Chesapeake Energy releases 3Q19 financial and operational results

Highlights

• Maintaining 2019 production and CAPEX guidance:
- 4Q19 oil production projected to increase approximately 10% over 3Q19 levels
- Brazos Valley sets net average oil production record of approximately 40 000 bpd for the month of October 2019; continue to deliver capital and operating costs ahead of projected synergies
- Powder River Basin (PRB) Turner well costs down approximately 10% year to date; first Niobrara well drilled and completed since 2014 produces more than 100 000 bbl of oil in first 87 days
• Continuing progress on managing balance sheet and cash costs:
- Recently re-affirmed borrowing base of Chesapeake credit facility
- Exchanged US$693 million of Senior Notes and US$40 million of preferred shares for 319 million common shares at an average discount of approximately 25%, reducing annual interest and preferred dividend payments
- Restructured gas gathering and crude oil transportation contracts in South Texas and Brazos Valley, improving future returns
• Reducing 2020 CAPEX forecast by approximately 30%, targeting free cash flow:
- Anticipate flat oil production year over year, utilising 10 to 13 rigs with projected total capital expenditures of approximately US$1.3 to US$1.6 billion, contingent upon commodity prices
- Expect to reduce 2020 production and general and administrative (G&A) expenses by approximately 10%

Doug Lawler, Chesapeake's President and CEO, commented: "We are pleased with our execution this quarter as we continue to successfully integrate and realise value from our Brazos Valley acquisition and maximise cash flow from our oil assets while reducing capital directed to our natural gas assets. We expect our oil production to grow approximately 10% in the fourth quarter, compared to the third quarter, and we remain on track to meet our 2019 total production and capital expenditure guidance. Our capital efficiency improvements, expected reduction in cash costs and anticipated capital plan position us to target free cash flow in 2020."

3Q19 results

For 3Q19, Chesapeake reported a net loss of US$61 million and a net loss available to common stockholders of US$101 million, or US$0.06 per diluted share. Adjusting for items typically excluded by securities analysts, 3Q19 adjusted net loss attributable to Chesapeake was US$188 million, or US$0.11 per share, while adjusted EBITDAX was US$577 million.

Average daily production for 3Q19 was approximately 478 000 boe, representing year-over-year growth of 3% adjusted for asset purchases and sales, and consisted of approximately 115 000 bbl of oil, 1.989 billion ft³ of natural gas and 32 000 bbls of natural gas liquids (NGL). Average daily production for 3Q18 was approximately 537 000 boe and consisted of approximately 89 000 bbl of oil, 2.332 billion ft3 of natural gas and 59 000 bbl of NGL. Oil production represented approximately 24% of the company's 3Q19 aggregate production, compared to 17% in 3Q18.

Despite lower average prices for the oil, natural gas and NGL sold, Chesapeake's operating margin remained flat in 3Q19, compared to 3Q18, due to an increase in oil production mix and a decrease in cash costs. Gathering, processing and transportation and G&A expenses decreased by US$109 million, or approximately US$1.39 per boe, while production expense increased US$23 million, or US$0.86 per boe, when compared to 3Q18.

Read the article online at: https://www.oilfieldtechnology.com/hydraulic-fracturing/06112019/chesapeake-energy-releases-3q19-financial-and-operational-results/