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About Chesapeake Energy Corporation

Chesapeake Energy is an exploration and production company with 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 6.8 trillion cu. ft. of natural gas equivalent (about 50% of the reserves are undeveloped). Chesapeake has exploration and production assets in Appalachia, the Mid-Continent, the Barnett, Bossier, and Haynesville shale plays, and the Rockies. The company boasts 13,200 producing oil and natural gas wells that turn out 520,000 barrels of oil equivalent per day. Customers have included Valero Energy Corp., Royal Dutch Shell, and BP.

Operations

Chesapeake's two sources of revenue are its production of oil, natural gas, and natural gas liquids (NGL), which accounts for about 50% of revenue, and its marketing operations, also 50% of revenue.

The oil, natural gas, and NGL operations explore for, acquire, develop, and produce energy throughout the company's production areas. Within the segment, natural gas and oil each account for about 45% of sales with NGLs providing 10%.  

Chesapeake's marketing operations provide commodity price structuring, securing and negotiating of services for gathering, hauling, processing and transportation and contract administration and nomination services. Marketing also aggregates volumes sold to intermediary markets, end markets, and pipelines.

Geographic Reach

Chesapeake Energy, which is based in Oklahoma City, Oklahoma, has operations in the Marcellus - Northern Appalachian Basin in Pennsylvania; Haynesville in Northwestern Louisiana, Eagle Ford in South Texas, Brazos Valley in Southeast Texas, Powder River Basin in Wyoming, and the Mid-Continent - Anadarko Basin in northwestern Oklahoma.

 

Sales and Marketing

Chesapeake sells through market-sensitive short-term or spot price contracts. Natural gas and NGL production is sold to purchasers under percentage-of-proceeds contracts, percentage-of-index contracts or spot price contracts. Valero Energy accounted for 10% of revenue in 2018.

 

Financial Performance

The overall downward trend of energy prices has reduced Chesapeake's revenue from about $23 billion in 2014 to $7.8 billion in 2016. Since then, sales have resumed growing.

In 2018, revenue rose to $10.2 billion, up about $735 million from 2017, driven by across-the-board increases from its revenue-producing units. Oil led the way with a 32% year-over-year increase, while marketing revenue advanced 13%.

Profit slipped to $873 million in 2018 from $949 million the year before. The decrease came in spite of a $78 million reduction in production, general, and administrative, and gathering, processing, and transportation expenses.

Chesapeake's coffers held $4 million in cash at the end of 2018 compared to $5 million in 2017. Operating activities generated $2 billion in 2018, while investing activities provided $185 million and financing activities used about $2.2 billion.

The company has a significant amount of debt, about $8.6 billion, and added another $1.4 billion with the acquisition of WildHorse in 2019. Paying down principal and interest could draw money away from other purposes such as operations and capital expenditures.

Strategy

Chesapeake Energy has been through the ups and downs of the oil-and-gas business over the years. Now the company is trying to adjust its operations and balance sheet to deliver sustained performance in a volatile industry.

In 2018 and 2019, Chesapeake engineered transactions to improve its asset mix. The company in 2018 sold $2.2 billion of proved and unproved properties, including its Utica Shale properties in Ohio and used the proceeds to pay down debt (it paid off $2.6 billion in secured debt in 2018) and fund development.

In 2019, the company acquired WildHorse Resource Development Corp. and its oil-rich assets and merged it with its Brazos Valley operations. Chesapeake says the deal should provide further profitability and flexibility for the company.

Chesapeake has put new technologies in the field to improve operations. In the Eagle Ford South Texas area, the company deployed a digital field technology to reduce down time, resulting in a 17% reduction in controllable down volumes per day in 2018 (the equivalent of an additional 1,100 barrels of oil sold per day). The company has expanded use of the technology to its other fields.

 

Mergers and Acquisitions

In 2019 Chesapeake bought WildHorse Resource for nearly $4 billion, adding 20,000 net acres in the Eagle Ford shale and Austin Chalk formations in Texas. Synergies will be around $280 million over the first five years, the company said. However, the deal came as a surprise to stockholders who expected further sell-offs to improve profitability. Investors have punished shares of peers like Denbury, Concho Resources and Diamondback after similar merger announcements. 

 

Chesapeake Energy Corporation

6100 N WESTERN AVE
Oklahoma City, OK 73118-1044
Phone: 1 (405) 848-8000

Firm Stats

Employer Type: Publicly Owned
Stock Symbol: CHK
Stock Exchange: , NYSE
President and CEO: Robert D. Lawler
Chairman: R. Brad Martin
EVP Operations and Technical Services: M. Jason Pigott
Employees (This Location): 1,968
Employees (All Locations): 2,350

Major Office Locations

Oklahoma City, OK

Other Locations

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