CHESAPEAKE OPERATING, LLC

Chesapeake Energy (named after the childhood Chesapeake Bay haunts of a company founder) builds oil and natural gas reserves through the acquisition and development of oil and gas assets across the US. In 2013 the company had estimated proved reserves of 11.7 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. In 2013 Chesapeake had 46,800 producing oil and natural gas wells that produced 665,000 barrels of oil equivalent per day, the bulk of which was natural gas.

Geographic Reach

The company 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; the Barnett Shale in the Fort Worth Basin of north-central Texas; and the Pearsall Shale in South 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; the Bone Spring, Avalon, Wolfcamp and Wolfberry plays in the Permian and Delaware Basins in West Texas and southern New Mexico; and the Niobrara Shale in the Powder River Basin in Wyoming.

Operations

Chesapeake is a leading producer of natural gas, and a top 10 producer of oil and natural gas liquids. The company has vertically integrated many of its operations and owns major marketing, compression, midstream and oilfield services businesses. Through its Nomac Drilling unit, the company saves costs by operating its own equipment. In 2013 the company was operating 71 drilling rigs. Other major subsidiaries include Chesapeake Energy Marketing, and Chesapeake Oilfield Operating.

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.

Financial Performance

In 2013 the company’s revenues grew by 42% due to higher natural gas, oil, and NGL volumes and prices.

After enjoying two straight years of profits, Chesapeake experienced $769 million net loss in 2012 due to higher operating expenses, however in fiscal 2013 it posted net income of $724 million due to higher revenues and other income.

In 2013 Chesapeake’s operating cash inflow increased to $4.61 billion (up from $2.84 billion in 2012) due to the net income surge and a change in working capital.

Strategy

To get better financial returns the company is selling assets to secure capital. Hurt by continuing low natural gas prices, the company sold its midstream assets in 2012 and 2013 for $4.9 billion in three separate deals. As part of this move, in 2012 the company sold its limited partner units and its general partner interests in Chesapeake Midstream Partners to Global Infrastructure Partners for $2 billion. That year the company also sold about $6.9 billion of its Permian basin properties in order to pay down debt.

In 2014 Chesapeake agreed to sell its assets in the Southern Marcellus Shale and a portion of the Eastern Utica Shale in West Virginia to Southwestern Energy for $5.4 billion. In 2013 it also sold assets in the Northern Eagle Ford Shale and Haynesville Shale to an EXCO Resources subsidiary for $1 billion.

In 2013 the company sold its 50% undivided interest in 850,000 acres in northern Oklahoma (its Mississippi Lime joint venture with Sinopec International Petroleum Exploration and Production) for $1.02 billion.

Other asset sales in 2013 included Granite Wash Midstream Gas Services (to a subsidiary of MarkWest Energy Partners, for $252 million), and its interests in certain gathering system assets in Pennsylvania to Western Gas Partners, for $134 million.

To simplify its operations, in 2012 Chesapeake spun off its oilfield service affiliate  Chesapeake Oilfield Services.

Ownership

Southeast Asset Management, Inc. holds about 14% of Chesapeake.

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CHESAPEAKE OPERATING, LLC


6100 N Western Ave
Oklahoma City, OK 73118-1044
Phone: 1 (405) 848-8000
Fax: 1 (405) 8482974
www.chk.com

STATS


  • Employer Type: Unknown
  • Mbr-svp-treas-sec: Jennifer Grigsby
  • Senior Asset Manager: Tom Pepper
  • Mbr-exec V Pres-cfo: Marcus Rowland

Major Office Locations

  • Oklahoma City, OK
  • Oklahoma City, OK

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