COST: 1125 $MM
VOLUMES: 1.8 Bcf/d
COST: 45 $MM
COST: 155 $MM
DALLAS, Aug. 8, 2018 /PRNewswire/ -- Alerian announced today that Williams Partners (NYSE: WPZ) is expected to be removed from the Alerian Midstream Energy Index (AMNA), Alerian MLP Infrastructure Index (AMZI), Alerian US Midstream Energy Index (AMUS), Alerian MLP Index (AMZ), Alerian MLP Equal Weight Index (AMZE), Alerian Natural Gas MLP Index (ANGI), and Alerian Large Cap MLP Index (AMLI) in a special rebalancing.
Special rebalancings are triggered by corporate actions such as mergers, bankruptcies, and liquidations. Pending unitholder approval, WPZ will cease to trade due to its merger with the Williams Companies (NYSE: WMB). If approved, the rebalancing will take place one full trading day after the issuance of a press release indicating all needed merger votes have passed.
Each index will be rebalanced in accordance with its existing methodology. Constituent additions to and deletions from an index do not reflect an opinion by Alerian on the investment merits of the respective securities.
About Alerian
Alerian equips investors to make informed decisions about energy infrastructure and Master Limited Partnerships (MLPs). Its benchmarks are widely used by industry executives, investment professionals, research analysts, and national media to analyze relative performance. As of July 31, 2018, over $15 billion is directly tied to the Alerian Index Series through exchange-traded funds and notes, separately managed accounts, and structured products. For more information, including index values and constituents, research content, and announcements regarding rebalancings, please visit alerian.com.
View original content:http://www.prnewswire.com/news-releases/williams-partners-expected-to-be-removed-from-the-alerian-index-series-300693850.html
SOURCE Alerian
DALLAS, Aug. 1, 2018 /PRNewswire/ -- Alerian reported index linked product positions of $15.0 billion as of June 30, 2018. Linked products include exchange-traded funds, exchange-traded notes, return of capital notes, variable insurance portfolios, and mutual funds.
Below is a full list of energy master limited partnership (MLP) positions, as of June 30, 2018, in products linked to the Alerian Index Series.
Ticker |
Exposure in |
Exposure in |
Ticker |
Exposure in |
Exposure in | |
AM |
305,257,484 |
10,340,701 |
HEP |
151,911,915 |
5,375,510 | |
AMGP |
1,164,270 |
61,732 |
MMP |
1,501,453,809 |
21,735,000 | |
ANDX |
446,822,576 |
10,506,056 |
MPLX |
1,162,174,520 |
34,041,433 | |
APU |
58,778,057 |
1,392,185 |
NBLX |
22,166,701 |
434,130 | |
ARLP |
25,591,033 |
1,394,607 |
NGL |
165,162,738 |
13,213,019 | |
BPL |
604,497,037 |
17,197,640 |
NS |
210,933,016 |
9,312,716 | |
BPMP |
20,189,424 |
961,859 |
NSH |
239,822 |
19,340 | |
BWP |
170,678,160 |
14,688,310 |
PAA |
1,177,071,579 |
49,791,522 | |
CEQP |
183,499,246 |
5,779,504 |
PAGP |
3,213,393 |
134,395 | |
CQP |
173,601,824 |
4,828,980 |
PSXP |
318,554,875 |
6,238,834 | |
CVRR |
20,028,626 |
896,135 |
RMP |
147,346,450 |
8,657,253 | |
DCP |
421,401,442 |
10,654,904 |
SEP |
341,382,494 |
9,638,128 | |
DM |
13,475,016 |
990,810 |
SHLX |
322,823,077 |
14,554,692 | |
EEP |
277,227,481 |
25,363,905 |
SMLP |
12,744,536 |
827,567 | |
ENBL |
176,973,526 |
10,343,280 |
SPH |
28,830,596 |
1,227,356 | |
ENLC |
853,859 |
51,906 |
SUN |
27,065,571 |
1,084,358 | |
ENLK |
303,905,691 |
19,568,943 |
TCP |
165,868,659 |
6,391,856 | |
EPD |
1,503,782,388 |
54,347,032 |
TEGP |
386,005,955 |
17,419,041 | |
EQGP |
355,540 |
15,123 |
TGP |
18,444,324 |
1,094,619 | |
EQM |
356,373,011 |
6,907,792 |
USAC |
16,751,289 |
995,323 | |
ETE |
6,023,303 |
349,177 |
VLP |
17,131,051 |
449,988 | |
ETP |
1,481,856,983 |
77,828,623 |
VNOM |
25,953,041 |
813,320 | |
GEL |
281,851,288 |
12,864,048 |
WES |
571,788,034 |
11,816,244 | |
GLOP |
14,609,467 |
612,556 |
WGP |
826,761 |
23,126 | |
GMLP |
15,169,006 |
981,178 |
WPZ |
1,218,967,796 |
30,031,234 | |
HCLP |
18,789,000 |
1,592,288 |
||||
About Alerian
Alerian equips investors to make informed decisions about energy infrastructure and Master Limited Partnerships (MLPs). Its benchmarks are widely used by industry executives, investment professionals, research analysts, and national media to analyze relative performance. As of June 30, 2018, over $15 billion is directly tied to the Alerian Index Series through exchange-traded funds and notes, separately managed accounts, and structured products. For more information, including index values and constituents, research content, and announcements regarding rebalancings, please visit alerian.com.
View original content:http://www.prnewswire.com/news-releases/alerian-reports-june-30-2018-index-linked-product-positions-300690263.html
SOURCE Alerian
DALLAS, June 8, 2018 /PRNewswire/ -- Swank Capital, LLC and Cushing® Asset Management, LP, announce today an upcoming interim rebalancing of The Cushing® Energy Index (the "Index"). Per the Index's methodology guide, the removal of an Index constituent from a Sub-Index without a named direct replacement necessitates the rebalancing of the Index. The Cushing® 30 MLP Index (the "Sub-Index") announced today that Index constituents Spectra Energy Partners, LP (NYSE: SEP) and Tallgrass Energy GP, LP (NYSE: TEGP) will be removed from the Sub-Index after the markets close on June 15, 2018, and effective on June 18, 2018. Replacements named for the removed constituents are not direct replacements. After the markets close on June 15, 2018, the constituents of the Index will be rebalanced, and the changes in the table below will become effective on June 18, 2018.
Cushing® Energy Index constituents, effective June 18, 2018:
Company Name |
Ticker |
Index Weight |
Status |
The Williams Companies, Inc. |
WMB |
6.00% |
Existing |
Kinder Morgan, Inc. |
KMI |
6.00% |
Existing |
ONEOK, Inc. |
OKE |
6.00% |
Existing |
Helmerich & Payne, Inc. |
HP |
5.78% |
Existing |
Exxon Mobil Corporation |
XOM |
5.22% |
Existing |
Chevron Corporation |
CVX |
4.74% |
Existing |
Occidental Petroleum Corporation |
OXY |
4.65% |
Existing |
Schlumberger N.V. (Schlumberger Limited) |
SLB |
3.79% |
Existing |
Phillips 66 |
PSX |
3.58% |
Existing |
Valero Energy Corporation |
VLO |
3.45% |
Existing |
Apache Corporation |
APA |
3.30% |
Existing |
Marathon Petroleum Corporation |
MPC |
3.05% |
Existing |
Baker Hughes, A GE Company |
BHGE |
2.72% |
Existing |
ConocoPhillips |
COP |
2.19% |
Existing |
Andeavor |
ANDV |
2.14% |
Existing |
TechnicFMC plc |
FTI |
2.13% |
Existing |
Hess Corporation |
HES |
2.12% |
Existing |
Dominion Energy Midstream Partners, LP |
DM |
2.00% |
NEW |
Alliance Resource Partners, L.P. |
ARLP |
2.00% |
Existing |
Andeavor Logistics LP |
ANDX |
2.00% |
Existing |
Tallgrass Energy Partners, LP |
TEP |
2.00% |
Existing |
EnLink Midstream Partners, LP |
ENLK |
2.00% |
Existing |
DCP Midstream, LP |
DCP |
2.00% |
Existing |
Enable Midstream Partners, LP |
ENBL |
2.00% |
NEW |
EQT Midstream Partners, LP |
EQM |
2.00% |
NEW |
Western Gas Partners, L.P. |
WES |
2.00% |
Existing |
Crestwood Equity Partners LP |
CEQP |
2.00% |
NEW |
Energy Transfer Equity, L.P. |
ETE |
2.00% |
Existing |
Energy Transfer Partners, L.P. |
ETP |
2.00% |
NEW |
Halliburton Company |
HAL |
1.95% |
Existing |
Anadarko Petroleum Corporation |
APC |
1.88% |
Existing |
Noble Energy, Inc. |
NBL |
1.67% |
Existing |
Cabot Oil & Gas Corporation |
COG |
1.37% |
Existing |
Marathon Oil Corporation |
MRO |
1.26% |
Existing |
Devon Energy Corporation |
DVN |
1.01% |
Existing |
Constituents removed, effective June 18, 2018:
Company Name |
Ticker |
MPLX LP |
MPLX |
Spectra Energy Partners, LP |
SEP |
Sunoco LP |
SUN |
Tallgrass Energy GP, LP |
TEGP |
Williams Partners L.P. |
WPZ |
ABOUT THE CUSHING® ENERGY INDEX
The Cushing® Energy Index tracks the performance of widely held companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, natural gas, coal and consumable fuels, as well as oil and natural gas equipment and services companies. Constituents of the Index are weighted based on current yield. The Index price level is calculated by S&P Dow Jones Indices and reported on a real-time basis under the Bloomberg ticker "CENI".
ABOUT SWANK CAPITAL AND CUSHING® ASSET MANAGEMENT
Cushing® Asset Management, LP ("Cushing"), a subsidiary of Swank Capital, LLC, is an SEC-registered investment adviser headquartered in Dallas, Texas. Cushing serves as investment adviser to affiliated funds and managed accounts which invest primarily in securities of MLPs and other natural resource companies.
Cushing is also dedicated to serving the needs of investors by sponsoring a variety of benchmarks, including The Cushing® 30 MLP Index (Bloomberg Ticker: MLPX), The Cushing® 30 MLP Market Cap Index (Bloomberg Ticker: CMCI), The Cushing® MLP High Income Index (Bloomberg Ticker: MLPY), The Cushing® Energy Supply Chain Index (Bloomberg Ticker: CSCI), The Cushing® Transportation Index (Bloomberg Ticker: CTRI) and The Cushing® Utility Index (Bloomberg Ticker: CUTI). For more information, please visit http://www.cushingasset.com/indices.
Contact:
Judson Redmond
214-692-6334
www.cushingasset.com
The Cushing® Energy Index (the "Index") is the exclusive property of Swank Capital, LLC, and Cushing Asset Management, LP, which have contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) ("S&P Dow Jones Indices") to calculate and maintain the Index. S&P® is a registered trademark of Standard & Poor's Financial Services LLC ("SPFS"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and, these trademarks have been licensed to S&P Dow Jones Indices. "Calculated by S&P Dow Jones Indices" and its related stylized mark(s) have been licensed for use by Swank Capital, LLC, and Cushing Asset Management, LP. Neither S&P Dow Jones Indices, SPFS, Dow Jones nor any of their affiliates sponsor and promote the Index and none shall be liable for any errors or omissions in calculating the Index.
CUSH-CENI
View original content:http://www.prnewswire.com/news-releases/swank-capital-and-cushing-asset-management-announce-rebalancing-of-the-cushing-energy-index-300662241.html
SOURCE Cushing Asset Management, LP; Swank Capital, LLC
DALLAS, May 18, 2018 /PRNewswire/ -- Swank Capital, LLC and Cushing® Asset Management, LP announce an upcoming interim change to the constituents of The Cushing® 30 MLP Index (the "Index"). On February 23, 2018, Index constituents Alliance Holdings GP, L.P. (NASDAQ: AHGP) and Alliance Resource Partners, L.P. (NASDAQ: ARLP) announced a series of simplification transactions (the "Simplification Transactions") whereby ARLP would acquire AHGP, subject to the written consent of the holders of a majority of AHGP's common units. AHGP sent notice to unitholders soliciting their written consent on April 27, 2018, and established a date 20 business days after that date, or May 25, 2018, as the earliest end of the consent period.
In the notice to unitholders sent April 27, 2018, AHGP stated that certain AHGP unitholders, which collectively own a majority of the outstanding AHGP common units, have agreed to deliver a written consent approving the Simplification Transactions pursuant to a support agreement. As AHGP has received sufficient consent to approve the transactions, per the Index's Methodology Guide, the earliest end of the consent period, or May 25, 2018, will be deemed the date for replacing AHGP in the Index. Consequently, after the market closes on May 25, 2018, and effective on May 29, 2018, Williams Partners, L.P. (NYSE: WPZ) will replace AHGP as a constituent of the Index at AHGP's then-current weight.
There will be no changes to the remaining constituents of the Index.
ABOUT THE CUSHING® 30 MLP INDEX
The Cushing® 30 MLP Index tracks the performance of 30 publicly traded MLP securities that hold midstream energy infrastructure assets in North America, chosen according to a formula-based proprietary valuation model developed by Cushing® Asset Management, LP to rank MLPs for potential inclusion in the Index. The Index price level is calculated by S&P Dow Jones Indices and reported on a real-time basis under the Bloomberg ticker "MLPX".
ABOUT SWANK CAPITAL AND CUSHING® ASSET MANAGEMENT
Cushing® Asset Management, LP ("Cushing"), a subsidiary of Swank Capital, LLC, is an SEC-registered investment adviser headquartered in Dallas, Texas. Cushing serves as investment adviser to affiliated funds and managed accounts which invest primarily in securities of MLPs and other natural resource companies.
Cushing is also dedicated to serving the needs of MLP and energy income investors by sponsoring a variety of industry benchmarks, including The Cushing® MLP Market Cap Index (Bloomberg Ticker: CMCI), The Cushing® MLP High Income Index (Bloomberg Ticker: MLPY), The Cushing® Energy Index (Bloomberg Ticker: CENI), The Cushing® Energy Supply Chain Index (Bloomberg Ticker: CSCI), The Cushing® Transportation Index (Bloomberg Ticker: CTRI) and The Cushing® Utility Index (Bloomberg Ticker: CUTI). For more information, please visit http://www.cushingasset.com/indices.
Contact:
Judson Redmond
214-692-6334
www.cushingasset.com
The Cushing® 30 MLP Index (the "Index") is the exclusive property of Swank Capital, LLC, and Cushing Asset Management, LP, which have contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) ("S&P Dow Jones Indices") to calculate and maintain the Index. S&P® is a registered trademark of Standard & Poor's Financial Services LLC ("SPFS"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and, these trademarks have been licensed to S&P Dow Jones Indices. "Calculated by S&P Dow Jones Indices" and its related stylized mark(s) have been licensed for use by Swank Capital, LLC, and Cushing Asset Management, LP. Neither S&P Dow Jones Indices, SPFS, Dow Jones nor any of their affiliates sponsor and promote the Index and none shall be liable for any errors or omissions in calculating the Index.
CUSH-MLPX
View original content:http://www.prnewswire.com/news-releases/swank-capital-and-cushing-asset-management-announce-a-constituent-change-to-the-cushing-30-mlp-index-300650764.html
SOURCE Cushing® Asset Management, LP; Swank Capital, LLC
DALLAS, May 18, 2018 /PRNewswire/ -- Swank Capital, LLC and Cushing® Asset Management, LP announce an upcoming interim change to the constituents of The Cushing® Utility Index (the "Index"). The Cushing® 30 MLP Index (the "Sub-Index") announced today that after the market closes on May 25, 2018, and effective on May 29, 2018, Index constituent Alliance Holdings GP, L.P. (NASDAQ: AHGP) will be removed from the Sub-Index and replaced with Williams Partners, L.P. (NYSE: WPZ). Consequently, per the Index's Methodology Guide, after the market closes on May 25, 2018, and effective on May 29, 2018, WPZ will replace AHGP in the Index at AHGP's then-current weight.
There will be no changes to the remaining constituents of the Index.
ABOUT THE CUSHING® UTILITY INDEX
The Cushing® Utility Index tracks the performance of widely held companies engaged in electric, gas and water utility services as well as master limited partnerships (MLPs) engaged in storage and transportation of oil, natural gas, coal and consumable fuels. Constituents of the Index are weighted based on current yield. The Index price level is calculated by S&P Dow Jones Indices and reported on a real-time basis under the Bloomberg ticker "CUTI".
ABOUT SWANK CAPITAL AND CUSHING® ASSET MANAGEMENT
Cushing® Asset Management, LP ("Cushing"), a subsidiary of Swank Capital, LLC, is an SEC-registered investment adviser headquartered in Dallas, Texas. Cushing serves as investment adviser to affiliated funds and managed accounts which invest primarily in securities of MLPs and other natural resource companies.
Cushing is also dedicated to serving the needs of investors by sponsoring a variety of benchmarks, including The Cushing® 30 MLP Index (Bloomberg Ticker: MLPX), The Cushing® 30 MLP Market Cap Index (Bloomberg Ticker: CMCI), The Cushing® MLP High Income Index (Bloomberg Ticker: MLPY), The Cushing® Energy Index (Bloomberg Ticker: CENI), The Cushing® Energy Supply Chain Index (Bloomberg Ticker: CSCI) and The Cushing® Transportation Index (Bloomberg Ticker: CTRI). For more information, please visit http://www.cushingasset.com/indices.
Contact:
Judson Redmond
214-692-6334
www.cushingasset.com
The Cushing® Utility Index (the "Index") is the exclusive property of Swank Capital, LLC, and Cushing Asset Management, LP, which have contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) ("S&P Dow Jones Indices") to calculate and maintain the Index. S&P® is a registered trademark of Standard & Poor's Financial Services LLC ("SPFS"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and, these trademarks have been licensed to S&P Dow Jones Indices. "Calculated by S&P Dow Jones Indices" and its related stylized mark(s) have been licensed for use by Swank Capital, LLC, and Cushing Asset Management, LP. Neither S&P Dow Jones Indices, SPFS, Dow Jones nor any of their affiliates sponsor and promote the Index and none shall be liable for any errors or omissions in calculating the Index.
CUSH-CUTI
View original content:http://www.prnewswire.com/news-releases/swank-capital-and-cushing-asset-management-announce-a-constituent-change-to-the-cushing-utility-index-300650781.html
SOURCE Cushing® Asset Management, LP; Swank Capital, LLC
DALLAS, Feb. 21, 2018 /PRNewswire/ -- Alerian reported index linked product positions of $16.3 billion as of December 31, 2017. Linked products include exchange-traded funds, exchange-traded notes, return of capital notes, variable insurance portfolios, and mutual funds.
Below is a full list of energy master limited partnership (MLP) positions, as of December 31, 2017, in products linked to the Alerian Index Series.
Ticker |
Exposure in |
Exposure in |
Ticker |
Exposure in |
Exposure in | |
AM |
318,072,149 |
10,952,898 |
MMP |
1,644,568,414 |
23,182,526 | |
AMGP |
754,587 |
38,265 |
MPLX |
1,279,929,181 |
36,084,837 | |
ANDX |
516,099,522 |
11,173,404 |
NBLX |
21,404,873 |
428,097 | |
APU |
76,556,528 |
1,655,992 |
NGL |
195,952,022 |
13,946,763 | |
ARLP |
20,166,275 |
1,023,669 |
NS |
296,565,295 |
9,902,013 | |
BPL |
908,164,717 |
18,328,249 |
NSH |
236,356 |
15,055 | |
BWP |
201,509,203 |
15,608,769 |
PAA |
1,085,692,515 |
52,601,382 | |
CEQP |
30,317,020 |
1,175,078 |
PAGP |
3,567,709 |
162,538 | |
CQP |
30,774,953 |
1,038,291 |
PSXP |
303,822,210 |
5,803,672 | |
DCP |
411,714,791 |
11,332,639 |
RMP |
197,598,050 |
9,203,449 | |
DM |
186,044,367 |
6,109,831 |
SEP |
397,826,315 |
10,061,364 | |
EEP |
372,358,764 |
26,962,981 |
SHLX |
369,468,507 |
12,389,957 | |
ENBL |
30,305,242 |
2,131,170 |
SMLP |
20,113,987 |
981,170 | |
ENLC |
1,134,945 |
64,485 |
SPH |
35,347,307 |
1,459,426 | |
ENLK |
317,615,016 |
20,664,607 |
SUN |
36,559,156 |
1,287,294 | |
EPD |
1,672,410,145 |
63,086,011 |
TCP |
350,896,258 |
6,608,216 | |
EQGP |
315,059 |
11,712 |
TEGP |
1,533,669 |
59,583 | |
EQM |
536,502,790 |
7,339,299 |
TEP |
269,478,027 |
5,877,383 | |
ETE |
6,574,648 |
380,918 |
TGP |
26,220,374 |
1,301,259 | |
ETP |
1,669,396,449 |
93,158,284 |
VLP |
23,823,578 |
535,361 | |
GEL |
300,264,393 |
13,434,648 |
VNOM |
20,179,418 |
864,956 | |
GLOP |
17,814,465 |
719,776 |
WES |
604,184,334 |
12,563,617 | |
GMLP |
26,442,305 |
1,159,750 |
WGP |
664,201 |
17,874 | |
HEP |
168,157,229 |
5,175,661 |
WPZ |
1,231,920,496 |
31,766,903 |
About Alerian
Alerian equips investors to make informed decisions about Master Limited Partnerships (MLPs) and energy infrastructure. Its benchmarks, including the flagship Alerian MLP Index (AMZ), are widely used by industry executives, investment professionals, research analysts, and national media to analyze relative performance. As of December 31, 2017, over $16 billion was directly tied to the Alerian Index Series through exchange-traded funds and notes, separately managed accounts, and structured products. For more information, including index values and constituents, research content, and announcements regarding rebalancings, please visit alerian.com.
View original content:http://www.prnewswire.com/news-releases/alerian-reports-december-31-2017-index-linked-product-positions-300602316.html
SOURCE Alerian
HOUSTON, Dec. 30, 2016 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) ("Cabot" or the "Company") today announced that the Federal Energy Regulatory Commission ("FERC") issued its final Environmental Impact Statement ("EIS") for Williams Partners' (NYSE: WPZ) Atlantic Sunrise project. The issuance of the final EIS is a key step toward the FERC's final decision on the project, which is expected in early 2017. Following the receipt of all necessary regulatory approvals, Williams Partners anticipates beginning construction in mid-2017, allowing for a full in-service of the project in mid-2018.
In addition to previously announced gas sale and purchase agreements related to Cabot's 850,000 MMBtu per day of transportation capacity on the Atlantic Sunrise project, Cabot also reported the execution of a new definitive gas sale and purchase agreement with an undisclosed company. Under the terms of this new agreement, the Company has agreed to sell an additional 150,000 MMBtu per day of natural gas for a term of three years commencing on the full in-service of the Atlantic Sunrise project.
"Today's final EIS issuance represents a major milestone toward the final approval of the Atlantic Sunrise project," commented Dan O. Dinges, Chairman, President and Chief Executive Officer. "We are also excited to increase our committed sales on the Atlantic Sunrise project utilizing capacity subscribed to by Cabot or by third parties to approximately 1 billion cubic feet (Bcf) per day through the addition of this new sales agreement that is linked to the Gulf Coast market."
Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading independent natural gas producer with its entire resource base located in the continental United States. For additional information, visit the Company's website at www.cabotog.com.
This press release includes forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements regarding future financial and operating performance and results, strategic pursuits and goals, market prices, future hedging and risk management activities, and other statements that are not historical facts contained in this report are forward-looking statements. The words "expect", "project", "estimate", "believe", "anticipate", "intend", "budget", "plan", "forecast", "predict", "may", "should", "could", "will" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, market factors, market prices (including geographic basis differentials) of natural gas and crude oil, results of future drilling and marketing activity, future production and costs, legislative and regulatory initiatives, electronic, cyber or physical security breaches and other factors detailed herein and in our other Securities and Exchange Commission (SEC) filings. See "Risk Factors" in Item 1A of the Form 10-K and subsequent public filings for additional information about these risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not undertake any obligation to correct or update any forward-looking statement, whether as the result of new information, future events or otherwise, except as required by applicable law.
FOR MORE INFORMATION CONTACT
Matt Kerin (281) 589-4642
SOURCE Cabot Oil & Gas Corporation
OKLAHOMA CITY, Nov. 3, 2016 /PRNewswire/ -- Chesapeake Energy Corporation (NYSE: CHK) today reported financial and operational results for the 2016 third quarter plus other recent developments. Highlights include:
Doug Lawler, Chesapeake's Chief Executive Officer, commented, "We continue to make progress in reducing leverage, decreasing total cash costs and improving future midstream expenses. Our achievements in these areas, particularly in regard to our balance sheet, provide a stronger foundation for improving profitability and enhanced returns from our capital program in 2017 and beyond. As we have previously stated, our large resource base and significant inventory of high-return drilling opportunities offer long-term growth and flexibility for our shareholders."
2016 Third Quarter Results
For the 2016 third quarter, Chesapeake's revenues declined by 33% year over year due to a decrease in the average realized commodity prices received for its production, lower production volumes and a decrease in the volumes sold and prices received by the company's marketing affiliate on behalf of third-party producers. Average daily production for the 2016 third quarter of approximately 638,100 barrels of oil equivalent (boe) consisted of approximately 86,600 barrels (bbls) of oil, 2.914 billion cubic feet (bcf) of natural gas and 65,700 bbls of natural gas liquids (NGL).
Chesapeake's operating expenses continue to decline. Average production expenses during the 2016 third quarter were $2.80 per boe, while G&A expenses (including stock-based compensation) during the 2016 third quarter were $1.08 per boe. Combined production and G&A expenses (including stock-based compensation) during the 2016 third quarter were $3.88 per boe, a decrease of 20% year over year and 5% from the 2016 second quarter. A summary of the company's production and operating cost guidance for 2016 and 2017 is provided in the Outlook dated November 3, 2016, beginning on Page 20.
Chesapeake reported a net loss available to common stockholders of $1.197 billion, or $1.54 per share, while the company's ebitda for the 2016 third quarter was a loss of $801 million. The primary drivers of the net loss were Barnett Shale exit costs of approximately $616 million and a noncash impairment of the carrying value of Chesapeake's oil and natural gas properties of approximately $433 million, largely resulting from decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of September 30, 2016, as compared to June 30, 2016. Adjusting for these and other items that are typically excluded by securities analysts, the 2016 third quarter adjusted net income available to common stockholders was $27 million, or $0.09 per common share, while the company's adjusted ebitda was $421 million in the 2016 third quarter. These adjusted results include a recorded gain of $146 million of proceeds related to the sale of a long-term natural gas supply contract which was sold in the 2016 third quarter and reflected in the company's marketing, gathering and compression revenues. Reconciliations of financial measures calculated in accordance with generally accepted accounting principles (GAAP) to non-GAAP measures are provided on pages 12 – 18 of this release.
Capital Spending Overview
Chesapeake's total capital investments were approximately $412 million during the 2016 third quarter, compared to approximately $623 million in the 2015 third quarter, as summarized in the table below. A summary of the company's capital expenditure guidance for 2016 and 2017 is provided in the Outlook dated November 3, 2016, beginning on Page 20.
2016 |
2016 |
2015 | |||||||
Operated activity comparison |
Q3 |
Q2 |
Q3 | ||||||
Average rig count |
11 |
9 |
18 | ||||||
Gross wells completed |
80 |
131 |
84 | ||||||
Gross wells spud |
63 |
49 |
81 | ||||||
Gross wells connected |
105 |
141 |
112 | ||||||
Type of cost ($ in millions) |
|||||||||
Drilling and completion costs |
$ |
332 |
$ |
337 |
$ |
467 |
|||
Exploration costs, leasehold and additions to other PP&E |
21 |
56 |
57 |
||||||
Subtotal capital expenditures |
$ |
353 |
$ |
393 |
$ |
524 |
|||
Capitalized interest |
59 |
63 |
99 |
||||||
Total guided capital expenditures |
$ |
412 |
$ |
456 |
$ |
623 |
Balance Sheet and Liquidity
As of September 30, 2016, Chesapeake's debt principal balance was approximately $8.7 billion, including approximately $240 million of borrowings outstanding on the company's revolving credit facility, compared to $9.7 billion as of December 31, 2015, and $11.7 billion as of September 30, 2015.
During the 2016 third quarter, the company entered into a $1.5 billion secured five-year term loan facility. Chesapeake used the net proceeds from this term loan to purchase and retire $898 million principal amount of its senior notes and $708 million principal amount of its contingent convertible senior notes for $1.5 billion pursuant to tender offers.
In October 2016, Chesapeake issued in a private placement $1.25 billion principal amount of unsecured 5.5% Convertible Senior Notes due 2026. The company intends to use the net proceeds for general corporate purposes, which may include debt repurchases and the repayment of borrowings under its credit facility and senior notes with near-term maturities as they become due. Additionally, the company completed private exchanges in aggregate of approximately 110.3 million shares of its common stock for 134,000 shares of 5.00% Cumulative Convertible Preferred Stock (Series 2005B), 606,271 shares of 5.75% Cumulative Convertible Preferred Stock and 553,007 shares of 5.75% Cumulative Convertible Preferred Stock (Series A). This amount of preferred stock represents approximately $1.2 billion of liquidation value, which was exchanged at a discount of approximately 40%. The company also repurchased in the open market approximately $105 million principal amount of its outstanding debt scheduled to mature or that could be put to the company in 2017 and 2018 for $106 million.
Since September 30, 2015, Chesapeake has significantly reduced its near-term debt maturities. As of November 2, 2016, Chesapeake's principal debt maturities by year, including debt that could be put to the company, are as follows:
Principal Amount | ||||||
11/2/2016 |
9/30/2015 | |||||
2016 |
$ |
— |
$ |
500 |
||
2017 |
625 |
2,212 |
||||
2018 |
599 |
1,016 |
||||
2019 |
504 |
1,500 |
||||
2020-2026 (a) |
7,894 |
6,496 |
||||
Total |
$ |
9,622 |
$ |
11,724 |
||
(a) Includes $1.25 billion principal amount of unsecured 5.5% Convertible Senior Notes issued on October 5, 2016. |
Asset Acquisitions and Divestitures Update
In the 2016 third quarter, the company entered into an agreement to convey its interests in the Barnett Shale operating area located in North Texas to Total S.A. (NYSE: TOT) and simultaneously terminate future commitments associated with this asset. The transaction closed on October 31, 2016, and Chesapeake paid $334 million to terminate an existing gathering agreement with Williams Partners L.P. (NYSE: WPZ) ("Williams").
Also in the 2016 third quarter, the company entered into a purchase and sale agreement to sell the majority of its upstream and midstream assets in the Devonian Shale located in West Virginia and Kentucky, which includes approximately 882,000 net acres and approximately 5,600 wells along with related gathering assets, as well as other property, plant and equipment. Chesapeake will retain deep drilling rights in the area after the anticipated disposition. In connection with this divestiture, the company expects to repurchase one of its two remaining volumetric production payment (VPP) transactions. All of the acquired interests will be conveyed in the divestiture and the company will no longer have any future obligations related to this VPP. After the repurchase of this VPP, the company expects net cash proceeds from this disposition to be nominal.
In the 2016 third quarter, Chesapeake purchased additional working interests in certain of its operated properties in its Haynesville Shale operating area for approximately $85 million, adding approximately 72,500 net acres to its net acreage position and approximately 55 million cubic feet (mmcf) per day of net natural gas production.
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.
Midstream Update
In addition to the gas gathering agreement termination with Williams in the Barnett Shale, Chesapeake renegotiated its existing cost-of-service gas gathering agreement with Williams in the Mid-Continent operating area to a fixed-fee arrangement in exchange for a $66 million payment in the 2016 third quarter. This new agreement became effective July 1, 2016.
The company also accelerated the value of a long-term natural gas supply contract in the 2016 third quarter by selling rights under a long-term gas supply agreement for $146 million in cash proceeds. In connection with this sale, the company reversed a $280 million derivative asset which was reflected as an unrealized hedging loss during the current quarter.
In October 2016, Chesapeake announced that it signed a letter of intent to restructure its natural gas gathering and service agreement in its Powder River Basin operating area with Williams and Crestwood Equity Partners L.P. (NYSE: CEQP). The restructured services are expected to replace the current cost-of-service arrangement and improve economics which support increased development across an expanded area of dedication in the region. Subject to board approvals from all three companies of the definitive agreement, the restructured services are to become effective January 1, 2017, for a 20-year term.
Operations Update
Chesapeake's average daily production for the 2016 third quarter was approximately 638,100 boe and is further detailed in the table below. For the 2016 fourth quarter, the company expects its average daily production to range between 550,000 and 570,000 boe (including approximately one month of production from the Barnett Shale assets). With average daily oil production of approximately 91,000 barrels per day for the month of October 2016, the company expects its average daily oil production to range between 90,000 and 95,000 barrels per day for the 2016 fourth quarter.
Chesapeake currently expects its exit rate production to grow significantly over the next two years. The company is currently projecting an exit-to-exit increase in total production from the fourth quarter of 2016 to the fourth quarter of 2017 of approximately 7%, adjusted for asset sales. More importantly, the company is projecting an exit-to-exit increase in its oil production from the fourth quarter of 2016 to the fourth quarter of 2017 of approximately 10%. For 2018, the company is currently projecting an increase in its total production from the fourth quarter of 2017 to the fourth quarter of 2018 of approximately 15%, primarily driven by an exit-to-exit increase in its oil production from the fourth quarter of 2017 to the fourth quarter of 2018 of approximately 20%. Chesapeake's projected growth rates are preliminary and its flexible capital expenditure program will be adjusted based on prevailing market conditions and are subject to final capital allocation decisions for 2017 and 2018.
2016 |
2016 |
2015 | ||||
Operating area net production (mboe/day) |
Q3 |
Q2 |
Q3 | |||
Eagle Ford |
101 |
92 |
108 |
|||
Haynesville |
139 |
126 |
106 |
|||
Marcellus |
134 |
134 |
135 |
|||
Utica |
127 |
137 |
106 |
|||
Mid-Continent |
55 |
78 |
118 |
|||
Powder River Basin |
14 |
16 |
21 |
|||
Barnett |
59 |
65 |
63 |
|||
Other |
9 |
9 |
10 |
|||
Total production |
638 |
657 |
667 |
Chesapeake is currently utilizing 11 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 two rigs in the Utica Shale. Chesapeake plans to utilize its existing rigs through year-end and plans to drill 50 to 60 wells and place approximately 100 to 110 wells on production in the 2016 fourth quarter.
Key Financial and Operational Results
The table below summarizes Chesapeake's key financial and operational results during the 2016 third quarter as compared to results in prior periods.
Three Months Ended | |||||||||||||||||||||||
09/30/16 |
06/30/16 |
09/30/15 | |||||||||||||||||||||
Oil equivalent production (in mmboe) |
59 |
60 |
61 |
||||||||||||||||||||
Oil production (in mmbbls) |
8 |
8 |
11 |
||||||||||||||||||||
Average realized oil price ($/bbl)(a) |
45.24 |
44.31 |
66.04 |
||||||||||||||||||||
Natural gas production (in bcf) |
268 |
269 |
263 |
||||||||||||||||||||
Average realized natural gas price ($/mcf)(a) |
2.13 |
1.97 |
2.51 |
||||||||||||||||||||
NGL production (in mmbbls) |
6 |
7 |
7 |
||||||||||||||||||||
Average realized NGL price ($/bbl)(a) |
13.70 |
12.88 |
10.90 |
||||||||||||||||||||
Production expenses ($/boe) |
(2.80) |
(3.05) |
(4.09) |
||||||||||||||||||||
Gathering, processing and transportation expenses ($/boe) |
(8.07) |
(8.04) |
(7.88) |
||||||||||||||||||||
Oil - ($/bbl) |
(3.67) |
(3.64) |
(3.35) |
||||||||||||||||||||
Natural Gas - ($/mcf) |
(1.47) |
(1.48) |
(1.49) |
||||||||||||||||||||
NGL - ($/bbl) |
(8.13) |
(7.61) |
(8.03) |
||||||||||||||||||||
Production taxes ($/boe) |
(0.29) |
(0.32) |
(0.42) |
||||||||||||||||||||
General and administrative expenses ($/boe)(b) |
(0.90) |
(0.86) |
(0.64) |
||||||||||||||||||||
Stock-based compensation ($/boe) |
(0.18) |
(0.16) |
(0.15) |
||||||||||||||||||||
DD&A of oil and natural gas properties ($/boe) |
(4.35) |
(4.43) |
(7.95) |
||||||||||||||||||||
DD&A of other assets ($/boe) |
(0.42) |
(0.48) |
(0.51) |
||||||||||||||||||||
Interest expenses ($/boe)(a) |
(1.20) |
(1.00) |
(1.41) |
||||||||||||||||||||
Marketing, gathering and compression net margin ($ in millions)(c) |
(162) |
(25) |
58 |
||||||||||||||||||||
Operating cash flow ($ in millions)(d) |
209 |
176 |
476 |
||||||||||||||||||||
Operating cash flow ($/boe) |
3.56 |
2.94 |
7.76 |
||||||||||||||||||||
Adjusted ebitda ($ in millions)(e) |
421 |
252 |
560 |
||||||||||||||||||||
Adjusted ebitda ($/boe) |
7.17 |
4.21 |
9.12 |
||||||||||||||||||||
Net loss available to common stockholders ($ in millions) |
(1,197) |
(1,792) |
(4,695) |
||||||||||||||||||||
Loss per share – diluted ($) |
(1.54) |
(2.48) |
(7.08) |
||||||||||||||||||||
Adjusted net income (loss) available to common stockholders ($ in millions)(f) |
27 |
(145) |
(83) |
||||||||||||||||||||
Adjusted income (loss) per share ($)(g) |
0.09 |
(0.14) |
(0.06) |
||||||||||||||||||||
(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 unrealized gains (losses) on supply contract derivatives, but excludes depreciation and amortization of other assets. For the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, unrealized gains (losses) were ($280 million), ($37 million) and $70 million, respectively. Additionally, the three months ended September 30, 2016 includes $146 million of proceeds related to the sale of the supply contract. | ||||||||||||||||||||||
(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 18. | ||||||||||||||||||||||
(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 Third Quarter Financial and Operational Results Conference Call Information
A conference call to discuss this release has been scheduled on Thursday, November 3, 2016, at 9:00 am EDT. The telephone number to access the conference call is 913-312-6668 or toll-free 888-609-5667. The passcode for the call is 2510197. 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 2510197. The conference call will be webcast and can be found 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 to low commodity prices; our ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; our ability to generate profits or achieve targeted results in drilling and well operations; leasehold terms expiring before production can be established; commodity derivative activities resulting in lower prices realized on oil, natural gas and NGL sales; the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; charges incurred in response to market conditions and in connection with our ongoing actions to reduce financial leverage and complexity; drilling and operating risks and resulting liabilities; effects of environmental protection laws and regulation on our business; legislative and regulatory initiatives further regulating hydraulic fracturing; our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used; impacts of potential legislative and regulatory actions addressing climate change; federal and state tax proposals affecting our industry; potential OTC derivatives regulation limiting our ability to hedge against commodity price fluctuations; competition in the oil and gas exploration and production industry; a deterioration in general economic, business or industry conditions; negative public perceptions of our industry; limited control over properties we do not operate; pipeline and gathering system capacity constraints and transportation interruptions; terrorist activities and cyber-attacks adversely impacting our operations; 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 |
Gordon Pennoyer |
(405) 935-8870 |
(405) 935-8878 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
($ in millions, except per share data) | ||||||||
(unaudited) | ||||||||
Three Months Ended | ||||||||
2016 |
2015 | |||||||
REVENUES: |
||||||||
Oil, natural gas and NGL |
$ |
1,177 |
$ |
1,363 |
||||
Marketing, gathering and compression |
1,099 |
2,013 |
||||||
Total Revenues |
2,276 |
3,376 |
||||||
OPERATING EXPENSES: |
||||||||
Oil, natural gas and NGL production |
164 |
251 |
||||||
Oil, natural gas and NGL gathering, processing and transportation |
473 |
483 |
||||||
Production taxes |
17 |
25 |
||||||
Marketing, gathering and compression |
1,261 |
1,955 |
||||||
General and administrative |
63 |
49 |
||||||
Restructuring and other termination costs |
— |
53 |
||||||
Provision for legal contingencies |
8 |
— |
||||||
Oil, natural gas and NGL depreciation, depletion and amortization |
255 |
488 |
||||||
Depreciation and amortization of other assets |
25 |
31 |
||||||
Impairment of oil and natural gas properties |
433 |
5,416 |
||||||
Impairments of fixed assets and other |
751 |
79 |
||||||
Net gains on sales of fixed assets |
— |
(1) |
||||||
Total Operating Expenses |
3,450 |
8,829 |
||||||
LOSS FROM OPERATIONS |
(1,174) |
(5,453) |
||||||
OTHER INCOME (EXPENSE): |
||||||||
Interest expense |
(73) |
(88) |
||||||
Losses on investments |
(1) |
(33) |
||||||
Gains on purchases or exchanges of debt |
87 |
— |
||||||
Other income (expense) |
7 |
(2) |
||||||
Total Other Income (Expense) |
20 |
(123) |
||||||
LOSS BEFORE INCOME TAXES |
(1,154) |
(5,576) |
||||||
INCOME TAX BENEFIT: |
||||||||
Current income taxes |
— |
— |
||||||
Deferred income taxes |
— |
(937) |
||||||
Total Income Tax Benefit |
— |
(937) |
||||||
NET LOSS |
(1,154) |
(4,639) |
||||||
Net income attributable to noncontrolling interests |
(1) |
(13) |
||||||
NET LOSS ATTRIBUTABLE TO CHESAPEAKE |
(1,155) |
(4,652) |
||||||
Preferred stock dividends |
(42) |
(43) |
||||||
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ |
(1,197) |
$ |
(4,695) |
||||
LOSS PER COMMON SHARE: |
||||||||
Basic |
$ |
(1.54) |
$ |
(7.08) |
||||
Diluted |
$ |
(1.54) |
$ |
(7.08) |
||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): |
||||||||
Basic |
777 |
663 |
||||||
Diluted |
777 |
663 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
($ in millions, except per share data) | ||||||||
(unaudited) | ||||||||
Nine Months Ended | ||||||||
2016 |
2015 | |||||||
REVENUES: |
||||||||
Oil, natural gas and NGL |
$ |
2,610 |
$ |
4,122 |
||||
Marketing, gathering and compression |
3,241 |
5,993 |
||||||
Total Revenues |
5,851 |
10,115 |
||||||
OPERATING EXPENSES: |
||||||||
Oil, natural gas and NGL production |
552 |
826 |
||||||
Oil, natural gas and NGL gathering, processing and transportation |
1,436 |
1,429 |
||||||
Production taxes |
54 |
87 |
||||||
Marketing, gathering and compression |
3,410 |
5,751 |
||||||
General and administrative |
172 |
174 |
||||||
Restructuring and other termination costs |
3 |
39 |
||||||
Provision for legal contingencies |
112 |
359 |
||||||
Oil, natural gas and NGL depreciation, depletion and amortization |
791 |
1,773 |
||||||
Depreciation and amortization of other assets |
83 |
100 |
||||||
Impairment of oil and natural gas properties |
2,331 |
15,407 |
||||||
Impairments of fixed assets and other |
795 |
167 |
||||||
Net (gains) losses on sales of fixed assets |
(5) |
3 |
||||||
Total Operating Expenses |
9,734 |
26,115 |
||||||
LOSS FROM OPERATIONS |
(3,883) |
(16,000) |
||||||
OTHER INCOME (EXPENSE): |
||||||||
Interest expense |
(197) |
(210) |
||||||
Losses on investments |
(3) |
(57) |
||||||
Loss on sale of investment |
(10) |
— |
||||||
Gains on purchases or exchanges of debt |
255 |
— |
||||||
Other income |
13 |
3 |
||||||
Total Other Income (Expense) |
58 |
(264) |
||||||
LOSS BEFORE INCOME TAXES |
(3,825) |
(16,264) |
||||||
INCOME TAX BENEFIT: |
||||||||
Current income taxes |
— |
(6) |
||||||
Deferred income taxes |
— |
(3,808) |
||||||
Total Income Tax Benefit |
— |
(3,814) |
||||||
NET LOSS |
(3,825) |
(12,450) |
||||||
Net income attributable to noncontrolling interests |
(1) |
(50) |
||||||
NET LOSS ATTRIBUTABLE TO CHESAPEAKE |
(3,826) |
(12,500) |
||||||
Preferred stock dividends |
(127) |
(128) |
||||||
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ |
(3,953) |
$ |
(12,628) |
||||
LOSS PER COMMON SHARE: |
||||||||
Basic |
$ |
(5.47) |
$ |
(19.07) |
||||
Diluted |
$ |
(5.47) |
$ |
(19.07) |
||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): |
||||||||
Basic |
722 |
662 |
||||||
Diluted |
722 |
662 |
CHESAPEAKE ENERGY CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
September 30, 2016 |
December 31, 2015 | |||||||
Cash and cash equivalents |
$ |
4 |
$ |
825 |
||||
Other current assets |
1,063 |
1,655 |
||||||
Total Current Assets |
1,067 |
2,480 |
||||||
Property and equipment, (net) |
11,051 |
14,298 |
||||||
Other assets |
405 |
536 |
||||||
Total Assets |
$ |
12,523 |
$ |
17,314 |
||||
Current liabilities |
$ |
3,606 |
$ |
3,685 |
||||
Long-term debt, net |
9,022 |
10,311 |
||||||
Other long-term liabilities |
827 |
921 |
||||||
Total Liabilities |
13,455 |
14,917 |
||||||
Preferred stock |
3,036 |
3,062 |
||||||
Noncontrolling interests |
259 |
259 |
||||||
Common stock and other stockholders' equity |
(4,227) |
(924) |
||||||
Total Equity |
(932) |
2,397 |
||||||
Total Liabilities and Equity |
$ |
12,523 |
$ |
17,314 |
||||
Common shares outstanding (in millions) |
776 |
663 |
||||||
Principal amount of debt outstanding |
$ |
8,717 |
$ |
9,706 |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||||||||
SUPPLEMENTAL DATA – OIL, NATURAL GAS AND NGL PRODUCTION, SALES AND INTEREST EXPENSE | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Three Months Ended |
Nine Months Ended | |||||||||||||||||
2016 |
2015 |
2016 |
2015 | |||||||||||||||
Net Production: |
||||||||||||||||||
Oil (mmbbl) |
8 |
11 |
25 |
32 |
||||||||||||||
Natural gas (bcf) |
268 |
263 |
814 |
802 |
||||||||||||||
NGL (mmbbl) |
6 |
7 |
19 |
21 |
||||||||||||||
Oil equivalent (mmboe) |
59 |
61 |
180 |
187 |
||||||||||||||
Oil, natural gas and NGL Sales ($ in millions): |
||||||||||||||||||
Oil sales |
$ |
342 |
$ |
469 |
$ |
952 |
$ |
1,549 |
||||||||||
Oil derivatives – realized gains (losses)(a) |
18 |
224 |
102 |
641 |
||||||||||||||
Oil derivatives – unrealized gains (losses)(a) |
23 |
(100) |
(217) |
(444) |
||||||||||||||
Total Oil Sales |
383 |
593 |
837 |
1,746 |
||||||||||||||
Natural gas sales |
622 |
590 |
1,545 |
1,937 |
||||||||||||||
Natural gas derivatives – realized gains (losses)(a) |
(50) |
70 |
192 |
341 |
||||||||||||||
Natural gas derivatives – unrealized gains (losses)(a) |
131 |
33 |
(204) |
(198) |
||||||||||||||
Total Natural Gas Sales |
703 |
693 |
1,533 |
2,080 |
||||||||||||||
NGL sales |
84 |
77 |
247 |
296 |
||||||||||||||
NGL derivatives – realized gains (losses)(a) |
(2) |
— |
(5) |
— |
||||||||||||||
NGL derivatives – unrealized gains (losses)(a) |
9 |
— |
(2) |
— |
||||||||||||||
Total NGL Sales |
91 |
77 |
240 |
296 |
||||||||||||||
Total Oil, Natural Gas and NGL Sales |
$ |
1,177 |
$ |
1,363 |
$ |
2,610 |
$ |
4,122 |
||||||||||
Average Sales Price – excluding gains (losses) on derivatives: |
||||||||||||||||||
Oil ($ per bbl) |
$ |
42.94 |
$ |
44.60 |
$ |
38.21 |
$ |
47.90 |
||||||||||
Natural gas ($ per mcf) |
$ |
2.32 |
$ |
2.25 |
$ |
1.90 |
$ |
2.41 |
||||||||||
NGL ($ per bbl) |
$ |
13.93 |
$ |
10.90 |
$ |
12.90 |
$ |
14.06 |
||||||||||
Oil equivalent ($ per boe) |
$ |
17.86 |
$ |
18.52 |
$ |
15.27 |
$ |
20.21 |
||||||||||
Average Sales Price –including realized gains (losses) on derivatives: |
||||||||||||||||||
Oil ($ per bbl) |
$ |
45.24 |
$ |
66.04 |
$ |
42.31 |
$ |
67.73 |
||||||||||
Natural gas ($ per mcf) |
$ |
2.13 |
$ |
2.51 |
$ |
2.13 |
$ |
2.84 |
||||||||||
NGL ($ per bbl) |
$ |
13.70 |
$ |
10.90 |
$ |
12.66 |
$ |
14.06 |
||||||||||
Oil equivalent ($ per boe) |
$ |
17.30 |
$ |
23.33 |
$ |
16.88 |
$ |
25.47 |
||||||||||
Interest Expense ($ in millions): |
||||||||||||||||||
Interest(b) |
$ |
74 |
$ |
88 |
$ |
199 |
$ |
222 |
||||||||||
Interest rate derivatives – realized (gains) losses(c) |
(3) |
(2) |
(9) |
(4) |
||||||||||||||
Interest rate derivatives – unrealized (gains) losses(c) |
2 |
2 |
7 |
(8) |
||||||||||||||
Total Interest Expense |
$ |
73 |
$ |
88 |
$ |
197 |
$ |
210 |
||||||||||
(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: |
September 30, |
September 30, | ||||||||||||||||||||
Beginning cash |
$ |
4 |
$ |
2,051 |
||||||||||||||||||
Net cash provided by operating activities |
376 |
318 |
||||||||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||
Drilling and completion costs(a) |
(339) |
(528) |
||||||||||||||||||||
Acquisitions of proved and unproved properties(b) |
(157) |
(141) |
||||||||||||||||||||
Proceeds from divestitures of proved and unproved properties |
24 |
174 |
||||||||||||||||||||
Additions to other property and equipment(c) |
(7) |
(21) |
||||||||||||||||||||
Proceeds from sales of other property and equipment |
— |
73 |
||||||||||||||||||||
Decrease in restricted cash |
— |
52 |
||||||||||||||||||||
Other |
(1) |
(2) |
||||||||||||||||||||
Net cash used in investing activities |
(480) |
(393) |
||||||||||||||||||||
Net cash provided by (used in) financing activities |
104 |
(217) |
||||||||||||||||||||
Change in cash and cash equivalents |
— |
(292) |
||||||||||||||||||||
Ending cash |
$ |
4 |
$ |
1,759 |
||||||||||||||||||
(a) |
Includes capitalized interest of $1 million and $3 million for the three months ended September 30, 2016 and 2015, respectively. | |||||||||||||||||||||
(b) |
Includes capitalized interest of $56 million and $93 million for the three months ended September 30, 2016 and 2015, respectively. | |||||||||||||||||||||
(c) |
Includes capitalized interest of a nominal amount and $1 million for the three months ended September 30, 2016 and 2015, respectively. |
CHESAPEAKE ENERGY CORPORATION | ||||||||||||||||||||||
CONDENSED CONSOLIDATED CASH FLOW DATA | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
NINE MONTHS ENDED: |
September 30, |
September 30, 2015 | ||||||||||||||||||||
Beginning cash |
$ |
825 |
$ |
4,108 |
||||||||||||||||||
Net cash provided by operating activities |
50 |
1,055 |
||||||||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||
Drilling and completion costs(a) |
(948) |
(2,696) |
||||||||||||||||||||
Acquisitions of proved and unproved properties(b) |
(583) |
(407) |
||||||||||||||||||||
Proceeds from divestitures of proved and unproved properties |
988 |
188 |
||||||||||||||||||||
Additions to other property and equipment(c) |
(32) |
(114) |
||||||||||||||||||||
Proceeds from sales of other property and equipment |
70 |
80 |
||||||||||||||||||||
Cash paid for title defects |
(69) |
— |
||||||||||||||||||||
Additions to investments |
— |
(1) |
||||||||||||||||||||
Decrease in restricted cash |
— |
52 |
||||||||||||||||||||
Other |
(5) |
(7) |
||||||||||||||||||||
Net cash used in investing activities |
(579) |
(2,905) |
||||||||||||||||||||
Net cash used in financing activities |
(292) |
(499) |
||||||||||||||||||||
Change in cash and cash equivalents |
(821) |
(2,349) |
||||||||||||||||||||
Ending cash |
$ |
4 |
$ |
1,759 |
||||||||||||||||||
(a) |
Includes capitalized interest of $5 million and $21 million for the nine months ended September 30, 2016 and 2015, respectively. | |||||||||||||||||||||
(b) |
Includes capitalized interest of $179 million and $305 million for the nine months ended September 30, 2016 and 2015, respectively. | |||||||||||||||||||||
(c) |
Includes capitalized interest of $1 million and $3 million for the nine months ended September 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: |
September 30, 2016 | |||||||||||||||||||||||||||||||||||||
$ |
Shares(a) |
$/Share(c) (d) | ||||||||||||||||||||||||||||||||||||
Net loss available to common stockholders |
$ |
(1,197) |
777 |
$ |
(1.54) | |||||||||||||||||||||||||||||||||
Adjustments: |
||||||||||||||||||||||||||||||||||||||
Unrealized gains on commodity derivatives |
(163) |
(0.21) | ||||||||||||||||||||||||||||||||||||
Unrealized losses on supply contract derivatives |
280 |
0.36 | ||||||||||||||||||||||||||||||||||||
Provision for legal contingencies |
8 |
0.01 | ||||||||||||||||||||||||||||||||||||
Impairment of oil and natural gas properties |
433 |
0.56 | ||||||||||||||||||||||||||||||||||||
Impairments of fixed assets and other |
751 |
0.97 | ||||||||||||||||||||||||||||||||||||
Gains on purchases or exchanges of debt |
(87) |
(0.11) | ||||||||||||||||||||||||||||||||||||
Other |
2 |
— | ||||||||||||||||||||||||||||||||||||
Tax effect of above items(b) |
— |
— | ||||||||||||||||||||||||||||||||||||
Adjusted net income available to common stockholders(c) (Non-GAAP) |
27 |
0.04 | ||||||||||||||||||||||||||||||||||||
Preferred stock dividends |
42 |
0.05 | ||||||||||||||||||||||||||||||||||||
Total adjusted net income attributable to Chesapeake(c) (d) (Non-GAAP) |
$ |
69 |
$ |
0.09 | ||||||||||||||||||||||||||||||||||
(a) |
Weighted average common and common equivalent shares outstanding do not include 113 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. | |||||||||||||||||||||||||||||||||||||
(b) |
Our effective tax rate in the three months ended September 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) | |||||||||||||||
THREE MONTHS ENDED: |
September 30, 2015 | ||||||||||||||
$ |
Shares(a) |
$/Share(c) (d) | |||||||||||||
Net loss available to common stockholders |
$ |
(4,695) |
663 |
$ |
(7.08) |
||||||||||
Adjustments: |
|||||||||||||||
Unrealized losses on commodity derivatives |
67 |
0.10 |
|||||||||||||
Unrealized gains on supply contract derivatives |
(70) |
(0.10) |
|||||||||||||
Restructuring and other termination costs |
53 |
0.08 |
|||||||||||||
Impairment of oil and natural gas properties |
5,416 |
8.17 |
|||||||||||||
Impairments of fixed assets and other |
79 |
0.12 |
|||||||||||||
Net gains on sales of fixed assets |
(1) |
— |
|||||||||||||
Tax effect of above items(b) |
(932) |
(1.41) |
|||||||||||||
Adjusted net loss available to common stockholders(c) (Non-GAAP) |
(83) |
(0.12) |
|||||||||||||
Preferred stock dividends |
43 |
0.06 |
|||||||||||||
Total adjusted net loss attributable to Chesapeake(c) (d) (Non-GAAP) |
$ |
(40) |
$ |
(0.06) |
|||||||||||
(a) |
Weighted average common and common equivalent shares outstanding do not include 113 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. | ||||||||||||||
(b) |
Our effective tax rate in the three months ended September 30, 2015 was 16.8%. | ||||||||||||||
(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) | |||||||||||||||||||||||
NINE MONTHS ENDED: |
September 30, 2016 | ||||||||||||||||||||||
$ |
Shares(a) |
$/Share(c) (d) | |||||||||||||||||||||
Net loss available to common stockholders |
$ |
(3,953) |
722 |
$ |
(5.47) |
||||||||||||||||||
Adjustments: |
|||||||||||||||||||||||
Unrealized losses on commodity derivatives |
423 |
0.58 |
|||||||||||||||||||||
Unrealized losses on supply contract derivatives |
297 |
0.41 |
|||||||||||||||||||||
Restructuring and other termination costs |
3 |
— |
|||||||||||||||||||||
Provision for legal contingencies |
112 |
0.16 |
|||||||||||||||||||||
Impairment of oil and natural gas properties |
2,331 |
3.23 |
|||||||||||||||||||||
Impairments of fixed assets and other |
795 |
1.10 |
|||||||||||||||||||||
Net gains on sales of fixed assets |
(5) |
(0.01) |
|||||||||||||||||||||
Loss on sale of investment |
10 |
0.01 |
|||||||||||||||||||||
Gains on purchases or exchanges of debt |
(255) |
(0.35) |
|||||||||||||||||||||
Tax rate adjustment |
— |
— |
|||||||||||||||||||||
Other |
8 |
0.01 |
|||||||||||||||||||||
Tax effect of above items(b) |
— |
— |
|||||||||||||||||||||
Adjusted net loss available to common stockholders(c) (Non-GAAP) |
(234) |
(0.33) |
|||||||||||||||||||||
Preferred stock dividends |
127 |
0.18 |
|||||||||||||||||||||
Total adjusted net loss attributable to Chesapeake(c) (d) (Non-GAAP) |
$ |
(107) |
$ |
(0.15) |
|||||||||||||||||||
(a) |
Weighted average common and common equivalent shares outstanding do not include 113 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. | ||||||||||||||||||||||
(b) |
Our effective tax rate in the nine months ended September 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 ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS |
|||||||||||||||||||||||
(in millions, except per share data) |
|||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||
NINE MONTHS ENDED: |
September 30, 2015 | ||||||||||||||||||||||
$ |
Shares(a) |
$/Share(c) (d) | |||||||||||||||||||||
Net loss available to common stockholders |
$ |
(12,628) |
662 |
$ |
(19.07) |
||||||||||||||||||
Adjustments: |
|||||||||||||||||||||||
Unrealized losses on commodity derivatives |
642 |
0.97 | |||||||||||||||||||||
Unrealized gains on supply contract derivatives |
(290) |
(0.44) | |||||||||||||||||||||
Restructuring and other termination costs |
39 |
0.06 | |||||||||||||||||||||
Provision for legal contingencies |
359 |
0.54 | |||||||||||||||||||||
Impairment of oil and natural gas properties |
15,407 |
23.27 | |||||||||||||||||||||
Impairments of fixed assets and other |
167 |
0.25 | |||||||||||||||||||||
Net losses on sales of fixed assets |
3 |
— | |||||||||||||||||||||
Tax rate adjustment |
(17) |
(0.02) | |||||||||||||||||||||
Other |
(17) |
(0.02) | |||||||||||||||||||||
Tax effect of above items(b) |
(3,827) |
(5.78) | |||||||||||||||||||||
Adjusted net loss available to common stockholders(c) (Non-GAAP) |
(162) |
(0.24) | |||||||||||||||||||||
Preferred stock dividends |
128 |
0.19 | |||||||||||||||||||||
Total adjusted net loss attributable to Chesapeake(c) (d) (Non-GAAP) |
$ |
(34) |
(0.05) | ||||||||||||||||||||
(a) |
Weighted average common and common equivalent shares outstanding do not include 115 million shares that were considered antidilutive for calculating earnings per share in accordance with GAAP. | ||||||||||||||||||||||
(b) |
Our effective tax rate in the nine months ended September 30, 2015 was 23.5%. | ||||||||||||||||||||||
(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 OPERATING CASH FLOW AND EBITDA | ||||||||
($ in millions) | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED: |
September 30, 2016 |
September 30, 2015 | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES |
$ |
376 |
$ |
318 |
||||
Changes in assets and liabilities |
(167) |
158 |
||||||
OPERATING CASH FLOW(a) |
$ |
209 |
$ |
476 |
THREE MONTHS ENDED: |
September 30, |
September 30, | ||||||
NET LOSS |
$ |
(1,154) |
$ |
(4,639) |
||||
Interest expense |
73 |
88 |
||||||
Income tax benefit |
— |
(937) |
||||||
Depreciation and amortization of other assets |
25 |
31 |
||||||
Oil, natural gas and NGL depreciation, depletion and amortization |
255 |
488 |
||||||
EBITDA(b) |
$ |
(801) |
$ |
(4,969) |
THREE MONTHS ENDED: |
September 30, |
September 30, | |||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES |
$ |
376 |
$ |
318 |
|||||||||
Changes in assets and liabilities |
(167) |
158 |
|||||||||||
Interest expense, net of unrealized gains (losses) on derivatives |
71 |
86 |
|||||||||||
Gains on commodity derivatives, net |
129 |
227 |
|||||||||||
Gains (losses) on supply contract derivatives, net |
(134) |
70 |
|||||||||||
Cash receipts on commodity and supply contract derivative settlements, net |
(101) |
(223) |
|||||||||||
Amendment of natural gas gathering contract |
66 |
— |
|||||||||||
Stock-based compensation |
(15) |
(18) |
|||||||||||
Restructuring and other termination costs |
1 |
(53) |
|||||||||||
Provision for legal contingencies |
27 |
— |
|||||||||||
Impairment of oil and natural gas properties |
(433) |
(5,416) |
|||||||||||
Impairments of fixed assets and other |
(751) |
(79) |
|||||||||||
Net gains on sales of fixed assets |
— |
1 |
|||||||||||
Investment activity |
(1) |
(33) |
|||||||||||
Gains on purchases or exchanges of debt |
87 |
— |
|||||||||||
Other items |
44 |
(7) |
|||||||||||
EBITDA(b) |
$ |
(801) |
$ |
(4,969) |
|||||||||
(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) | ||||||||
NINE MONTHS ENDED: |
September 30, |
September 30, | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES |
$ |
50 |
$ |
1,055 |
||||
Changes in assets and liabilities |
598 |
877 |
||||||
OPERATING CASH FLOW(a) |
$ |
648 |
$ |
1,932 |
NINE MONTHS ENDED: |
September 30, |
September 30, | ||||||
NET LOSS |
$ |
(3,825) |
$ |
(12,450) |
||||
Interest expense |
197 |
210 |
||||||
Income tax benefit |
— |
(3,814) |
||||||
Depreciation and amortization of other assets |
83 |
100 |
||||||
Oil, natural gas and NGL depreciation, depletion and amortization |
791 |
1,773 |
||||||
EBITDA(b) |
$ |
(2,754) |
$ |
(14,181) |
NINE MONTHS ENDED: |
September 30, |
September 30, | |||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES |
$ |
50 |
$ |
1,055 |
|||||||||
Changes in assets and liabilities |
598 |
877 |
|||||||||||
Interest expense, net of unrealized gains (losses) on derivatives |
190 |
218 |
|||||||||||
Gains (losses) on commodity derivatives, net |
(134) |
340 |
|||||||||||
Gains (losses) on supply contract derivatives, net |
(151) |
290 |
|||||||||||
Cash receipts on commodity and supply contract derivative settlements, net |
(487) |
(859) |
|||||||||||
Amendment of natural gas gathering contract |
66 |
— |
|||||||||||
Stock-based compensation |
(40) |
(61) |
|||||||||||
Restructuring and other termination costs |
(1) |
(39) |
|||||||||||
Provision for legal contingencies |
(77) |
(359) |
|||||||||||
Impairment of oil and natural gas properties |
(2,331) |
(15,407) |
|||||||||||
Impairments of fixed assets and other |
(785) |
(159) |
|||||||||||
Net gains (losses) on sales of fixed assets |
5 |
(3) |
|||||||||||
Investment activity |
(13) |
(57) |
|||||||||||
Gains on purchases or exchanges of debt |
255 |
— |
|||||||||||
Other items |
101 |
(17) |
|||||||||||
EBITDA(b) |
$ |
(2,754) |
$ |
(14,181) |
|||||||||
(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: |
September 30, |
September 30, | ||||||
EBITDA |
$ |
(801) |
$ |
(4,969) |
||||
Adjustments: |
||||||||
Unrealized (gains) losses on commodity derivatives |
(163) |
67 |
||||||
Unrealized (gains) losses on supply contract derivatives |
280 |
(70) |
||||||
Restructuring and other termination costs |
— |
53 |
||||||
Provision for legal contingencies |
8 |
— |
||||||
Impairment of oil and natural gas properties |
433 |
5,416 |
||||||
Impairments of fixed assets and other |
751 |
79 |
||||||
Net gains on sales of fixed assets |
— |
(1) |
||||||
Gains on purchases or exchanges of debt |
(87) |
— |
||||||
Net income attributable to noncontrolling interests |
(1) |
(13) |
||||||
Other |
1 |
(2) |
||||||
Adjusted EBITDA(a) |
$ |
421 |
$ |
560 |
CHESAPEAKE ENERGY CORPORATION | |||||||||||||
RECONCILIATION OF ADJUSTED EBITDA | |||||||||||||
($ in millions) | |||||||||||||
(unaudited) | |||||||||||||
NINE MONTHS ENDED: |
September 30, |
September 30, | |||||||||||
EBITDA |
$ |
(2,754) |
$ |
(14,181) |
|||||||||
Adjustments: |
|||||||||||||
Unrealized losses on commodity derivatives |
423 |
642 |
|||||||||||
Unrealized (gains) losses on supply contract derivatives |
297 |
(290) |
|||||||||||
Restructuring and other termination costs |
3 |
39 |
|||||||||||
Provision for legal contingencies |
112 |
359 |
|||||||||||
Impairment of oil and natural gas properties |
2,331 |
15,407 |
|||||||||||
Impairments of fixed assets and other |
795 |
167 |
|||||||||||
Net (gains) losses on sales of fixed assets |
(5) |
3 |
|||||||||||
Loss on sale of investment |
10 |
— |
|||||||||||
Gains on purchases or exchanges of debt |
(255) |
— |
|||||||||||
Net income attributable to noncontrolling interests |
(1) |
(50) |
|||||||||||
Other |
(1) |
(9) |
|||||||||||
Adjusted EBITDA(a) |
$ |
955 |
$ |
2,087 |
|||||||||
(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 September 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 – September 30, 2016 @ NYMEX Strip |
$ |
11,847 |
|
Less: Change in discount factor from 9 to 10 |
(743) |
||
PV-10 – September 30, 2016 @ NYMEX Strip |
11,104 |
||
Less: Change in pricing assumption from NYMEX Strip to SEC |
(7,284) |
||
PV-10 – September 30, 2016 @ SEC |
3,820 |
||
Plus: Change in PV-10 from 12/31/15 to 9/30/16 |
908 |
||
PV-10 – December 31, 2015 @ SEC |
4,728 |
||
Less: Present value of future income tax discounted at 10% |
(34) |
||
Standardized measure of discounted future cash flows – December 31, 2015 |
$ |
4,694 |
CHESAPEAKE ENERGY CORPORATION
MANAGEMENT'S OUTLOOK AS OF NOVEMBER 3, 2016
Chesapeake periodically provides guidance on certain factors that affect the company's future financial performance. Changes from the company's August 9, 2016 Outlook are italicized bold below.
Year Ending | ||||||
Adjusted Production Growth(a) |
0% to 3% | |||||
Absolute Production |
||||||
Liquids - mmbbls |
56 - 60 | |||||
Oil - mmbbls |
33 - 35 | |||||
NGL - mmbbls |
23 - 25 | |||||
Natural gas - bcf |
1,020 - 1,040 | |||||
Total absolute production - mmboe |
226 - 233 | |||||
Absolute daily rate - mboe |
617 - 637 | |||||
Estimated Realized Hedging Effects(b) (based on 11/1/16 strip prices): |
||||||
Oil - $/bbl |
$3.13 | |||||
Natural gas - $/mcf |
$0.16 | |||||
NGL - $/bbl |
($0.33) | |||||
Estimated Basis to NYMEX Prices: |
||||||
Oil - $/bbl |
$2.55 - $2.65 | |||||
Natural gas - $/mcf |
$0.35 - $0.45 | |||||
NGL - $/bbl |
$4.80 - $5.00 | |||||
Operating Costs per Boe of Projected Production: |
||||||
Production expense |
$3.00 - $3.20 | |||||
Gathering, processing and transportation expenses |
$7.60 - $8.10 | |||||
Oil - $/bbl |
$3.75 - $3.95 | |||||
Natural Gas - $/mcf |
$1.40 - $1.50 | |||||
NGL - $/bbl |
$7.60 - $7.85 | |||||
Production taxes |
$0.35 - $0.45 | |||||
General and administrative(c) |
$0.80 - $0.90 | |||||
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(d) |
$1.20 - $1.30 | |||||
Marketing, gathering and compression net margin(e) |
$90 - $100 | |||||
Book Tax Rate |
0% | |||||
Capital Expenditures ($ in millions)(f) |
$1,400 - $1,500 | |||||
Capitalized Interest ($ in millions) |
$250 | |||||
Total Capital Expenditures ($ in millions) |
$1,650 - $1,750 | |||||
(a) |
Based on 2015 production of 550 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 expenses associated with stock-based compensation. | |||||
(d) |
Excludes unrealized gains (losses) on interest rate derivatives. | |||||
(e) |
Includes revenue and operating expenses. Excludes depreciation and amortization of other assets and unrealized gains (losses) on supply contract derivatives. | |||||
(f) |
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. |
CHESAPEAKE ENERGY CORPORATION
MANAGEMENT'S PRELIMINARY OUTLOOK FOR 2017 AS OF NOVEMBER 3, 2016
Chesapeake periodically provides guidance on certain factors that affect the company's future financial performance. Changes from the company's August 9, 2016 Outlook are italicized bold below.
Year Ending 12/31/2017 | ||||||
Adjusted Production Growth(a) |
(5%) to 0% | |||||
Absolute Production |
||||||
Liquids - mmbbls |
51 - 55 | |||||
Oil - mmbbls |
33 - 35 | |||||
NGL - mmbbls |
18 - 20 | |||||
Natural gas - bcf |
860 - 900 | |||||
Total absolute production - mmboe |
194 - 205 | |||||
Absolute daily rate - mboe |
532 - 562 | |||||
Operating Costs per Boe of Projected Production: |
||||||
Production expense, production taxes and general and administrative expenses(b) |
$4.00 - $4.50 | |||||
Gathering, processing and transportation expenses |
$7.00 - $7.50 | |||||
Oil - $/bbl |
$4.25 - $4.45 | |||||
Natural Gas - $/mcf |
$1.25 - $1.35 | |||||
NGL - $/bbl |
$8.10 - $8.30 | |||||
Marketing, gathering and compression net margin(c) |
($80) - ($60) | |||||
Capital Expenditures ($ in millions)(d) |
$1,600 - $2,400 | |||||
Capitalized Interest ($ in millions) |
$220 | |||||
Total Capital Expenditures ($ in millions) |
$1,820 - $2,620 | |||||
(a) |
Based on 2016 production of 548 mboe per day, adjusted for 2016 sales. | |||||
(b) |
Includes expenses associated with stock-based compensation. | |||||
(c) |
Includes revenue and operating expenses. Excludes depreciation and amortization of other assets. | |||||
(d) |
Includes capital expenditures for drilling and completion, leasehold, geological and geophysical costs, rig termination payments and other property and plant and equipment. |
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 November 1, 2016, the company had downside protection, through open swaps, on a portion of its remaining 2016 oil production at an average price of $46.84 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 $2.86 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. In addition, the company had downside protection, through open swaps, on a portion of its 2017 oil production at an average price of $49.68 per bbl. The company had downside price protection, through open swaps and two-way collars, on a portion of its 2017 natural gas production at an average price of $3.07 per mcf.
The company's crude oil hedging positions as of November 1, 2016 were as follows:
Open Crude Oil Swaps; Gains from Closed | |||||||||
Crude Oil Trades and Call Option Premiums | |||||||||
Open Swaps (mbbls) |
Avg. NYMEX Price of Open Swaps |
Total Gains from Closed Trades and Premiums for Call Options ($ in millions) | |||||||
Q4 2016 (a) |
6,072 |
$ |
46.84 |
$ |
10 |
||||
Q1 2017 |
4,500 |
$ |
49.47 |
$ |
22 |
||||
Q2 2017 |
4,550 |
$ |
49.61 |
23 |
|||||
Q3 2017 |
4,232 |
$ |
49.77 |
23 |
|||||
Q4 2017 |
4,232 |
$ |
49.89 |
23 |
|||||
Total 2017 |
17,514 |
$ |
49.68 |
$ |
91 |
||||
Total 2018 – 2022 |
$ |
(13) |
|||||||
(a) |
Certain hedging arrangements include a sold option to extend at an average price of $53.67 per bbl covering 0.7 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 | |||
Q4 2016 |
3,489 |
$ |
87.25 |
|
Q1 2017 |
1,305 |
$ |
83.50 |
|
Q2 2017 |
1,320 |
$ |
83.50 |
|
Q3 2017 |
1,334 |
$ |
83.50 |
|
Q4 2017 |
1,334 |
$ |
83.50 |
|
Total 2017 |
5,293 |
$ |
83.50 |
The company's natural gas hedging positions as of November 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) | |||||||
Q4 2016 (a) |
155 |
$ |
2.85 |
$ |
(28) |
||||
Q1 2017 |
134 |
$ |
3.23 |
$ |
(3) |
||||
Q2 2017 |
135 |
$ |
2.95 |
(1) |
|||||
Q3 2017 |
136 |
$ |
3.00 |
(2) |
|||||
Q4 2017 |
129 |
$ |
3.10 |
(3) |
|||||
Total 2017 |
534 |
$ |
3.07 |
$ |
(9) |
||||
Total 2018 – 2022 |
51 |
$ |
2.97 |
$ |
(69) |
||||
(a) |
Certain hedging arrangements include a sold option to extend at an average price of $2.80 per mmbtu covering 26 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 |
||
Q1 2017 |
23 |
$ |
3.00 |
$ |
3.48 |
Natural Gas Net Written Call Options | ||||
Call Options (bcf) |
Avg. NYMEX Strike Price | |||
Q4 2016 |
46 |
$ |
5.27 |
|
Q1 2017 |
12 |
$ |
9.43 |
|
Q2 2017 |
12 |
$ |
9.43 |
|
Q3 2017 |
12 |
$ |
9.43 |
|
Q4 2017 |
12 |
$ |
9.43 |
|
Total 2017 |
48 |
$ |
9.43 |
|
Total 2018 – 2022 |
66 |
$ |
12.00 |
Natural Gas Basis Protection Swaps | ||||
Volume (bcf) |
Avg. NYMEX plus/(minus) | |||
Q4 2016 |
12 |
$ |
0.05 |
|
Q1 2017 |
13 |
$ |
0.35 |
|
Q2 2017 |
6 |
$ |
(0.46) |
|
Q3 2017 |
6 |
$ |
(0.46) |
|
Q4 2017 |
6 |
$ |
(0.46) |
|
Total 2017 |
31 |
$ |
(0.11) |
|
Total 2018 - 2022 |
1 |
$ |
(0.98) |
The company's natural gas liquids hedging positions as of November 1, 2016 were as follows:
Open Ethane Swaps | ||||
Volume (mmgal) |
Avg. NYMEX Price of Open Swaps | |||
Q4 2016 |
20 |
$ |
0.17 |
Open Propane Swaps | ||||
Volume (mmgal) |
Avg. NYMEX Price of Open Swaps | |||
Q4 2016 |
17 |
$ |
0.46 |
SOURCE Chesapeake Energy Corporation
OKLAHOMA CITY, Aug. 10, 2016 /PRNewswire/ -- Chesapeake Energy Corporation (NYSE:CHK) today announced that it has entered into an agreement to convey its interests in the Barnett Shale operating area located in North Texas to Saddle Barnett Resources, LLC ("Saddle Resources"), a company backed by First Reserve, a leading global private equity and infrastructure investment firm exclusively focused on energy, and simultaneously terminate future commitments associated with this asset.
The impacts to Chesapeake upon completion of these actions will be as follows:
As part of the transaction, Chesapeake and Williams Partners (NYSE:WPZ) have agreed to terminate the current gathering agreement, projected MVC shortfall payments and fees pertaining to the Barnett Shale assets, for which Chesapeake expects to pay $334 million in cash to Williams, with First Reserve portfolio company Saddle Resources expected to pay an additional sum. The transaction is subject to a number of closing conditions, including the receipt of third-party consents, and is expected to close in the third quarter of 2016.
In addition, the company announced it has renegotiated its gas gathering agreement with Williams in its Mid-Continent operating area in exchange for a payment by the company of $66 million.
Separately, Chesapeake accelerated the value of a gas supply contract by selling its rights under a long-term gas supply agreement for $146 million in cash proceeds. Both of these transactions are discussed further below.
Chesapeake Chief Executive Officer Doug Lawler commented, "Today's announcements mark a major step in our continued progress to transform Chesapeake. By exiting the Barnett, we expect to increase our operating income for the remainder of 2016 through 2019 between $200 and $300 million annually, eliminate approximately $1.9 billion of total future midstream and downstream commitments, and increase the PV-10 of our proved reserves. Given the significant negative cash flow profile of the Barnett assets, the net cash paid out in these transactions has a payback of less than 18 months, and it will be partially funded by the $146 million sale and assignment of our long-term gas supply contract.
"We are also releasing preliminary 2017 guidance for the items most directly impacted by these transactions, including wide initial ranges for production and capital spending, in order to highlight our flexibility around commodity prices. The transformation of Chesapeake into a top-tier E&P company continues, and these transactions, along with our previously announced balance sheet and liquidity improvements, provide significant forward progress. We believe there are more positive moves to come."
Properties in the proposed Barnett transaction include approximately 215,000 net developed and undeveloped acres and approximately 2,800 operated wells, which produced an average of approximately 65,000 boe per day (96% natural gas, 4% natural gas liquids) in the 2016 second quarter. The expected net production impact from the proposed transaction is approximately 62,000 boe per day. Proved oil and natural gas reserves in the Barnett Shale as of December 31, 2015 were approximately 81 million boe (96% natural gas, 4% natural gas liquids).
In exchange for a cash payment of $66 million, Chesapeake also renegotiated its existing cost-of-service gas gathering agreement with Williams covering the Mid-Continent operating area to a fixed-fee arrangement. As a result, Chesapeake's Mid-Continent gas gathering costs are expected to be reduced by 36%, effective July 1, 2016.
Lawler continued, "We believe that our approximately 1.5 million net acreage position in the Mid-Continent area represents a tremendous resource. The new gas gathering agreement makes our operations more competitive and enhances the operating income from this asset."
Separately, Chesapeake agreed to accelerate the value of a long-term natural gas supply contract with a $4.00 per million British thermal units floor pricing mechanism by selling it to a third party for cash proceeds of approximately $146 million. This transaction strengthens the company's liquidity position by providing partial funding to pay for these announced midstream transactions.
As a result of these transactions, Chesapeake has updated its guidance on certain factors that affect its financial performance for the remainder of 2016 and has also provided preliminary 2017 guidance. Changes from the company's August 4, 2016 Outlook are italicized bold below.
CHESAPEAKE ENERGY CORPORATION MANAGEMENT'S OUTLOOK AS OF AUGUST 9, 2016 | |
Year Ending 12/31/2016 | |
Adjusted Production Growth(a) |
(2%) to 3% |
Absolute Production |
|
Liquids – mmbbls |
56 - 60 |
Oil – mmbbls |
33 - 35 |
NGL - mmbbls |
23 - 25 |
Natural gas - bcf |
1,000 - 1,040 |
Total absolute production - mmboe |
223 - 233 |
Absolute daily rate - mboe |
611 - 638 |
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 - $/mcf |
$1.40 - $1.50 |
NGL - $/bbl |
$7.60 - $7.85 |
Production taxes |
$0.35 - $0.45 |
General and administrative(c) |
$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(d) |
$1.05 - $1.15 |
Marketing, gathering and compression net margin(e) |
($20) - $0 |
Book Tax Rate |
0% |
Capital Expenditures ($ in millions)(f) |
$1,000 - $1,500 |
Capitalized Interest ($ in millions) |
$260 |
Total Capital Expenditures ($ in millions) |
$1,260 - $1,760 |
(a) |
Based on 2015 production of 559 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 expenses associated with stock-based compensation. |
(d) |
Excludes unrealized gains (losses) on interest rate derivatives. |
(e) |
Includes revenue and operating expenses. Excludes depreciation and amortization of other assets and unrealized gains (losses) on supply contract derivatives. Includes the impact of the recent sale of a long-term gas supply contract. |
(f) |
Includes capital expenditures for drilling and completion, leasehold, geological and geophysical costs, rig termination payments and other property and plant and equipment and excludes approximately $259 million for the repurchase of overriding royalty interests associated with the sale of certain of the company's properties. |
CHESAPEAKE ENERGY CORPORATION MANAGEMENT'S PRELIMINARY OUTLOOK FOR 2017 AS OF AUGUST 9, 2016 | ||
Adjusted Production Growth(a) |
(7%) to (2%) | |
Absolute Production |
||
Liquids - mmbbls |
51 - 55 | |
Oil - mmbbls |
33 - 35 | |
NGL - mmbbls |
18 - 20 | |
Natural gas - bcf |
860 - 900 | |
Total absolute production - mmboe |
194 - 205 | |
Absolute daily rate - mboe |
532 - 562 | |
Operating Costs per Boe of Projected Production: |
||
Production expense |
$3.10 - $3.30 | |
Gathering, processing and transportation expenses |
$7.15 - $7.65 | |
Oil - $/bbl |
$4.65 - $4.85 | |
Natural Gas - $/mcf |
$1.25 - $1.35 | |
NGL - $/bbl |
$7.40 - $7.60 | |
Marketing, gathering and compression net margin(b) |
($60) – ($40) | |
Capital Expenditures ($ in millions)(a)(c) |
$1,600 - $2,400 | |
Capitalized Interest ($ in millions) |
$200 | |
Total Capital Expenditures ($ in millions) |
$1,800 - $2,600 | |
(a) |
Based on 2016 production of 567 mboe per day, adjusted for 2016 asset sales. Subject to future asset acquisition and divestiture activity. |
(b) |
Includes revenue and operating expenses. Excludes depreciation and amortization of other assets and unrealized gains (losses) on supply contract derivatives. |
(c) |
Includes capital expenditures for drilling and completion, leasehold, geological and geophysical costs, rig termination payments and other property and plant and equipment. |
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 includes "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, including the consummation and expected benefits of transactions. 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; write-downs of our oil and natural gas carrying values due to declines in prices; the limitations our level of indebtedness may have on our financial flexibility; the availability of operating cash flow and other funds to finance reserve replacement costs; 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 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; federal and state tax proposals affecting our industry; potential OTC derivatives regulation limiting our ability to hedge against commodity price fluctuations; impacts of potential legislative and regulatory actions addressing climate change; 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; cyber attacks adversely impacting our operations; and interruption in operations at our headquarters due to a catastrophic event.
The transactions may not be completed in the time frame anticipated or at all. In addition, these transactions are subject to closing conditions, including the consummation of the related transactions and receipt of third-party consents, and 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.
NON-GAAP FINANCIAL MEASURES
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 standardized measure of discounted future net cash flows is the most directly comparable GAAP measure. Management believes 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. We are unable to reconcile PV-10 to the standardized measure because it is not practical to project taxes for future periods. PV-10 should not be considered as an alternative to the standardized measure of discounted future net cash flows as computed under GAAP.
INVESTOR CONTACT: |
MEDIA CONTACT: |
CHESAPEAKE ENERGY CORPORATION | |||
Brad Sylvester, CFA (405) 935-8870 ir@chk.com |
Gordon Pennoyer |
6100 North Western Avenue |
SOURCE Chesapeake Energy Corporation
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