Business context and reporting period
This is Chesapeake Energy Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2023. The filing identifies Chesapeake Energy Corporation—not Expand Energy Corp—as the registrant. Chesapeake is a U.S. onshore natural gas and oil producer, with operations in the Marcellus, Haynesville and Eagle Ford. It planned to complete its exit from Eagle Ford through a pending sale.
Financial and operating highlights
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenues and other | $1.512B | $3.162B | $6.773B | $7.617B |
| Operating income | $79M | $1.005B | $2.416B | $1.552B |
| Net income | $70M | $883M | $1.850B | $1.356B |
| Operating cash flow | Not separately stated for the quarter | $1.910B | $3.075B | |
| Capital expenditures | Not separately stated for the quarter | $1.450B | $1.299B |
Q3 basic/diluted EPS was $0.53/$0.49, versus $7.29/$6.12. Nine-month basic/diluted EPS was $13.86/$12.90, versus $11.03/$9.35. Nine-month results included $807M in gains on asset sales, primarily from Eagle Ford divestitures.
At September 30, cash and cash equivalents were $713M (plus $73M restricted cash); current assets were $2.515B and current liabilities $1.614B. Long-term debt, net, was $2.032B; the company reported no borrowings under its New Credit Facility. Available liquidity was $2.7B, including $2.0B of unused facility capacity. Stockholders’ equity was $10.268B.
Average production was 3.495 Bcfe/day in Q3, down from 4.108 Bcfe/day a year earlier. Average realized price including derivatives was $2.79/Mcfe, versus $4.65/Mcfe. Nine-month average production was 3.737 Bcfe/day versus 3.985 Bcfe/day, and realized price was $2.99/Mcfe versus $4.44/Mcfe.
Material changes versus prior periods
- Q3 natural gas, oil and NGL sales fell $2.305B year over year; management attributed $2.071B of the decline to lower average prices, with Eagle Ford divestitures and lower Marcellus and Haynesville volumes also contributing.
- Nine-month operating cash flow declined $1.165B, mainly because of lower commodity prices and reduced sales volumes following Eagle Ford divestitures.
- Nine-month derivative results improved by $4.863B, from a $3.668B loss in 2022 to a $1.195B gain in 2023. Asset-sale gains were $807M in 2023 versus $298M in 2022.
- Nine-month interest expense fell to $82M from $120M, primarily reflecting lower average debt. Debt declined from $3.093B at December 31, 2022; the company used divestiture proceeds and operating cash to repay $1.050B net on its New Credit Facility.
- Cash dividends paid were $412M and share repurchases were $313M in the first nine months of 2023, both below the respective 2022 amounts of $788M and $667M.
Outlook, commentary and risks
- For 2023, management expected to bring online approximately 150–175 gross wells using 10–12 rigs and invest approximately $1.765B–$1.835B in capital expenditures, with about 85% directed to natural gas assets.
- Management expected liquidity from operating cash flow, cash on hand, Eagle Ford sale proceeds and credit capacity to cover needs for the next 12 months and foreseeable future. The borrowing base was reaffirmed in October 2023.
- About 70% of projected natural gas volumes for the remainder of 2023 were hedged. At September 30, natural gas derivatives had a net fair value asset of $331M; there were no open oil or NGL derivative positions.
- The final Eagle Ford sale to SilverBow was announced at approximately $700M, subject to customary adjustments, with up to $50M additional contingent consideration tied to commodity-price triggers. Closing was expected in Q4 2023; approximately $520M of assets were classified as held for sale.
- Key risks include commodity-price volatility, inflation and operating costs, production and reserve uncertainty, pipeline and gathering constraints, credit-facility covenant compliance, litigation and environmental matters. Undiscounted gathering, processing and transportation commitments totaled approximately $2.654B.
- Chesapeake declared a $0.575-per-share base quarterly dividend on October 31, 2023. Future dividends remain at the board’s discretion. The company also reported a $184M remaining commitment through 2024 to its Momentum Sustainable Ventures pipeline and carbon-capture project.
Important facts for investors to verify
- Confirm the issuer and filing match the intended company: this 10-Q is for Chesapeake Energy Corporation, despite the request metadata naming Expand Energy Corp.
- Check the final Eagle Ford sale’s closing, net proceeds, adjustments and any contingent consideration.
- Assess how commodity prices, production volumes and hedge settlements may affect cash flow after the reported period.
- Review the 2023 capital-spending plan, remaining investment commitments, and the $2.654B of transportation-related commitments.
- Verify debt-covenant headroom, borrowing-base terms and the sustainability of dividends and buybacks given commodity and cash-flow volatility.