production
taxes
|
37
|
|
62
|
|
Marketing, gathering
and compression
|
2,149
|
|
3,796
|
|
General and
administrative
|
109
|
|
125
|
|
Restructuring and
other termination costs
|
3
|
|
(14)
|
|
Provision for legal
contingencies
|
104
|
|
359
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
536
|
|
1,285
|
|
Depreciation and
amortization of other assets
|
58
|
|
69
|
|
Impairment of oil and
natural gas properties
|
1,898
|
|
9,991
|
|
Impairments of fixed
assets and other
|
44
|
|
88
|
|
Net (gains) losses on
sales of fixed assets
|
(5)
|
|
4
|
|
Total Operating
Expenses
|
6,284
|
|
17,286
|
|
LOSS FROM
OPERATIONS
|
(2,709)
|
|
(10,547)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
(124)
|
|
(122)
|
|
Losses on
investments
|
(2)
|
|
(24)
|
|
Loss on sale of
investment
|
(10)
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
168
|
|
—
|
|
Other
income
|
6
|
|
5
|
|
Total Other Income
(Expense)
|
38
|
|
(141)
|
|
LOSS BEFORE INCOME
TAXES
|
(2,671)
|
|
(10,688)
|
|
INCOME TAX
BENEFIT:
|
|
|
|
|
Current income
taxes
|
—
|
|
(6)
|
|
Deferred income
taxes
|
—
|
|
(2,872)
|
|
Total Income Tax
Benefit
|
—
|
|
(2,878)
|
|
NET
LOSS
|
(2,671)
|
|
(7,810)
|
|
Net income
attributable to noncontrolling interests
|
—
|
|
(37)
|
|
NET LOSS
ATTRIBUTABLE TO CHESAPEAKE
|
(2,671)
|
|
(7,847)
|
|
Preferred stock
dividends
|
(85)
|
|
(86)
|
|
NET LOSS AVAILABLE
TO COMMON STOCKHOLDERS
|
$
|
(2,756)
|
|
$
|
(7,933)
|
|
LOSS PER COMMON
SHARE:
|
|
|
|
|
Basic
|
$
|
(3.97)
|
|
$
|
(11.99)
|
|
Diluted
|
$
|
(3.97)
|
|
$
|
(11.99)
|
|
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING (in millions):
|
|
|
|
|
Basic
|
695
|
|
662
|
|
Diluted
|
695
|
|
662
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
|
|
|
June
30,
2016
|
|
December 31,
2015
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
4
|
|
$
|
825
|
|
Other current
assets
|
1,200
|
|
1,655
|
|
Total Current
Assets
|
1,204
|
|
2,480
|
|
|
|
|
|
Property and
equipment, (net)
|
11,685
|
|
14,298
|
|
Other
assets
|
598
|
|
536
|
|
Total
Assets
|
$
|
13,487
|
|
$
|
17,314
|
|
|
|
|
|
Current
liabilities
|
$
|
3,777
|
|
$
|
3,685
|
|
Long-term debt,
net
|
8,621
|
|
10,311
|
|
Other long-term
liabilities
|
860
|
|
921
|
|
Total
Liabilities
|
13,258
|
|
14,917
|
|
|
|
|
|
Preferred
stock
|
3,036
|
|
3,062
|
|
Noncontrolling
interests
|
261
|
|
259
|
|
Common stock and
other stockholders' equity
|
(3,068)
|
|
(924)
|
|
Total
Equity
|
229
|
|
2,397
|
|
|
|
|
|
Total Liabilities and
Equity
|
$
|
13,487
|
|
$
|
17,314
|
|
|
|
|
|
Common shares
outstanding (in millions)
|
775
|
|
663
|
|
Principal amount of
debt outstanding
|
$
|
8,679
|
|
$
|
9,706
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
SUPPLEMENTAL
DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND
INTEREST EXPENSE
|
|
(unaudited)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net
Production:
|
|
|
Oil
(mmbbl)
|
8
|
|
11
|
|
17
|
|
22
|
|
Natural gas
(bcf)
|
269
|
|
275
|
|
546
|
|
539
|
|
NGL
(mmbbl)
|
7
|
|
7
|
|
13
|
|
14
|
|
Oil equivalent
(mmboe)
|
60
|
|
64
|
|
121
|
|
126
|
|
|
|
Oil, natural gas
and NGL Sales ($ in millions):
|
|
|
Oil sales
|
$
|
355
|
|
$
|
594
|
|
$
|
610
|
|
$
|
1,080
|
|
Oil derivatives –
realized gains (losses)(a)
|
11
|
|
182
|
|
84
|
|
417
|
|
Oil derivatives –
unrealized gains (losses)(a)
|
(168)
|
|
(234)
|
|
(240)
|
|
(344)
|
|
Total Oil
Sales
|
198
|
|
542
|
|
454
|
|
1,153
|
|
|
|
Natural gas
sales
|
440
|
|
577
|
|
923
|
|
1,347
|
|
Natural gas
derivatives – realized gains (losses)(a)
|
92
|
|
71
|
|
242
|
|
271
|
|
Natural gas
derivatives – unrealized gains (losses)(a)
|
(365)
|
|
(67)
|
|
(335)
|
|
(231)
|
|
Total Natural Gas
Sales
|
167
|
|
581
|
|
830
|
|
1,387
|
|
|
|
NGL sales
|
89
|
|
93
|
|
163
|
|
219
|
|
NGL derivatives –
realized gains (losses)(a)
|
(3)
|
|
—
|
|
(3)
|
|
—
|
|
NGL derivatives –
unrealized gains (losses)(a)
|
(11)
|
|
—
|
|
(11)
|
|
—
|
|
Total NGL
Sales
|
75
|
|
93
|
|
149
|
|
219
|
|
Total Oil, Natural
Gas and NGL Sales
|
$
|
440
|
|
$
|
1,216
|
|
$
|
1,433
|
|
$
|
2,759
|
|
|
|
|
|
|
|
|
Average Sales
Price –
excluding gains
(losses) on derivatives:
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
$
|
43.00
|
|
$
|
54.69
|
|
$
|
35.98
|
|
$
|
49.48
|
|
Natural gas ($ per
mcf)
|
$
|
1.63
|
|
$
|
2.09
|
|
$
|
1.69
|
|
$
|
2.50
|
|
NGL ($ per
bbl)
|
$
|
13.37
|
|
$
|
13.02
|
|
$
|
12.43
|
|
$
|
15.64
|
|
Oil equivalent ($ per
boe)
|
$
|
14.76
|
|
$
|
19.77
|
|
$
|
14.01
|
|
$
|
21.04
|
|
|
|
|
|
|
|
|
Average Sales
Price –
including realized
gains (losses) on derivatives:
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
$
|
44.31
|
|
$
|
71.39
|
|
$
|
40.93
|
|
$
|
68.55
|
|
Natural gas ($ per
mcf)
|
$
|
1.97
|
|
$
|
2.35
|
|
$
|
2.14
|
|
$
|
3.00
|
|
NGL ($ per
bbl)
|
$
|
12.88
|
|
$
|
13.02
|
|
$
|
12.17
|
|
$
|
15.64
|
|
Oil equivalent ($ per
boe)
|
$
|
16.43
|
|
$
|
23.72
|
|
$
|
16.68
|
|
$
|
26.51
|
|
|
|
|
|
|
|
|
Interest Expense
($ in millions):
|
|
|
|
|
|
|
|
Interest(b)
|
$
|
63
|
|
$
|
72
|
|
$
|
125
|
|
$
|
134
|
|
Interest rate
derivatives – realized (gains) losses(c)
|
(3)
|
|
(1)
|
|
(6)
|
|
(2)
|
|
Interest rate
derivatives – unrealized (gains) losses(c)
|
2
|
|
—
|
|
5
|
|
(10)
|
|
Total Interest
Expense
|
$
|
62
|
|
$
|
71
|
|
$
|
124
|
|
$
|
122
|
|
|
|
(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:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
Beginning
cash
|
$
|
16
|
|
$
|
2,907
|
|
|
|
|
|
Net cash provided
by operating activities
|
95
|
|
314
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
(344)
|
|
(862)
|
|
Acquisitions of
proved and unproved properties(b)
|
(359)
|
|
(138)
|
|
Divestitures of
proved and unproved properties
|
833
|
|
(7)
|
|
Additions to other
property and equipment(c)
|
(15)
|
|
(35)
|
|
Proceeds from sales
of other property and equipment
|
61
|
|
5
|
|
Other
|
(2)
|
|
(3)
|
|
Net cash provided
by (used in) investing activities
|
174
|
|
(1,040)
|
|
|
|
|
|
Net cash used in
financing activities
|
(281)
|
|
(130)
|
|
Change in cash and
cash equivalents
|
(12)
|
|
(856)
|
|
Ending
cash
|
$
|
4
|
|
$
|
2,051
|
|
|
|
(a)
|
Includes capitalized
interest of $1 million and $7 million for the three months ended
June 30, 2016 and 2015, respectively.
|
|
(b)
|
Includes capitalized
interest of $60 million and $104 million for the three months ended
June 30, 2016 and 2015, respectively.
|
|
(c)
|
Includes capitalized
interest of a nominal amount and $1 million for the three months
ended June 30, 2016 and 2015, respectively.
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED CASH FLOW DATA
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
Beginning
cash
|
$
|
825
|
|
$
|
4,108
|
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
(326)
|
|
737
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Drilling and
completion costs(a)
|
(609)
|
|
(2,168)
|
|
Acquisitions of
proved and unproved properties(b)
|
(426)
|
|
(266)
|
|
Proceeds from
divestitures of proved and unproved properties
|
964
|
|
14
|
|
Additions to other
property and equipment(c)
|
(25)
|
|
(93)
|
|
Proceeds from sales
of other property and equipment
|
70
|
|
7
|
|
Cash paid for title
defects
|
(69)
|
|
—
|
|
Additions to
investments
|
—
|
|
(1)
|
|
Other
|
(4)
|
|
(5)
|
|
Net cash used in
investing activities
|
(99)
|
|
(2,512)
|
|
|
|
|
|
Net cash used in
financing activities
|
(396)
|
|
(282)
|
|
Change in cash and
cash equivalents
|
(821)
|
|
(2,057)
|
|
Ending
cash
|
$
|
4
|
|
$
|
2,051
|
|
|
|
(a)
|
Includes capitalized
interest of $3 million and $18 million for the six months ended
June 30, 2016 and 2015, respectively.
|
|
(b)
|
Includes capitalized
interest of $124 million and $212 million for the six months ended
June 30, 2016 and 2015, respectively.
|
|
(c)
|
Includes capitalized
interest of $1 million and $2 million for the six months ended
June 30, 2016 and 2015, respectively.
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
RECONCILIATION OF
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
|
(in millions,
except per share data)
|
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
Net loss available
to common stockholders
|
$
|
(1,792)
|
|
$
|
(4,151)
|
|
|
|
|
|
Weighted average
common and common equivalent shares outstanding (a)
|
724
|
|
662
|
|
|
|
|
|
Loss per common
share (diluted)
|
$
|
(2.48)
|
|
$
|
(6.27)
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity and interest rate derivatives
|
$
|
546
|
|
$
|
301
|
|
Unrealized (gains)
losses on supply contract derivatives
|
37
|
|
(220)
|
|
Restructuring and
other termination costs
|
3
|
|
(4)
|
|
Provision for legal
contingencies
|
82
|
|
334
|
|
Impairment of oil and
natural gas properties
|
1,045
|
|
5,015
|
|
Impairments of fixed
assets and other
|
6
|
|
84
|
|
Net (gains) losses on
sales of fixed assets
|
(1)
|
|
1
|
|
Gains on purchases or
exchanges of debt
|
(68)
|
|
—
|
|
Other
|
(3)
|
|
(3)
|
|
Tax effect of above
items(b)
|
—
|
|
(1,483)
|
|
Adjusted net loss
available to common stockholders(c)
|
$
|
(145)
|
|
$
|
(126)
|
|
|
|
|
|
Preferred stock
dividends
|
42
|
|
43
|
|
Total adjusted net
loss attributable to Chesapeake
|
$
|
(103)
|
|
$
|
(83)
|
|
|
|
|
|
Adjusted loss per
share(c) (d)
|
$
|
(0.14)
|
|
$
|
(0.13)
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include
shares that were considered antidilutive for calculating earnings
per share in accordance with GAAP.
|
|
(b)
|
Our effective tax
rate in the three months ended June 30, 2016 was 0%; thus, there is
no tax effect on the reconciling adjustments.
|
|
(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)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when 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)
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
Net loss available
to common stockholders
|
$
|
(2,756)
|
|
$
|
(7,933)
|
|
|
|
|
|
Weighted average
common and common equivalent shares outstanding (a)
|
695
|
|
662
|
|
|
|
|
|
Loss per common
share (diluted)
|
$
|
(3.97)
|
|
$
|
(11.99)
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity and interest rate derivatives
|
$
|
591
|
|
$
|
565
|
|
Unrealized (gains)
losses on supply contract derivatives
|
17
|
|
(220)
|
|
Restructuring and
other termination costs
|
3
|
|
(14)
|
|
Provision for legal
contingencies
|
104
|
|
359
|
|
Impairment of oil and
natural gas properties
|
1,898
|
|
9,991
|
|
Impairments of fixed
assets and other
|
44
|
|
88
|
|
Net (gains) losses on
sales of fixed assets
|
(5)
|
|
4
|
|
Loss on sale of
investment
|
10
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
(168)
|
|
—
|
|
Tax rate
adjustment
|
—
|
|
(17)
|
|
Other
|
(2)
|
|
(7)
|
|
Tax effect of above
items(b)
|
—
|
|
(2,900)
|
|
Adjusted net loss
available to common stockholders(c)
|
$
|
(264)
|
|
$
|
(84)
|
|
|
|
|
|
Preferred stock
dividends
|
85
|
|
86
|
|
Total adjusted net
income (loss) attributable to Chesapeake
|
$
|
(179)
|
|
$
|
2
|
|
|
|
|
|
Adjusted earnings
(loss) per common share(c) (d)
|
$
|
(0.26)
|
|
$
|
0.00
|
|
|
|
(a)
|
Weighted average
common and common equivalent shares outstanding do not include
shares that were considered antidilutive for calculating earnings
per share in accordance with GAAP.
|
|
(b)
|
Our effective tax
rate in the six months ended June 30, 2016 was 0%; thus, there is
no tax effect on the reconciling adjustments.
|
|
(c)
|
Adjusted net income
and adjusted earnings per 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)
|
We have revised our
presentation of adjusted loss per share to exclude shares
considered antidilutive when calculating earnings per share in
accordance with GAAP.
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
RECONCILIATION OF
OPERATING CASH FLOW AND EBITDA
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
June 30,
2016
|
|
June 30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
$
|
95
|
|
$
|
314
|
|
Changes in assets and
liabilities
|
81
|
|
258
|
|
OPERATING CASH
FLOW(a)
|
$
|
176
|
|
$
|
572
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
NET
LOSS
|
$
|
(1,750)
|
|
$
|
(4,090)
|
|
Interest
expense
|
62
|
|
71
|
|
Income tax
benefit
|
—
|
|
(1,506)
|
|
Depreciation and
amortization of other assets
|
29
|
|
34
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
265
|
|
601
|
|
EBITDA(b)
|
$
|
(1,394)
|
|
$
|
(4,890)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
$
|
95
|
|
$
|
314
|
|
Changes in assets and
liabilities
|
81
|
|
258
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
59
|
|
71
|
|
Losses on commodity
derivatives, net
|
(444)
|
|
(48)
|
|
Gains (losses) on
supply contract derivatives, net
|
(37)
|
|
220
|
|
Cash receipts on
commodity derivative settlements, net
|
(119)
|
|
(223)
|
|
Stock-based
compensation
|
(13)
|
|
(20)
|
|
Restructuring and
other termination costs
|
(3)
|
|
4
|
|
Provision for legal
contingencies
|
(82)
|
|
(334)
|
|
Impairment of oil and
natural gas properties
|
(1,045)
|
|
(5,015)
|
|
Impairments of fixed
assets and other
|
(1)
|
|
(79)
|
|
Net gains (losses) on
sales of fixed assets
|
1
|
|
(1)
|
|
Investment
activity
|
(2)
|
|
(17)
|
|
Gains on purchases or
exchanges of debt
|
68
|
|
—
|
|
Other
items
|
48
|
|
(20)
|
|
EBITDA(b)
|
$
|
(1,394)
|
|
$
|
(4,890)
|
|
|
|
(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)
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June 30,
2016
|
|
June 30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
$
|
(326)
|
|
$
|
737
|
|
Changes in assets and
liabilities
|
765
|
|
719
|
|
OPERATING CASH
FLOW(a)
|
$
|
439
|
|
$
|
1,456
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
NET
LOSS
|
$
|
(2,671)
|
|
$
|
(7,810)
|
|
Interest
expense
|
124
|
|
122
|
|
Income tax
benefit
|
—
|
|
(2,878)
|
|
Depreciation and
amortization of other assets
|
58
|
|
69
|
|
Oil, natural gas and
NGL depreciation, depletion and amortization
|
536
|
|
1,285
|
|
EBITDA(b)
|
$
|
(1,953)
|
|
$
|
(9,212)
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
|
$
|
(326)
|
|
$
|
737
|
|
Changes in assets and
liabilities
|
765
|
|
719
|
|
Interest expense, net
of unrealized gains (losses) on derivatives
|
119
|
|
132
|
|
Gains (losses) on
commodity derivatives, net
|
(263)
|
|
113
|
|
Gains (losses) on
supply contract derivatives, net
|
(17)
|
|
220
|
|
Cash receipts on
commodity derivative settlements, net
|
(386)
|
|
(636)
|
|
Stock-based
compensation
|
(25)
|
|
(43)
|
|
Restructuring and
other termination costs
|
(3)
|
|
14
|
|
Provision for legal
contingencies
|
(104)
|
|
(359)
|
|
Impairment of oil and
natural gas properties
|
(1,898)
|
|
(9,991)
|
|
Impairments of fixed
assets and other
|
(34)
|
|
(81)
|
|
Net gains (losses) on
sales of fixed assets
|
5
|
|
(4)
|
|
Investment
activity
|
(12)
|
|
(24)
|
|
Gains on purchases or
exchanges of debt
|
168
|
|
—
|
|
Other
items
|
58
|
|
(9)
|
|
EBITDA(b)
|
$
|
(1,953)
|
|
$
|
(9,212)
|
|
|
|
(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
ADJUSTED EBITDA
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
|
|
|
THREE MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
EBITDA
|
$
|
(1,394)
|
|
$
|
(4,890)
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
544
|
|
301
|
|
Unrealized (gains)
losses on supply contract derivatives
|
37
|
|
(220)
|
|
Restructuring and
other termination costs
|
3
|
|
(4)
|
|
Provision for legal
contingencies
|
82
|
|
334
|
|
Impairment of oil and
natural gas properties
|
1,045
|
|
5,015
|
|
Impairments of fixed
assets and other
|
6
|
|
84
|
|
Net (gains) losses on
sales of fixed assets
|
(1)
|
|
1
|
|
Gains on purchases or
exchanges of debt
|
(68)
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
—
|
|
(18)
|
|
Other
|
(2)
|
|
(3)
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
$
|
252
|
|
$
|
600
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
RECONCILIATION OF
ADJUSTED EBITDA
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
|
|
|
SIX MONTHS
ENDED:
|
June
30,
2016
|
|
June
30,
2015
|
|
|
|
|
|
EBITDA
|
$
|
(1,953)
|
|
$
|
(9,212)
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Unrealized losses on
commodity derivatives
|
586
|
|
575
|
|
Unrealized (gains)
losses on supply contract derivatives
|
17
|
|
(220)
|
|
Restructuring and
other termination costs
|
3
|
|
(14)
|
|
Provision for legal
contingencies
|
104
|
|
359
|
|
Impairment of oil and
natural gas properties
|
1,898
|
|
9,991
|
|
Impairments of fixed
assets and other
|
44
|
|
88
|
|
Net (gains) losses on
sales of fixed assets
|
(5)
|
|
4
|
|
Loss on sale of
investment
|
10
|
|
—
|
|
Gains on purchases or
exchanges of debt
|
(168)
|
|
—
|
|
Net income
attributable to noncontrolling interests
|
—
|
|
(37)
|
|
Other
|
(2)
|
|
(6)
|
|
|
|
|
|
Adjusted
EBITDA(a)
|
$
|
534
|
|
$
|
1,528
|
|
|
|
(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.
|
|
|
|
|
Accordingly, adjusted
EBITDA 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
PV-9 AND PV-10 TO STANDARDIZED MEASURE
|
|
($ in
millions)
|
|
(unaudited)
|
|
|
PV-9 is a non-GAAP
metric used in the determination of the value of collateral under
Chesapeake's credit facility. PV-10 is a non-GAAP metric used by
the industry, investors and analysts to estimate the present value,
discounted at 10% per annum, of estimated future cash flows of the
company's estimated proved reserves before income tax and asset
retirement obligations. The following table shows the
reconciliation of PV-9 and PV-10 to the company's standardized
measure of discounted future net cash flows, the most directly
comparable GAAP measure, for the year ended December 31, 2015 and
for the interim period ended June 30, 2016. Management believes
that PV-9 provides useful information to investors regarding the
company's collateral position and that PV-10 provides useful
information to investors because it is widely used by professional
analysts and sophisticated investors in evaluating oil and natural
gas companies. Because there are many unique factors that can
impact an individual company when estimating the amount of future
income taxes to be paid, management believes the use of a pre-tax
measure is valuable for evaluating the company. Neither PV-9 nor
PV-10 should be considered as an alternative to the standardized
measure of discounted future net cash flows as computed under GAAP.
With respect to PV-9 and PV-10 calculated as of an interim date, it
is not practical to calculate taxes for the related interim period
because GAAP does not provide for disclosure of standardized
measure on an interim basis.
|
|
|
|
|
PV-9 – June 30, 2016
@ NYMEX Strip
|
$
|
11,857
|
|
Less: Change in
discount factor from 9 to 10
|
(807)
|
|
PV-10 – June 30, 2016
@ NYMEX Strip
|
11,050
|
|
Less: Change in
pricing assumption from NYMEX Strip to SEC
|
(7,995)
|
|
PV-10 – June 30, 2016
@ SEC
|
3,055
|
|
Change in PV-10 from
12/31/15 to 6/30/16
|
1,672
|
|
PV-10 – December 31,
2015 @ SEC
|
4,727
|
|
Less: Present value
of future income tax discounted at 10%
|
(34)
|
|
Standardized measure
of discounted future cash flows – December 31, 2015
|
$
|
4,693
|
|
|
|
CHESAPEAKE ENERGY
CORPORATION
|
|
MANAGEMENT'S
OUTLOOK AS OF AUGUST 4, 2016
|
|
|
Chesapeake
periodically provides guidance on certain factors that affect the
company's future financial performance. Changes from the company's
May 5, 2016 Outlook are italicized bold
below.
|
|
Year Ending
12/31/2016
|
|
Adjusted Production
Growth(a)
|
(3%) to
2%
|
|
Absolute
Production
|
|
|
Liquids -
mmbbls
|
56 -
60
|
|
Oil -
mmbbls
|
33 -
35
|
|
NGL -
mmbbls
|
23 -
25
|
|
Natural gas -
bcf
|
1,030 -
1,070
|
|
Total absolute
production - mmboe
|
228 -
238
|
|
Absolute daily rate -
mboe
|
625 -
650
|
|
Estimated Realized
Hedging Effects(b) (based on 8/1/16 strip
prices):
|
|
|
Oil -
$/bbl
|
$4.63
|
|
Natural gas -
$/mcf
|
$0.13
|
|
NGL -
$/bbl
|
($0.18)
|
|
Estimated Basis to
NYMEX Prices:
|
|
|
Oil -
$/bbl
|
$2.55 -
$2.65
|
|
Natural gas -
$/mcf
|
$0.35 -
$0.45
|
|
NGL -
$/bbl
|
$5.20 -
$5.45
|
|
Operating Costs per
Boe of Projected Production:
|
|
|
Production
expense
|
$3.20 -
$3.40
|
|
Gathering, processing
and transportation expenses
|
$7.60 -
$8.10
|
|
Oil -
$/bbl
|
$3.75 -
$3.95
|
|
Natural
Gas(c) - $/mcf
|
$1.40 -
$1.50
|
|
NGL -
$/bbl
|
$7.60 -
$7.85
|
|
Production
taxes
|
$0.35 -
$0.45
|
|
General and
administrative(d)
|
$0.60 -
$0.70
|
|
Stock-based
compensation (noncash)
|
$0.10 -
$0.20
|
|
DD&A of natural
gas and liquids assets
|
$3.50 -
$4.50
|
|
Depreciation of other
assets
|
$0.40 -
$0.50
|
|
Interest
expense(e)
|
$1.05 -
$1.15
|
|
Marketing, gathering
and compression net margin(f)
|
($10) -
$10
|
|
Book Tax
Rate
|
0%
|
|
Capital Expenditures
($ in millions)(g)
|
$1,000 -
$1,500
|
|
Capitalized Interest
($ in millions)
|
$260
|
|
Total Capital
Expenditures ($ in millions)
|
$1,260 -
$1,760
|
|
|
|
(a)
|
Based on 2015
production of 621 mboe per day, adjusted for 2015 and 2016
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 a 2016
fourth quarter minimum volume commitment (MVC) shortfall estimate
of approximately $165 to $175 million.
|
|
(d)
|
Excludes expenses
associated with stock-based compensation.
|
|
(e)
|
Excludes unrealized
gains (losses) on interest rate derivatives.
|
|
(f)
|
Includes revenue and
operating expenses. Excludes depreciation and amortization of other
assets and unrealized gains (losses) on supply contract
derivatives.
|
|
(g)
|
Includes capital
expenditures for drilling and completion, leasehold, geological and
geophysical costs, rig termination payments and other property and
plant and equipment. Excludes approximately $259 million for the
repurchase of overriding royalty interests associated with the sale
of certain of the company's properties and any additional proved
property acquisitions.
|
|
|
|
Oil, Natural Gas
and Natural Gas Liquids Hedging Activities
|
|
|
Chesapeake enters
into commodity derivative transactions in order to mitigate a
portion of its exposure to adverse changes in market prices.
Please see the quarterly reports on Form 10-Q and annual reports on
Form 10-K filed by Chesapeake with the SEC for detailed information
about derivative instruments the company uses, its quarter-end
derivative positions and accounting for oil, natural gas and
natural gas liquids derivatives.
|
|
|
As of August 1, 2016,
the company had downside protection, through open swaps, on a
portion of its remaining 2016 oil production at an average price of
$46.60 per bbl. The company had downside price protection, through
open swaps and two-way collars, on a portion of its remaining 2016
natural gas production at an average price of $2.77 per mcf.
Chesapeake also had downside price protection, through open swaps,
on a portion of its remaining 2016 ethane and propane production at
an average price of $0.17 per gallon and $0.46 per gallon,
respectively.
|
|
|
The company's crude
oil hedging positions as of August 1, 2016 were as
follows:
|
|
|
Open Crude Oil
Swaps; Gains from Closed
|
|
Crude Oil Trades
and Call Option Premiums
|
|
|
|
|
|
|
|
Open
Swaps
(mbbls)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total Gains from
Closed Trades
and Premiums
for
Call
Options
($ in
millions)
|
|
Q3 2016
|
6,072
|
|
$
|
46.35
|
|
|
$
|
10
|
|
|
Q4 2016
|
6,072
|
|
$
|
46.84
|
|
|
10
|
|
|
Total 2016
(a)
|
12,144
|
|
$
|
46.60
|
|
|
$
|
20
|
|
|
Total 2017 –
2022
|
7,665
|
|
$
|
47.79
|
|
|
$
|
78
|
|
|
|
(a) Certain hedging
arrangements include a sold option to extend at an average price of
$53.67 per bbl covering 1.5 mmbbls in 2016. Sold options are
included with net written call options.
|
|
|
|
Crude Oil Net
Written Call Options
|
|
|
|
|
Call
Options
(mbbls)
|
Avg.
NYMEX
Strike Price
|
|
Q3 2016
|
3,489
|
$
|
87.25
|
|
|
Q4 2016
|
3,488
|
$
|
87.25
|
|
|
Total 2016
|
6,977
|
$
|
87.25
|
|
|
Total 2017
|
5,293
|
$
|
83.50
|
|
|
|
|
The company's natural
gas hedging positions as of August 1, 2016 were as
follows:
|
|
|
Open Natural Gas
Swaps; Losses from Closed
|
|
Natural Gas Trades
and Call Option Premiums
|
|
|
|
|
|
|
|
Open Swaps
(bcf)
|
|
Avg. NYMEX
Price of
Open Swaps
|
|
Total
Losses
from Closed
Trades
and Premiums
for
Call
Options
($ in
millions)
|
|
Q3 2016
|
203
|
|
$
|
2.69
|
|
$
|
(26)
|
|
Q4 2016
|
155
|
|
$
|
2.85
|
|
(28)
|
|
Total 2016
(a)
|
358
|
|
$
|
2.76
|
|
$
|
(54)
|
|
Total 2017 –
2022
|
267
|
|
$
|
3.02
|
|
$
|
(78)
|
|
|
(a) Certain hedging
arrangements include a sold option to extend at an average price of
$2.80 per mmbtu covering 52 bcf in 2016. Sold options are included
with net written call options.
|
|
|
|
Natural Gas
Two-Way Collars
|
|
|
|
|
|
Open
Collars
(bcf)
|
Avg.
NYMEX
Bought Put
Price
|
Avg.
NYMEX
Sold Call
Price
|
|
Q4 2016
|
15
|
$
|
3.00
|
|
$
|
3.48
|
|
|
Total 2016
|
15
|
$
|
3.00
|
|
$
|
3.48
|
|
|
Total 2017
|
23
|
$
|
3.00
|
|
$
|
3.48
|
|
|
|
|
Natural Gas Net
Written Call Options
|
|
|
|
|
Call
Options
(bcf)
|
Avg. NYMEX
Strike
Price
|
|
Q3 2016
|
45
|
$
|
5.27
|
|
|
Q4 2016
|
46
|
$
|
5.27
|
|
|
Total 2016
|
91
|
$
|
5.27
|
|
|
Total 2017 –
2022
|
114
|
$
|
10.92
|
|
|
|
|
Natural Gas Basis
Protection Swaps
|
|
|
|
|
Volume
(bcf)
|
Avg. NYMEX
plus/(minus)
|
|
Q3 2016
|
12
|
$
|
(0.66)
|
|
|
Q4 2016
|
10
|
$
|
(0.26)
|
|
|
Total 2016
|
22
|
$
|
(0.49)
|
|
|
Total 2017 -
2022
|
27
|
$
|
(0.34)
|
|
|
|
|
|
|
|
The company's natural
gas liquids hedging positions as of August 1, 2016 were as
follows:
|
|
|
|
Open Ethane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
|
Q3 2016
|
58
|
$
|
0.17
|
|
|
Q4 2016
|
20
|
$
|
0.17
|
|
|
Total 2016
|
78
|
$
|
0.17
|
|
|
|
Open Propane
Swaps
|
|
|
|
|
Volume
(mmgal)
|
Avg. NYMEX
Price of Open
Swaps
|
|
Q3 2016
|
50
|
$
|
0.46
|
|
|
Q4 2016
|
17
|
$
|
0.46
|
|
|
Total 2016
|
67
|
$
|
0.46
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-2016-second-quarter-financial-and-operational-results-300309109.html
SOURCE Chesapeake Energy Corporation