About Chesapeake Energy Corporation

Chesapeake Energy builds hydrocarbon reserves through the acquisition and development of oil and gas assets across the US. The company, one of the biggest natural gas producers in the US and the world, has estimated proved reserves of some 6.5 trillion cu. ft. of natural gas equivalent. Chesapeake has exploration and production assets in Appalachia, the Mid-Continent, the Barnett, Bossier, and Haynesville shale plays, the Permian Basin and the Rockies. The company boasts 22,700 producing oil and natural gas wells that turn out 575,000 barrels of oil equivalent per day. The company was founded in 1989 by fracking pioneer Aubrey McClendon, who died in a car crash in 2016 shortly after being indicted for bid rigging.

Operations

The company has two reportable operating segments: marketing, gathering, and compression (MGC); and production and exploration.

MGC, through Chesapeake Energy Marketing, provides oil, natural gas, and NGL marketing services, including commodity price structuring; securing and negotiating gathering, hauling, processing, and transportation services; and marketing services for third party producers in wells in which it does not have an interest. It also conducts gas compression through subsidiary Compass Manufacturing and MidCon Compression. The segment accounts for some 60% of sales.

Production and exploration conducts natural gas, oil, and NGLs (natural gas liquids) mining. Natural gas accounts for about 65% of segment sales; oil 35%; and NGLs 5%.

Geographic Reach

Chesapeake Energy has natural gas resources in the Haynesville and Bossier Shales in northwestern Louisiana and East Texas; the Marcellus Shale in the northern Appalachian Basin of West Virginia and Pennsylvania; and the Barnett Shale in the Fort Worth Basin of north-central Texas. In addition, it has built leading positions in the liquids-rich resource plays of the Eagle Ford Shale in South Texas; the Utica Shale in Ohio and Pennsylvania; the Granite Wash, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin in western Oklahoma and the Texas Panhandle; and Utica Shale in the Powder River Basin in Wyoming.

Sales and Marketing

Chesapeake Energy Marketing provides natural gas, oil, and NGL marketing services, including commodity price structuring, contract administration and nomination services for Chesapeake, its partners and other producers. By aggregating volumes it seeks to increase the value of products to be sold to in various intermediary markets, end markets, and pipelines. Chesapeake's oil and NGL production is sold under market sensitive short-term or spot price contracts while its natural gas production is sold to purchasers under spot price contracts or percentage-of-proceeds and percentage-of-index contracts.

Sales to BP and Exxon Mobil account for more than 10% each.

Financial Performance

The oversupply-related fall in natural gas prices in recent years put a hefty dent in Chesapeake's revenue.

In fiscal 2016, revenue fell a further 38% to $7.9 billion due to lower prices and a 6% fall in total hydrocarbon output relating to asset sales; oil sales fell 20% on prior year.

Chesapeake lost $4.9 billion in 2016, down from the $14.9 billion loss the previous year. The relative improvement was down to a reduction in impairments, although derivative losses of $578 billion (versus gains of $624 million and $1.0 billion the previous two years) weighed heavily on the bottom line.

Cash from operations in 2016 constituted an outflow of $204 million compared to cash provided by operations of $1.2 billion the previous year. The fall was down to lower realized oil prices and lower volumes.

Strategy

Chesapeake is focused on maximizing liquidity by reducing its capital budget; optimizing its portfolio through divestitures of assets; continuing to improve its gathering and transportation agreements and reducing its production and G&A expenses; and continuing to reduce its debt, focusing primarily on its 2017 and 2018 maturities. It downscaled drilling activities in 2016 from 18 to 10 operating rigs on average. But with the price of natural gas showing shoots of recovery (in tandem with cash from asset sales), Chesapeake has sufficient liquidity to ramp up capital expenditure once more -- it plans to invest $1.9-2.5 billion in 2017.

To further improve its near-term liquidity, the company closed or signed asset sales totaling $2.5 billion in 2016, with further sales planned. As well as new drilling, the cash raised will help pay down debt.

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Chesapeake Energy Corporation

6100 N Western Ave
Oklahoma City, OK 73118-1044
Phone: 1 (405) 848-8000
Fax: 1 (405) 848-8588

Stats

  • Employer Type: Public
  • Stock Symbol: CHKPRD, CHK
  • Stock Exchange: NYSE, NYSE
  • President and CEO: Robert D. Lawler
  • Chairman: R. Brad Martin
  • EVP Operations and Technical Services: M. Jason Pigott
  • 2016 Employees: 3,300

Major Office Locations

  • Oklahoma City, OK

Other Locations

  • Niceville, FL
  • Elkhorn City, KY
  • Hueysville, KY
  • Mansfield, LA
  • Hobbs, NM
  • Horseheads, NY
  • Saint Clairsville, OH
  • Arkoma, OK
  • Elk City, OK
  • Hinton, OK
  • Kingfisher, OK
  • Lindsay, OK
  • Weatherford, OK
  • Wilburton, OK
  • Tyler, TX
  • Branchland, WV
  • Charleston, WV
  • Clendenin, WV
  • Hamlin, WV
  • Jane Lew, WV
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