UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2022
| (Exact name of Registrant as specified in its Charter) | |||||||||||||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification No.) | |||||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||||||||
| (Registrant’s telephone number, including area code) | |||||||||||||||||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| 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)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
| 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 | ||||||||
| 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. | ☐ | |||||||
Item 2.02 Results of Operations and Financial Condition.
On November 1, 2022, Chesapeake Energy Corporation (“Chesapeake”) issued a press release reporting financial and operational results for the third quarter of 2022. A copy of the press release, financial information and outlook are attached as Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3, respectively, to this Current Report on Form 8-K.
The information in the press release is being furnished, not filed, pursuant to Item 2.02. Accordingly, the information in the press release will not be incorporated by reference into any registration statement filed by Chesapeake under the Securities Act of 1933, as amended, except as set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
On November 2, 2022, Chesapeake will make a presentation about its financial and operating results for the third quarter of 2022, as noted in the press release described in Item 2.02 above. Chesapeake has made the presentation available on its website at http://investors.chk.com.
This information is being furnished, not filed, pursuant to Item 7.01. Accordingly, this information will not be incorporated by reference into any registration statement filed by Chesapeake Energy Corporation under the Securities Act of 1933, as amended, except as set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Document Description | |||||||
| Chesapeake Energy Corporation press release dated November 1, 2022 | ||||||||
| Supplemental Financial Information | ||||||||
| Outlook as of November 1, 2022 | ||||||||
| 104.0 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CHESAPEAKE ENERGY CORPORATION | |||||
| By: | /s/ DOMENIC J. DELL’OSSO, JR. | ||||
| Domenic J. Dell’Osso, Jr. | |||||
| President and Chief Executive Officer | |||||
Date: November 1, 2022
| Exhibit 99.1 | |||||
| N E W S R E L E A S E |  | ||||
FOR IMMEDIATE RELEASE
NOVEMBER 1, 2022
CHESAPEAKE ENERGY CORPORATION REPORTS 2022 THIRD QUARTER RESULTS
OKLAHOMA CITY, November 1, 2022 – Chesapeake Energy Corporation (NASDAQ:CHK) today reported 2022 third quarter financial and operating results. The company plans to host a conference call to discuss results at 9 a.m. EDT, on Wednesday, November 2, 2022. In addition, supplemental slides can be found on Chesapeake’s website at www.chk.com.
•Net cash provided by operating activities of $1,313 million
•Net income totaled $883 million, or $6.12 per diluted share; adjusted net income(1) totaling $730 million, or $5.06 per diluted share
•Delivered adjusted EBITDAX(1) of $1,256 million and a company record $773 million in adjusted free cash flow(1)
•Returned $1.9 billion to shareholders in the form of dividends and share repurchases YTD
•Announced total quarterly dividend of $3.16 per common share to be paid in December 2022, approximately $1.2 billion in total dividends to be paid in 2022
•Simplified capital structure through exchange of approximately 2/3rds of outstanding warrants; Repurchased approximately $400mm of common shares since 3Q; Completed approximately $1.1 billion of $2 billion common stock and warrant repurchase program YTD
•Produced approximately 4,108 mmcfe per day net, of which 90% was natural gas
•Entered into 700 mmcf per day gas gathering and transport agreement to anchor new Haynesville infrastructure; Added approximately 1 bcf per day of transport in the last 3 months to the LNG corridor at market rates beginning in 2024
(1) A Non-GAAP measure as defined in the supplemental financial tables available on the company's website at www.chk.com.
Nick Dell'Osso, Chesapeake's President and Chief Executive Officer, commented, “The third quarter marked another period of strong performance. We remain focused on capturing the tremendous value from the premium rock, returns, and runway of our Marcellus and Haynesville positions. Simultaneously, we are progressing efforts to exit our Eagle Ford position and have seen strong interest in these high-value assets. As we look to 2023, we will remain disciplined and continue to allocate capital to maximize returns from our assets, deliver sustainable free cash flow, and return that cash to shareholders through our peer-leading dividend and buyback programs. While domestic and international events continue to demonstrate the critical need for energy and the infrastructure required to transport it to market, we stand ready to deliver reliable, affordable, lower carbon energy desperately needed today.”
| INVESTOR CONTACT: | MEDIA CONTACT: | CHESAPEAKE ENERGY CORPORATION | ||||||
Chris Ayres (405) 935-8870 ir@chk.com | Brooke Coe (405) 935-8878 media@chk.com | 6100 North Western Avenue P.O. Box 18496 Oklahoma City, OK 73154 | ||||||
Shareholder Return Update
During the third quarter of 2022, Chesapeake generated $1,313 million of operating cash flow and had $74 million of cash on hand at quarter-end. Chesapeake plans to pay its base and variable dividend on December 1, 2022, to shareholders of record at the close of business on November 15, 2022. The total common stock dividend, including the variable and base components, is calculated as follows:
| ($ and shares in millions, except per share amounts) | 3Q 2022 | ||||||||||
Net cash provided by operating activities | $ | 1,313 | |||||||||
Less cash capital expenditures | 540 | ||||||||||
Adjusted free cash flow | 773 | ||||||||||
Less cash paid for common base dividends | 74 | ||||||||||
50% of adjusted free cash flow available for common variable dividends | $ | 350 | |||||||||
Common shares outstanding at 10/28/22(1) | 134 | ||||||||||
Variable dividend payable per common share in December 2022 | $ | 2.61 | |||||||||
Base dividend payable per common share in December 2022 | $ | 0.55 | |||||||||
Total dividend payable per common share in December 2022 | $ | 3.16 | |||||||||
| (1) Basic common shares outstanding as of the declaration date of 11/1/2022. Assumes no exercise of warrants between dividend declaration date and dividend record date. | |||||||||||
In June 2022, the company doubled its previously announced repurchase program authorization from $1 billion to $2 billion in aggregate value of its common stock and/or warrants through year-end 2023. Through September 30, 2022, Chesapeake repurchased approximately 7.6 million shares of its common stock for around $670 million. Additionally, the company repurchased approximately 4.0 million shares of common stock from former creditors in October 2022 for an aggregate price of around $400 million. As of November 1, 2022, Chesapeake had approximately $0.9 billion remaining under its share repurchase program and, in total, has repurchased approximately 11.6 million shares of its common stock at a weighted average price per share of approximately $91.96.
Operations Results
Third quarter net production was approximately 4,108 mmcfe per day (90% natural gas and 10% total liquids), utilizing an average of 16 rigs to drill 58 wells and placed 50 wells on production. Chesapeake is currently operating 13 rigs including five in the Marcellus, two in the Eagle Ford and six in the Haynesville and plans to add a seventh Haynesville rig by the end of the month. The company expects to drill 45 to 50 wells and place 60 to 65 wells on production in the fourth quarter of 2022.
Chesapeake entered into an agreement with Momentum Midstream which is expected to deliver 700 mmcf per day to premium Gulf Coast markets beginning in 2024. Momentum’s project, which has an option for Chesapeake to participate in 35% of the equity, includes a carbon capture and sequestration component that will help the company reach its net zero goals in 2035. Including the previously announced gas supply agreement (GSA) with Golden Pass LNG Terminal LLC (“Golden Pass”), the company has added 1 bcf per day of new capacity to deliver Responsibly Sourced, independently certified gas, from the Haynesville to the LNG corridor beginning in 2024. Chesapeake continues to work with its midstream partners to increase Haynesville gas gathering, treating, and takeaway capacity.
Additional information on each of its operating areas, including projections for activity, well statistics and pricing, can be found at www.chk.com.
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ESG Update
Chesapeake remains on track to achieve RSG certification of its recently acquired Chief position in the Marcellus by the end of 2022 under the MiQ methane standard and the EO100™ Standard for Responsible Energy Development, which cover a broad range of environmental, social and governance (ESG) criteria. The company previously announced the certification of its legacy Marcellus operations in August and its Haynesville operations in December 2021. Chesapeake is the first company to achieve Grade "A" ratings (the highest rating a company can earn) from MiQ in two major shale basins. The Company began conducting aerial Gas Mapping LiDAR scans to detect emissions semiannually across the entirety of its assets, facilitating prompt remediation efforts, reducing emissions and increasing gas revenues. Since 2021, Chesapeake has installed more than 2,000 continuous methane emission monitoring devices and retrofitted more than 18,000 pneumatic devices across its operations. Today, all newly constructed operated facilities use electric device technology, instrument air, or vent capture systems which are designed to be “vent free.”
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Conference Call Information
Chesapeake plans to host a conference call to discuss recent results at 9:00 a.m. EDT on Wednesday, November 2, 2022. The telephone number to access the conference call is 888-317-6003 or 412-317-6061 for international callers. The passcode for the call is 9111446. A webcast link to the conference call will be provided on Chesapeake’s website at www.chk.com. A replay will be available on the website following the call.
Financial Statements, Non-GAAP Financial Measures and 2022 Guidance and Outlook Projections
The company’s 2022 third quarter financial and operational results, along with non-GAAP measures that adjust for items that are typically excluded by securities analysts, are available on the company's website. Such non-GAAP measures should be not considered as an alternative to GAAP measures. Reconciliations of these non-GAAP measures and other disclosures are provided with the supplemental financial tables available on the company's website at www.chk.com. Management’s updated guidance for 2022 can be found on the company’s website at www.chk.com.
Headquartered in Oklahoma City, Chesapeake Energy Corporation is powered by dedicated and innovative employees who are focused on discovering and responsibly developing our leading positions in top U.S. oil and gas plays. With a goal to achieve net-zero direct GHG emissions by 2035, Chesapeake is committed to safely answering the call for affordable, reliable, lower carbon energy.
Forward-Looking Statements
This news release and the accompanying outlook include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than statements of historical fact. They include statements that give our current expectations, management’s outlook guidance or forecasts of future events, expected natural gas and oil growth trajectory, projected cash flow and liquidity, our ability to enhance our cash flow and financial flexibility, dividend plans, future production and commodity mix, plans and objectives for future operations, ESG initiatives, the ability of our employees, portfolio strength and operational leadership to create long-term value, and the assumptions on which such statements are based. Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time.
Factors that could cause actual results to differ materially from expected results include those described under “Risk Factors” in Item 1A of our annual report on Form 10-K and any updates to those factors set forth in Chesapeake’s subsequent quarterly reports on Form 10-Q or current reports on Form 8-K (available at http://www.chk.com/investors/sec-filings). These risk factors include: the impact of inflation and commodity price volatility resulting from Russia’s invasion of Ukraine, COVID-19 and related supply chain constraints, along with the effect on our business, financial condition, employees, contractors, vendors and the global demand for natural gas and oil and U.S. and world financial markets; the acquisitions of Vine Energy Inc. (“Vine”) and Chief E&D Holdings, LP and affiliates of Tug Hill, Inc. (together, "Chief"), including our ability to successfully integrate the businesses of Vine and Chief into the Company and achieve the expected synergies from these acquisitions within the expected timeframes; our ability to comply with the covenants under our reserve-based revolving credit facility and other indebtedness; our ability to realize anticipated cash cost reductions; the volatility of natural gas, oil and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles; a deterioration in general economic, business or industry conditions; uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; our ability to replace reserves and sustain production; drilling and operating risks and resulting liabilities; our ability to generate profits or achieve targeted results in drilling and well operations; the limitations our level of indebtedness may have on our financial flexibility; our ability to achieve and maintain ESG certifications/goals; our inability to access the capital markets on favorable terms; the availability of cash flows from operations and other funds to fund cash dividends and repurchases of equity securities, to finance reserve replacement costs and/or satisfy our debt obligations; write-downs of our natural gas and oil asset carrying values due to low commodity prices; charges incurred in response to market conditions; limited control over properties we do not operate; leasehold terms expiring before production can be established; commodity derivative activities resulting in lower prices realized on natural gas, oil and NGL sales; the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations; potential OTC derivatives regulations limiting our ability to hedge against commodity price fluctuations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used; pipeline and gathering system capacity constraints and transportation interruptions; legislative, regulatory and ESG initiatives, addressing environmental concerns, including initiatives addressing
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the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal; terrorist activities and/or cyber-attacks adversely impacting our operations; an interruption in operations at our headquarters due to a catastrophic event; federal and state tax proposals affecting our industry; competition in the natural gas and oil exploration and production industry; negative public perceptions of our industry; effects of purchase price adjustments and indemnity obligations..
In addition, disclosures concerning the estimated contribution of derivative contracts to our future results of operations are based upon market information as of a specific date. These market prices are subject to significant volatility. Our production forecasts are also dependent upon many assumptions, including estimates of production decline rates from existing wells and the outcome of future drilling activity. We caution you not to place undue reliance on our forward-looking statements that speak only as of the date of this news release, and we undertake no obligation to update any of the information provided in this release, except as required by applicable law. In addition, this news release contains time-sensitive information that reflects management’s best judgment only as of the date of this news release.
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Exhibit 99.2
CHESAPEAKE ENERGY CORPORATION - SUPPLEMENTAL TABLES | ||
| Table of Contents: | Page | |||||||
1
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | ||
| Successor | |||||||||||
| ($ in millions) | September 30, 2022 | December 31, 2021 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 74 | $ | 905 | |||||||
| Restricted cash | 56 | 9 | |||||||||
| Accounts receivable, net | 1,757 | 1,115 | |||||||||
| Short-term derivative assets | 4 | 5 | |||||||||
| Other current assets | 168 | 69 | |||||||||
| Total current assets | 2,059 | 2,103 | |||||||||
| Property and equipment: | |||||||||||
| Natural gas and oil properties, successful efforts method | |||||||||||
| Proved natural gas and oil properties | 11,437 | 7,682 | |||||||||
| Unproved properties | 2,192 | 1,530 | |||||||||
| Other property and equipment | 506 | 495 | |||||||||
| Total property and equipment | 14,135 | 9,707 | |||||||||
| Less: accumulated depreciation, depletion and amortization | (2,182) | (908) | |||||||||
| Property and equipment held for sale, net | 1 | 3 | |||||||||
| Total property and equipment, net | 11,954 | 8,802 | |||||||||
| Other long-term assets | 76 | 104 | |||||||||
| Total assets | $ | 14,089 | $ | 11,009 | |||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 539 | $ | 308 | |||||||
| Accrued interest | 40 | 38 | |||||||||
| Short-term derivative liabilities | 1,875 | 899 | |||||||||
| Other current liabilities | 1,784 | 1,202 | |||||||||
| Total current liabilities | 4,238 | 2,447 | |||||||||
| Long-term debt, net | 2,717 | 2,278 | |||||||||
| Long-term derivative liabilities | 419 | 249 | |||||||||
| Asset retirement obligations, net of current portion | 350 | 349 | |||||||||
| Other long-term liabilities | 18 | 15 | |||||||||
| Total liabilities | 7,742 | 5,338 | |||||||||
| Contingencies and commitments | |||||||||||
| Stockholders' equity: | |||||||||||
| Successor common stock, $0.01 par value, 450,000,000 shares authorized: 121,334,663 and 117,917,349 shares issued | 1 | 1 | |||||||||
| Successor additional paid-in capital | 5,627 | 4,845 | |||||||||
| Retained earnings | 719 | 825 | |||||||||
| Total stockholders' equity | 6,347 | 5,671 | |||||||||
| Total liabilities and stockholders' equity | $ | 14,089 | $ | 11,009 | |||||||
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||
| Successor | ||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||
| ($ in millions except per share data) | ||||||||||||||
| Revenues and other: | ||||||||||||||
| Natural gas, oil and NGL | $ | 2,987 | $ | 1,170 | ||||||||||
| Marketing | 1,206 | 627 | ||||||||||||
| Natural gas and oil derivatives | (1,029) | (910) | ||||||||||||
| Gains (losses) on sales of assets | (2) | 3 | ||||||||||||
| Total revenues and other | 3,162 | 890 | ||||||||||||
| Operating expenses: | ||||||||||||||
| Production | 121 | 80 | ||||||||||||
| Gathering, processing and transportation | 286 | 219 | ||||||||||||
| Severance and ad valorem taxes | 67 | 41 | ||||||||||||
| Exploration | 2 | 2 | ||||||||||||
| Marketing | 1,200 | 625 | ||||||||||||
| General and administrative | 40 | 30 | ||||||||||||
| Depreciation, depletion and amortization | 440 | 228 | ||||||||||||
| Other operating expense, net | 1 | 3 | ||||||||||||
| Total operating expenses | 2,157 | 1,228 | ||||||||||||
| Income (loss) from operations | 1,005 | (338) | ||||||||||||
| Other income (expense): | ||||||||||||||
| Interest expense | (52) | (17) | ||||||||||||
| Other income | 4 | — | ||||||||||||
| Total other income (expense), net | (48) | (17) | ||||||||||||
| Income (loss) before income taxes | 957 | (355) | ||||||||||||
| Income tax expense (benefit) | 74 | (10) | ||||||||||||
| Net income (loss) available to common stockholders | $ | 883 | $ | (345) | ||||||||||
| Earnings (loss) per common share: | ||||||||||||||
| Basic | $ | 7.29 | $ | (3.51) | ||||||||||
| Diluted | $ | 6.12 | $ | (3.51) | ||||||||||
| Weighted average common shares outstanding (in thousands): | ||||||||||||||
| Basic | 121,150 | 98,221 | ||||||||||||
| Diluted | 144,390 | 98,221 | ||||||||||||
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| Successor | Predecessor | |||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | ||||||||||||||||||
| ($ in millions except per share data) | ||||||||||||||||||||
| Revenues and other: | ||||||||||||||||||||
| Natural gas, oil and NGL | $ | 7,691 | $ | 2,615 | $ | 398 | ||||||||||||||
| Marketing | 3,296 | 1,443 | 239 | |||||||||||||||||
| Natural gas and oil derivatives | (3,668) | (1,604) | (382) | |||||||||||||||||
| Gains on sales of assets | 298 | 9 | 5 | |||||||||||||||||
| Total revenues and other | 7,617 | 2,463 | 260 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Production | 349 | 194 | 32 | |||||||||||||||||
| Gathering, processing and transportation | 802 | 541 | 102 | |||||||||||||||||
| Severance and ad valorem taxes | 187 | 106 | 18 | |||||||||||||||||
| Exploration | 14 | 4 | 2 | |||||||||||||||||
| Marketing | 3,279 | 1,440 | 237 | |||||||||||||||||
| General and administrative | 102 | 69 | 21 | |||||||||||||||||
| Separation and other termination costs | — | 11 | 22 | |||||||||||||||||
| Depreciation, depletion and amortization | 1,300 | 579 | 72 | |||||||||||||||||
| Impairments | — | 1 | — | |||||||||||||||||
| Other operating expense (income), net | 32 | 1 | (12) | |||||||||||||||||
| Total operating expenses | 6,065 | 2,946 | 494 | |||||||||||||||||
| Income (loss) from operations | 1,552 | (483) | (234) | |||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest expense | (120) | (47) | (11) | |||||||||||||||||
| Other income | 29 | 31 | 2 | |||||||||||||||||
| Reorganization items, net | — | — | 5,569 | |||||||||||||||||
| Total other income (expense), net | (91) | (16) | 5,560 | |||||||||||||||||
| Income (loss) before income taxes | 1,461 | (499) | 5,326 | |||||||||||||||||
| Income tax expense (benefit) | 105 | (10) | (57) | |||||||||||||||||
| Net income (loss) available to common stockholders | $ | 1,356 | $ | (489) | $ | 5,383 | ||||||||||||||
| Earnings (loss) per common share: | ||||||||||||||||||||
| Basic | $ | 11.03 | $ | (4.99) | $ | 550.35 | ||||||||||||||
| Diluted | $ | 9.35 | $ | (4.99) | $ | 534.51 | ||||||||||||||
| Weighted average common shares outstanding (in thousands): | ||||||||||||||||||||
| Basic | 122,924 | 98,040 | 9,781 | |||||||||||||||||
| Diluted | 145,031 | 98,040 | 10,071 | |||||||||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | ||
| Successor | ||||||||||||||
| ($ in millions) | Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income (loss) | $ | 883 | $ | (345) | ||||||||||
| Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||||||||||||||
| Depreciation, depletion and amortization | 440 | 228 | ||||||||||||
| Deferred income tax expense | 19 | — | ||||||||||||
| Derivative losses, net | 1,029 | 910 | ||||||||||||
| Cash payments on derivative settlements, net | (1,234) | (292) | ||||||||||||
| Share-based compensation | 6 | 2 | ||||||||||||
| (Gains) losses on sales of assets | 2 | (3) | ||||||||||||
| Other | 14 | 13 | ||||||||||||
| Changes in assets and liabilities | 154 | (70) | ||||||||||||
| Net cash provided by operating activities | 1,313 | 443 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | (540) | (178) | ||||||||||||
| Business combination, net | 39 | — | ||||||||||||
| Proceeds from divestitures of property and equipment | 6 | 3 | ||||||||||||
| Net cash used in investing activities | (495) | (175) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from Exit Credit Facility - Tranche A Loans | 2,705 | — | ||||||||||||
| Payments on Exit Credit Facility - Tranche A Loans | (3,030) | — | ||||||||||||
| Cash paid to repurchase and retire common stock | (109) | — | ||||||||||||
| Cash paid for common stock dividends | (280) | (33) | ||||||||||||
| Other | — | 1 | ||||||||||||
| Net cash used in financing activities | (714) | (32) | ||||||||||||
| Net increase in cash, cash equivalents and restricted cash | 104 | 236 | ||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 26 | 622 | ||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 130 | $ | 858 | ||||||||||
| Cash and cash equivalents | $ | 74 | $ | 849 | ||||||||||
| Restricted cash | 56 | 9 | ||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 130 | $ | 858 | ||||||||||
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| Successor | Predecessor | |||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | ||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | 1,356 | $ | (489) | $ | 5,383 | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation, depletion and amortization | 1,300 | 579 | 72 | |||||||||||||||||
| Deferred income tax expense (benefit) | 19 | — | (57) | |||||||||||||||||
| Derivative losses, net | 3,668 | 1,604 | 382 | |||||||||||||||||
| Cash payments on derivative settlements, net | (2,845) | (437) | (17) | |||||||||||||||||
| Share-based compensation | 16 | 5 | 3 | |||||||||||||||||
| Gains on sales of assets | (298) | (9) | (5) | |||||||||||||||||
| Impairments | — | 1 | — | |||||||||||||||||
| Non-cash reorganization items, net | — | — | (6,680) | |||||||||||||||||
| Exploration | 10 | 1 | 2 | |||||||||||||||||
| Other | 19 | 10 | 45 | |||||||||||||||||
| Changes in assets and liabilities | (170) | (19) | 851 | |||||||||||||||||
| Net cash provided by (used in) operating activities | 3,075 | 1,246 | (21) | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Capital expenditures | (1,299) | (404) | (66) | |||||||||||||||||
| Business combination, net | (1,967) | — | — | |||||||||||||||||
| Proceeds from divestitures of property and equipment | 409 | 9 | — | |||||||||||||||||
| Net cash used in investing activities | (2,857) | (395) | (66) | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from Exit Credit Facility - Tranche A Loans | 7,255 | 30 | — | |||||||||||||||||
| Payments on Exit Credit Facility - Tranche A Loans | (6,805) | (80) | (479) | |||||||||||||||||
| Payments on DIP Facility borrowings | — | — | (1,179) | |||||||||||||||||
| Proceeds from issuance of senior notes, net | — | — | 1,000 | |||||||||||||||||
| Proceeds from issuance of common stock | — | — | 600 | |||||||||||||||||
| Proceeds from warrant exercise | 3 | 2 | — | |||||||||||||||||
| Debt issuance and other financing costs | — | (3) | (8) | |||||||||||||||||
| Cash paid to repurchase and retire common stock | (667) | — | — | |||||||||||||||||
| Cash paid for common stock dividends | (788) | (67) | — | |||||||||||||||||
| Other | — | (1) | — | |||||||||||||||||
| Net cash used in financing activities | (1,002) | (119) | (66) | |||||||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (784) | 732 | (153) | |||||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 914 | 126 | 279 | |||||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 130 | $ | 858 | $ | 126 | ||||||||||||||
| Cash and cash equivalents | $ | 74 | $ | 849 | $ | 40 | ||||||||||||||
| Restricted cash | 56 | 9 | 86 | |||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 130 | $ | 858 | $ | 126 | ||||||||||||||
6
NATURAL GAS, OIL AND NGL PRODUCTION AND AVERAGE SALES PRICES (unaudited) | ||
| Successor | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,987 | 7.25 | — | — | — | — | 1,987 | 7.25 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 1,605 | 7.40 | — | — | — | — | 1,605 | 7.40 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 121 | 7.04 | 50 | 94.62 | 16 | 37.53 | 516 | 11.99 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 3,713 | 7.31 | 50 | 94.62 | 16 | 37.53 | 4,108 | 7.90 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 4.10 | 65.90 | 37.53 | 4.65 | ||||||||||||||||||||||||||||||||||||||||||||||
| Successor | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,302 | 3.20 | — | — | — | — | 1,302 | 3.20 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 589 | 3.81 | — | — | — | — | 589 | 3.81 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 140 | 4.07 | 59 | 70.36 | 18 | 33.32 | 599 | 8.83 | ||||||||||||||||||||||||||||||||||||||||||
| Powder River Basin | 53 | 4.33 | 9 | 69.31 | 3 | 44.53 | 128 | 7.91 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 2,084 | 3.46 | 68 | 70.22 | 21 | 35.14 | 2,618 | 4.86 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 2.61 | 49.69 | 35.14 | 3.65 | ||||||||||||||||||||||||||||||||||||||||||||||
| Successor | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,801 | 6.27 | — | — | — | — | 1,801 | 6.27 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 1,624 | 6.16 | — | — | — | — | 1,624 | 6.16 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 127 | 6.10 | 51 | 100.11 | 16 | 40.40 | 526 | 12.35 | ||||||||||||||||||||||||||||||||||||||||||
| Powder River Basin | 13 | 5.45 | 2 | 95.18 | 1 | 53.96 | 34 | 10.66 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 3,565 | 6.21 | 53 | 99.87 | 17 | 41.14 | 3,985 | 7.07 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 3.77 | 66.91 | 41.14 | 4.44 | ||||||||||||||||||||||||||||||||||||||||||||||
| Successor | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Period from February 10, 2021 through September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,289 | 2.57 | — | — | — | — | 1,289 | 2.57 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 552 | 3.11 | — | — | — | — | 552 | 3.11 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 142 | 3.83 | 63 | 66.41 | 19 | 27.36 | 630 | 8.28 | ||||||||||||||||||||||||||||||||||||||||||
| Powder River Basin | 55 | 3.94 | 10 | 65.02 | 3 | 36.91 | 133 | 7.25 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 2,038 | 2.84 | 73 | 66.23 | 22 | 28.85 | 2,604 | 4.31 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 2.46 | 48.30 | 28.85 | 3.51 | ||||||||||||||||||||||||||||||||||||||||||||||
7
| Predecessor | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Period from January 1, 2021 through February 9, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,233 | 2.42 | — | — | — | — | 1,233 | 2.42 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 543 | 2.44 | — | — | — | — | 543 | 2.44 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 165 | 2.57 | 74 | 53.37 | 18 | 23.94 | 721 | 6.71 | ||||||||||||||||||||||||||||||||||||||||||
| Powder River Basin | 61 | 2.92 | 10 | 51.96 | 4 | 34.31 | 144 | 5.71 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 2,002 | 2.45 | 84 | 53.21 | 22 | 25.92 | 2,641 | 3.77 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 2.62 | 49.06 | 31.42 | 3.65 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Combined | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas | Oil | NGL | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| MMcf per day | $/Mcf | MBbl per day | $/Bbl | MBbl per day | $/Bbl | MMcfe per day | $/Mcfe | |||||||||||||||||||||||||||||||||||||||||||
| Marcellus | 1,281 | 2.55 | — | — | — | — | 1,281 | 2.55 | ||||||||||||||||||||||||||||||||||||||||||
| Haynesville | 551 | 3.01 | — | — | — | — | 551 | 3.01 | ||||||||||||||||||||||||||||||||||||||||||
| Eagle Ford | 145 | 3.62 | 65 | 64.20 | 19 | 26.88 | 649 | 8.02 | ||||||||||||||||||||||||||||||||||||||||||
| Powder River Basin | 56 | 3.78 | 10 | 63.10 | 4 | 36.46 | 140 | 7.00 | ||||||||||||||||||||||||||||||||||||||||||
| Total | 2,033 | 2.79 | 75 | 64.06 | 23 | 28.42 | 2,621 | 4.23 | ||||||||||||||||||||||||||||||||||||||||||
| Average Realized Price (including realized derivatives) | 2.47 | 48.17 | 28.42 | 3.53 | ||||||||||||||||||||||||||||||||||||||||||||||
8
| ADJUSTED GROSS MARGIN (unaudited) | ||
| Successor | |||||||||||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | ||||||||||||||||||||||
| ($ in millions, except per unit) | $ | $/Mcfe | $ | $/Mcfe | |||||||||||||||||||
| Marcellus | |||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 1,324 | 7.25 | $ | 383 | 3.20 | |||||||||||||||||
| Production expenses | 22 | 0.12 | 9 | 0.08 | |||||||||||||||||||
| Gathering, processing and transportation expenses | 106 | 0.58 | 83 | 0.69 | |||||||||||||||||||
| Severance and ad valorem | 5 | 0.03 | 2 | 0.02 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 1,191 | 6.52 | $ | 289 | 2.41 | |||||||||||||||||
| Haynesville | |||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 1,093 | 7.40 | $ | 207 | 3.81 | |||||||||||||||||
| Production expenses | 38 | 0.26 | 13 | 0.24 | |||||||||||||||||||
| Gathering, processing and transportation expenses | 89 | 0.60 | 28 | 0.51 | |||||||||||||||||||
| Severance and ad valorem | 24 | 0.17 | 5 | 0.09 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 942 | 6.37 | $ | 161 | 2.97 | |||||||||||||||||
| Eagle Ford | |||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 570 | 11.99 | $ | 487 | 8.83 | |||||||||||||||||
| Production expenses | 61 | 1.28 | 49 | 0.89 | |||||||||||||||||||
| Gathering, processing and transportation expenses | 91 | 1.91 | 85 | 1.53 | |||||||||||||||||||
| Severance and ad valorem | 38 | 0.81 | 25 | 0.45 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 380 | 7.99 | $ | 328 | 5.96 | |||||||||||||||||
| Powder River Basin | |||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | — | — | $ | 93 | 7.91 | |||||||||||||||||
| Production expenses | — | — | 9 | 0.73 | |||||||||||||||||||
| Gathering, processing and transportation expenses | — | — | 23 | 1.99 | |||||||||||||||||||
| Severance and ad valorem | — | — | 9 | 0.76 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | — | — | $ | 52 | 4.43 | |||||||||||||||||
9
| Successor | Predecessor | Non-GAAP Combined | ||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions, except per unit) | $ | $/Mcfe | $ | $/Mcfe | $ | $/Mcfe | $ | $/Mcfe | ||||||||||||||||||||||||||||||||||||||||||
| Marcellus | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 3,085 | 6.27 | $ | 772 | 2.57 | $ | 119 | 2.42 | $ | 891 | 2.55 | ||||||||||||||||||||||||||||||||||||||
| Production expenses | 54 | 0.11 | 23 | 0.08 | 4 | 0.08 | 27 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 282 | 0.57 | 204 | 0.68 | 34 | 0.70 | 238 | 0.68 | ||||||||||||||||||||||||||||||||||||||||||
| Severance and ad valorem | 13 | 0.03 | 6 | 0.02 | 1 | 0.01 | 7 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 2,736 | 5.56 | $ | 539 | 1.79 | $ | 80 | 1.63 | $ | 619 | 1.77 | ||||||||||||||||||||||||||||||||||||||
| Haynesville | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 2,733 | 6.16 | $ | 401 | 3.11 | $ | 53 | 2.44 | $ | 454 | 3.01 | ||||||||||||||||||||||||||||||||||||||
| Production expenses | 109 | 0.25 | 30 | 0.23 | 4 | 0.19 | 34 | 0.22 | ||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 240 | 0.54 | 64 | 0.50 | 11 | 0.49 | 75 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||
| Severance and ad valorem | 48 | 0.11 | 12 | 0.09 | 2 | 0.09 | 14 | 0.09 | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 2,336 | 5.26 | $ | 295 | 2.29 | $ | 36 | 1.67 | $ | 331 | 2.20 | ||||||||||||||||||||||||||||||||||||||
| Eagle Ford | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 1,774 | 12.35 | $ | 1,217 | 8.28 | $ | 193 | 6.71 | $ | 1,410 | 8.02 | ||||||||||||||||||||||||||||||||||||||
| Production expenses | 176 | 1.22 | 120 | 0.82 | 21 | 0.71 | 141 | 0.80 | ||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 258 | 1.80 | 211 | 1.44 | 45 | 1.55 | 256 | 1.45 | ||||||||||||||||||||||||||||||||||||||||||
| Severance and ad valorem | 115 | 0.80 | 67 | 0.45 | 13 | 0.45 | 80 | 0.45 | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 1,225 | 8.53 | $ | 819 | 5.57 | $ | 114 | 4.00 | $ | 933 | 5.32 | ||||||||||||||||||||||||||||||||||||||
| Powder River Basin | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 99 | 10.66 | $ | 225 | 7.25 | $ | 33 | 5.71 | $ | 258 | 7.00 | ||||||||||||||||||||||||||||||||||||||
| Production expenses | 10 | 0.94 | 21 | 0.68 | 3 | 0.56 | 24 | 0.66 | ||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 22 | 2.32 | 62 | 2.00 | 12 | 2.09 | 74 | 2.01 | ||||||||||||||||||||||||||||||||||||||||||
| Severance and ad valorem | 11 | 1.09 | 21 | 0.69 | 2 | 0.48 | 23 | 0.65 | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 56 | 6.31 | $ | 121 | 3.88 | $ | 16 | 2.58 | $ | 137 | 3.68 | ||||||||||||||||||||||||||||||||||||||
10
| CAPITAL EXPENDITURES ACCRUED (unaudited) | ||
| Successor | ||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Drilling and completion capital expenditures: | ||||||||||||||
| Marcellus | $ | 151 | $ | 58 | ||||||||||
| Haynesville | 237 | 68 | ||||||||||||
| Eagle Ford | 172 | 25 | ||||||||||||
| Powder River Basin | — | 7 | ||||||||||||
| Total drilling and completion capital expenditures | 560 | 158 | ||||||||||||
| Non-drilling and completion - field | 33 | 10 | ||||||||||||
| Non-drilling and completion - corporate | 26 | 17 | ||||||||||||
| Total capital expenditures | $ | 619 | $ | 185 | ||||||||||
| Successor | Predecessor | Non-GAAP Combined | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Drilling and completion capital expenditures: | |||||||||||||||||||||||||||||
| Marcellus | $ | 338 | $ | 155 | $ | 26 | $ | 181 | |||||||||||||||||||||
| Haynesville | 618 | 138 | 22 | 160 | |||||||||||||||||||||||||
| Eagle Ford | 350 | 48 | 5 | 53 | |||||||||||||||||||||||||
| Powder River Basin | 22 | 12 | — | 12 | |||||||||||||||||||||||||
| Total drilling and completion capital expenditures | 1,328 | 353 | 53 | 406 | |||||||||||||||||||||||||
| Non-drilling and completion - field | 74 | 27 | 6 | 33 | |||||||||||||||||||||||||
| Non-drilling and completion - corporate | 67 | 36 | 3 | 39 | |||||||||||||||||||||||||
| Total capital expenditures | $ | 1,469 | $ | 416 | $ | 62 | $ | 478 | |||||||||||||||||||||
11
NATURAL GAS AND OIL HEDGING POSITIONS AS OF OCTOBER 27, 2022 | ||
| Natural Gas Swaps | |||||||||||
| Volume (Bcf) | Avg. NYMEX Price of Swaps | ||||||||||
Q4 2022 (a) | 117 | $ | 2.60 | ||||||||
| Total 2023 | 204 | $ | 2.67 | ||||||||
| Total 2024 | 101 | $ | 2.95 | ||||||||
| Total 2025 | 27 | $ | 2.65 | ||||||||
| Natural Gas Swaptions | |||||||||||
| Volume (Bcf) | Avg. NYMEX Strike Price | ||||||||||
| Total 2023 | 7 | $ | 2.88 | ||||||||
| Natural Gas Collars | |||||||||||||||||
| Volume (Bcf) | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | |||||||||||||||
Q4 2022 (a) | 120 | $ | 3.12 | $ | 4.27 | ||||||||||||
| Total 2023 | 413 | $ | 3.43 | $ | 5.83 | ||||||||||||
| Total 2024 | 66 | $ | 3.97 | $ | 6.08 | ||||||||||||
| Natural Gas Three-Way Collars | |||||||||||||||||||||||
| Volume (Bcf) | Avg. NYMEX Sold Put Price | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | ||||||||||||||||||||
Q4 2022 (a) | 6 | $ | 2.41 | $ | 2.90 | $ | 3.43 | ||||||||||||||||
| Total 2023 | 4 | $ | 2.50 | $ | 3.40 | $ | 3.79 | ||||||||||||||||
| Natural Gas Written Call Options | |||||||||||
| Volume (Bcf) | Avg. NYMEX strike price | ||||||||||
| Total 2023 | 18 | $ | 3.29 | ||||||||
12
| Natural Gas Basis Protection Swaps | |||||||||||
| Volume (Bcf) | Avg. NYMEX plus/(minus) | ||||||||||
Q4 2022 (a) | 127 | $ | (0.30) | ||||||||
| Total 2023 | 358 | $ | (0.26) | ||||||||
| Total 2024 | 135 | $ | (0.45) | ||||||||
| Total 2025 | 5 | $ | (0.21) | ||||||||
| Crude Oil Swaps | |||||||||||
| Volume (MMBbls) | Avg. NYMEX Price of Swaps | ||||||||||
Q4 2022 (a) | 2.6 | $ | 45.92 | ||||||||
| Total 2023 | 1.9 | $ | 47.17 | ||||||||
| Crude Oil Collars | |||||||||||||||||
| Volume (MMBbls) | Avg. NYMEX Bought Put Price | Avg. NYMEX Sold Call Price | |||||||||||||||
| Total 2023 | 6.2 | $ | 69.99 | $ | 83.86 | ||||||||||||
| Crude Oil Basis Protection Swaps | |||||||||||
| Volume (MMBbls) | Avg. NYMEX plus/(minus) | ||||||||||
Q4 2022 (a) | 3.5 | $ | 0.89 | ||||||||
| Total 2023 | 6.2 | $ | 0.96 | ||||||||
__________________________________________
(a)Includes amounts settled in October and November 2022.
13
| NON-GAAP FINANCIAL MEASURES | ||
As a supplement to the financial results prepared in accordance with U.S. GAAP, Chesapeake’s quarterly earnings releases contain certain financial measures that are not prepared or presented in accordance with U.S. GAAP. These non-GAAP financial measures include Adjusted Net Income (Loss) Attributable to Chesapeake, Adjusted EBITDAX, Adjusted Gross Margin, Adjusted Free Cash Flow and Net Debt. A reconciliation of each financial measure to its most directly comparable GAAP financial measure is included in the tables below.
These financial measures are non-GAAP and should not be considered as an alternative to, or more meaningful than, net income (loss), earnings (loss) per common share, gross margin or cash flow provided by operating activities prepared in accordance with GAAP.
Chesapeake believes that the non-GAAP measures presented, when viewed in combination with its financial measures prepared in accordance with GAAP, provide useful information as they exclude certain items management believes affects the comparability of operating results. Management believes these adjusted financial measures are a meaningful adjunct to earnings and cash flows calculated in accordance with GAAP because (a) management uses these financial measures to evaluate the company’s trends and performance relative to other oil and natural gas producing companies, (b) these financial measures are comparable to estimates provided by securities analysts, and (c) items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provide by the company generally excludes information regarding these types of items.
Because not all companies use identical calculations, Chesapeake’s non-GAAP measures may not be comparable to similar titled measures of other companies.
14
RECONCILIATION OF ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE (unaudited) | ||
| Successor | Successor | |||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||||||||||||||
| ($ in millions, except per share data) | $ | $/Share | $ | $/Share | ||||||||||||||||||||||
| Net income (loss) available to common stockholders (GAAP) | $ | 883 | $ | 7.29 | $ | (345) | $ | (3.51) | ||||||||||||||||||
| Effect of dilutive securities | — | (1.17) | — | — | ||||||||||||||||||||||
| Diluted income (loss) available to common stockholders (GAAP) | $ | 883 | $ | 6.12 | $ | (345) | $ | (3.51) | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Unrealized (gains) losses on natural gas and oil derivatives | (199) | (1.38) | 618 | 6.29 | ||||||||||||||||||||||
| (Gains) losses on sales of assets | 2 | 0.02 | (3) | (0.03) | ||||||||||||||||||||||
| Other operating expense, net | 6 | 0.04 | 6 | 0.06 | ||||||||||||||||||||||
| Other interest expense | 12 | 0.08 | — | — | ||||||||||||||||||||||
| Other | (4) | (0.03) | 6 | 0.06 | ||||||||||||||||||||||
Deferred income tax expense(a) | 19 | 0.13 | — | — | ||||||||||||||||||||||
Tax effect of adjustments(b) | 11 | 0.08 | (13) | (0.13) | ||||||||||||||||||||||
| Effect of dilutive securities | — | — | — | (0.36) | ||||||||||||||||||||||
| Adjusted net income available to common stockholders (Non-GAAP) | $ | 730 | $ | 5.06 | $ | 269 | $ | 2.38 | ||||||||||||||||||
15
| Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | |||||||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | $ | $/Share | $ | $/Share | $ | $/Share | |||||||||||||||||||||||||||||||||||
| Net income (loss) available to common stockholders (GAAP) | $ | 1,356 | $ | 11.03 | $ | (489) | $ | (4.99) | $ | 5,383 | $ | 550.35 | |||||||||||||||||||||||||||||
| Effect of dilutive securities | — | (1.68) | — | — | — | (15.84) | |||||||||||||||||||||||||||||||||||
| Diluted income (loss) available to common stockholders (GAAP) | $ | 1,356 | $ | 9.35 | $ | (489) | $ | (4.99) | $ | 5,383 | $ | 534.51 | |||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||
| Unrealized losses on natural gas and oil derivatives | 807 | 5.56 | 1,122 | 11.44 | 369 | 36.64 | |||||||||||||||||||||||||||||||||||
| Separation and other termination costs | — | — | 11 | 0.11 | 22 | 2.18 | |||||||||||||||||||||||||||||||||||
| Gains on sales of assets | (298) | (2.06) | (9) | (0.09) | (5) | (0.50) | |||||||||||||||||||||||||||||||||||
| Other operating expense (income), net | 53 | 0.37 | 4 | 0.04 | (12) | (1.19) | |||||||||||||||||||||||||||||||||||
| Impairments | — | — | 1 | 0.01 | — | — | |||||||||||||||||||||||||||||||||||
| Reorganization items, net | — | — | — | — | (5,569) | (552.97) | |||||||||||||||||||||||||||||||||||
| Other interest expense | 12 | 0.08 | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Other | (19) | (0.13) | (18) | (0.18) | — | — | |||||||||||||||||||||||||||||||||||
Deferred income tax expense(a) | 19 | 0.13 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Tax effect of adjustments(b) | (35) | (0.24) | (13) | (0.13) | (57) | (5.66) | |||||||||||||||||||||||||||||||||||
| Effect of dilutive securities | — | — | — | (0.73) | — | — | |||||||||||||||||||||||||||||||||||
| Adjusted net income available to common stockholders (Non-GAAP) | $ | 1,895 | $ | 13.06 | $ | 609 | $ | 5.48 | $ | 131 | $ | 13.01 | |||||||||||||||||||||||||||||
| (a) | In the 2022 Successor Period and 2022 Successor Quarter, we adjusted the net deferred tax liability associated with our acquisition of Vine. As a result of this adjustment to the deferred tax liability, we increased the valuation allowance that we maintain against our net deferred tax asset position and recorded $19 million of deferred income tax expense. | ||||
| (b) | The 2022 Successor Period and 2022 Successor Quarters include an incremental tax effect attributed to the reconciling adjustments using blended rates of 5.7% for the 2022 Successor Third Quarter, 5.8% for the 2022 Successor Second Quarter and 6.0% for the 2022 Successor First Quarter. The 2021 Successor Period and 2021 Successor Quarter include a tax effect attributed to the reconciling adjustments using an estimated rate of 2%. The 2021 Predecessor Period includes an income tax benefit of $57 million attributed to deferred income tax effects associated with Predecessor accumulated other comprehensive income, eliminated in fresh start accounting. | ||||
16
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDAX (unaudited) | ||
| Successor | Successor | |||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Net income (loss) available to common stockholders (GAAP) | $ | 883 | $ | (345) | ||||||||||
| Adjustments: | ||||||||||||||
| Interest expense | 52 | 17 | ||||||||||||
| Income tax expense (benefit) | 74 | (10) | ||||||||||||
| Depreciation, depletion and amortization | 440 | 228 | ||||||||||||
| Exploration | 2 | 2 | ||||||||||||
| Unrealized (gains) losses on natural gas and oil derivatives | (199) | 618 | ||||||||||||
| (Gains) losses on sales of assets | 2 | (3) | ||||||||||||
| Other operating expense, net | 6 | 6 | ||||||||||||
| Other | (4) | 6 | ||||||||||||
| Adjusted EBITDAX (Non-GAAP) | $ | 1,256 | $ | 519 | ||||||||||
| Successor | Predecessor | Non-GAAP Combined | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Net income (loss) available to common stockholders (GAAP) | $ | 1,356 | $ | (489) | $ | 5,383 | $ | 4,894 | |||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Interest expense | 120 | 47 | 11 | 58 | |||||||||||||||||||||||||
| Income tax expense (benefit) | 105 | (10) | (57) | (67) | |||||||||||||||||||||||||
| Depreciation, depletion and amortization | 1,300 | 579 | 72 | 651 | |||||||||||||||||||||||||
| Exploration | 14 | 4 | 2 | 6 | |||||||||||||||||||||||||
| Unrealized losses on natural gas and oil derivatives | 807 | 1,122 | 369 | 1,491 | |||||||||||||||||||||||||
| Separation and other termination costs | — | 11 | 22 | 33 | |||||||||||||||||||||||||
| Gains on sales of assets | (298) | (9) | (5) | (14) | |||||||||||||||||||||||||
| Other operating expense (income), net | 53 | 4 | (12) | (8) | |||||||||||||||||||||||||
| Impairments | — | 1 | — | 1 | |||||||||||||||||||||||||
| Reorganization items, net | — | — | (5,569) | (5,569) | |||||||||||||||||||||||||
| Other | (19) | (18) | — | (18) | |||||||||||||||||||||||||
| Adjusted EBITDAX (Non-GAAP) | $ | 3,438 | $ | 1,242 | $ | 216 | $ | 1,458 | |||||||||||||||||||||
17
RECONCILIATION OF GROSS MARGIN TO ADJUSTED GROSS MARGIN (unaudited) | ||
| Successor | ||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Gross margin (GAAP) | ||||||||||||||
| Natural gas, oil and NGL sales | $ | 2,987 | $ | 1,170 | ||||||||||
| Less: | ||||||||||||||
| Production | (121) | (80) | ||||||||||||
| Gathering, processing and transportation | (286) | (219) | ||||||||||||
| Severance and ad valorem taxes | (67) | (41) | ||||||||||||
| Depreciation, depletion and amortization | (440) | (228) | ||||||||||||
| Gross margin (GAAP) | 2,073 | 602 | ||||||||||||
| Add back: Depreciation, depletion and amortization | 440 | 228 | ||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 2,513 | $ | 830 | ||||||||||
| Successor | Predecessor | Non-GAAP Combined | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Gross margin (GAAP) | |||||||||||||||||||||||||||||
| Natural gas, oil and NGL sales | $ | 7,691 | $ | 2,615 | $ | 398 | $ | 3,013 | |||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||
| Production | (349) | (194) | (32) | (226) | |||||||||||||||||||||||||
| Gathering, processing and transportation | (802) | (541) | (102) | (643) | |||||||||||||||||||||||||
| Severance and ad valorem taxes | (187) | (106) | (18) | (124) | |||||||||||||||||||||||||
| Depreciation, depletion and amortization | (1,300) | (579) | (72) | (651) | |||||||||||||||||||||||||
| Gross margin (GAAP) | 5,053 | 1,195 | 174 | 1,369 | |||||||||||||||||||||||||
| Add back: Depreciation, depletion and amortization | 1,300 | 579 | 72 | 651 | |||||||||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 6,353 | $ | 1,774 | $ | 246 | $ | 2,020 | |||||||||||||||||||||
18
ADJUSTED FREE CASH FLOW | ||
| Successor | ||||||||||||||
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 1,313 | $ | 443 | ||||||||||
| Cash capital expenditures | (540) | (178) | ||||||||||||
| Adjusted free cash flow (Non-GAAP) | $ | 773 | $ | 265 | ||||||||||
| Successor | Predecessor | Non-GAAP Combined | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Period from February 10, 2021 through September 30, 2021 | Period from January 1, 2021 through February 9, 2021 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities (GAAP) | $ | 3,075 | $ | 1,246 | $ | (21) | $ | 1,225 | |||||||||||||||||||||
| Cash paid for reorganization items, net | — | 65 | 66 | 131 | |||||||||||||||||||||||||
| Cash paid for acquisition costs | 23 | — | — | — | |||||||||||||||||||||||||
| Cash capital expenditures | (1,299) | (404) | (66) | (470) | |||||||||||||||||||||||||
| Adjusted free cash flow (Non-GAAP) | $ | 1,799 | $ | 907 | $ | (21) | $ | 886 | |||||||||||||||||||||
NET DEBT | ||
| Successor | |||||
| ($ in millions) | September 30, 2022 | ||||
| Total debt (GAAP) | $ | 2,717 | |||
| Premiums and issuance costs on debt | (96) | ||||
| Principal amount of debt | 2,621 | ||||
| Cash and cash equivalents | (74) | ||||
| Net debt (Non-GAAP) | $ | 2,547 | |||
19
CHESAPEAKE ENERGY CORPORATION - MANAGEMENT’S OUTLOOK AS OF NOVEMBER 1, 2022 | ||
Chesapeake periodically provides guidance on certain factors that affect the company’s future financial performance. New information or changes from the company's August 2, 2022 outlook are italicized bold below.
2022 Projections | ||||||||
| Total production: | ||||||||
| Oil - mbbls per day | 51 - 56 | |||||||
| NGL - mbbls per day | 15 - 18 | |||||||
| Natural gas - mmcf per day | 3,600 - 3,680 | |||||||
| Total daily rate - mmcfe per day | 4,020 - 4,140 | |||||||
| Estimated basis to NYMEX prices, based on 10/27/22 strip prices: | ||||||||
| Oil - $/bbl | $1.75 - $2.25 | |||||||
| Natural gas - $/mcf | ($0.60) - ($0.70) | |||||||
| NGL - realizations as a % of WTI | 40% - 45% | |||||||
| Operating costs per mcfe of projected production: | ||||||||
| Production expense | $0.29 - $0.33 | |||||||
| Gathering, processing and transportation expenses | $0.70 - $0.80 | |||||||
| Oil - $/bbl | $2.80 - $3.00 | |||||||
| Natural Gas - $/mcf | $0.75 - $0.85 | |||||||
| Severance and ad valorem taxes | $0.16 - $0.18 | |||||||
General and administrative(a) | $0.08 - $0.11 | |||||||
| Depreciation, depletion and amortization expense | $1.17 - $1.33 | |||||||
| Marketing net margin and other ($ in millions) | $25 - $50 | |||||||
| Interest expense ($ in millions) | $150 - $160 | |||||||
| Cash taxes ($ in millions) | $175 - $225 | |||||||
| Cash taxes (as a percent of income before income taxes) | 6% - 9% | |||||||
Adjusted EBITDAX, based on 10/27/22 strip prices ($ in millions)(b) | $4,450 - $4,550 | |||||||
| Total capital expenditures ($ in millions) | $1,750 - $1,950 | |||||||
| Marcellus D&C | $400 - $440 | |||||||
| Haynesville D&C | $750 - $800 | |||||||
| Eagle Ford D&C | $375 - $415 | |||||||
| Powder River Basin D&C | $25 | |||||||
| Non-D&C Field (workover, infrastructure and leasehold) | $115 - $165 | |||||||
| Non-D&C Corporate (PP&E, G&G, capitalized interest and G&A) | $85 - $105 | |||||||
| (a) | Includes ~$0.01/mcfe of expenses associated with stock-based compensation, which are recorded in general and administrative expenses in Chesapeake's Condensed Consolidated Statement of Operations. | ||||
| (b) | Adjusted EBITDAX is a non-GAAP measure used by management to evaluate the company's operational trends and performance relative to other oil and natural gas producing companies. Adjusted EBITDAX excludes certain items that management believes affect the comparability of operating results. The most directly comparable GAAP measure is net income (loss), but it is not possible, without unreasonable efforts, to identify the amount or significance of events or transactions that may be included in future GAAP net income (loss) but that management does not believe to be representative of underlying business performance. The company further believes that providing estimates of the amounts that would be required to reconcile forecasted adjusted EBITDAX to forecasted GAAP net income (loss) would imply a degree of precision that may be confusing or misleading to investors. Items excluded from net income (loss) to arrive at adjusted EBITDAX include interest expense, income taxes, depreciation, depletion and amortization expense, and exploration expense as well as one-time items or items whose timing or amount cannot be reasonably estimated. | ||||
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