UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2022~~March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. ~~1-13726~~001-13726

CHESAPEAKE ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Oklahoma

73-1395733

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6100 North Western Avenue,

Oklahoma City,

Oklahoma

73118

(Address of principal executive offices)

(Zip Code)

(405)

848-8000

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value per share

CHK

The Nasdaq Stock Market LLC

Class A Warrants to purchase Common Stock

CHKEW

The Nasdaq Stock Market LLC

Class B Warrants to purchase Common Stock

CHKEZ

The Nasdaq Stock Market LLC

Class C Warrants to purchase Common Stock

CHKEL

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐

Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a ~~court~~court. Yes ☒ No ☐

As of ~~October~~April 28, ~~2022,~~2023, there were ~~133,971,136~~133,869,079 shares of our $0.01 par value common stock outstanding.

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

INDEX TO FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023


	PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	8
	~~Condensed Consolidated Statements of Comprehensive Income (Loss)~~	107
	Condensed Consolidated Statements of Cash Flows	118
	Condensed Consolidated Statements of Stockholders’ Equity	1310
	Notes to Condensed Consolidated Financial Statements (Unaudited)
	Note 1. Basis of Presentation and Summary of Significant Accounting Policies	11
	Note 2 . Natural Gas and Oil Property Transactions	12
	Note 3 . Earnings Per Share	14
	Note 4 . Debt	15
	Note ~~2. Chapter 11 Emergence~~5 . Contingencies and Commitments	16
	Note ~~3. Fresh Start Accounting~~6 . Other Current Liabilities	17
	Note 7 . Revenue	17
	Note 8 . Income Taxes	18
	Note ~~4. Natural Gas and Oil Property Transactions~~9 . Equity	26
	~~Note 5. Earnings Per Share~~	3019
	Note ~~6. Debt~~1 0 . Share-Based Compensation	3119
	Note ~~7. Contingencies~~1 1 . Derivative and ~~Commitments~~Hedging Activities	33
	~~Note 8. Other Current Liabilities~~	34
	~~Note 9. Revenue~~	34
	~~Note 10. Income Taxes~~	36
	~~Note 11. Equity~~	3821
	Note 12. ~~Share-Based Compensation~~Investments	3923
	~~Note 13. Derivative and Hedging Activities~~	42
	~~Note 14. Other Operating Expense (Income), Net~~	44

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4524
	Liquidity and Capital Resources	4726
	Results of Operations	5230
	Non-GAAP Measures	6334
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6637
Item 4.	Controls and Procedures	6738
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6839
Item 1A.	Risk Factors	6940
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6940
Item 3.	Defaults Upon Senior Securities	6940
Item 4.	Mine Safety Disclosures	6940
Item 5.	Other Information	6940
Item 6.	Exhibits	7041
Signatures		7243


Definitions

Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Chesapeake,” the “Company” and “Registrant” refer to Chesapeake Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:

“Adjusted Free Cash Flow” (a non-GAAP measure) means net cash provided by operating activities (GAAP) less cash capital expenditures and contributions to investments, adjusted to exclude certain items management believes affect the comparability of operating results.

“ASC” means Accounting Standards Codification.

“Backstop Commitment Agreement” means that certain Backstop Commitment Agreement, dated as of June 28, 2020, by and between Chesapeake and the Backstop Parties, as may be further amended, modified, or supplemented from time to time, in accordance with its terms.

“Backstop Parties” means the members of the FLLO Ad Hoc Group that are signatories to the Backstop Commitment Agreement and Franklin Advisers, Inc., as investment manager on behalf of certain funds and accounts.

“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as amended.

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas.

“Bbl” or “Bbls” means barrel or barrels.

“Bcf” means billion cubic feet.

“Chapter 11 Cases” means, when used with reference to a particular Debtor, the case pending for that Debtor under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and when used with reference to all the Debtors, the procedurally consolidated Chapter 11 cases pending for the Debtors in the Bankruptcy Court.

“Chief” means Chief E&D Holdings, LP.

“Class A Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan, the Class B Warrants, and the Class C Warrants), at an initial exercise price per share of $27.63. The Class A Warrants are exercisable from the Effective Date until February 9, 2026.

“Class B Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan and the Class C Warrants), at an initial exercise price per share of $32.13. The Class B Warrants are exercisable from the Effective Date until February 9, 2026.

“Class C Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), at an initial exercise price per share of $36.18. The Class C Warrants are exercisable from the Effective Date until February 9, 2026.

“Confirmation Order” means the order confirming the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, Docket No. 2915, entered by the Bankruptcy Court on January 16, 2021.

“DD&A” means depreciation, depletion and amortization.

“Debtors” means the Company, together with all of its direct and indirect subsidiaries that have filed the Chapter 11 Cases.

“~~DIP Facility” means that certain debtor-in-possession financing facility documented pursuant to the DIP Documents and DIP Order.~~

“Effective Date” means February 9, 2021.

“ESG” means environmental, social and governance.

“Exit Credit Facility” means the reserve-based revolving credit facility available upon emergence from bankruptcy.

“FLLO Term Loan Facility” means the facility outstanding under the FLLO Term Loan Facility Credit Agreement.

“FLLO Term Loan Facility Credit Agreement” means that certain Term Loan Agreement, dated as of December 19, 2019 ((i) as supplemented by that certain Class A Term Loan Supplement, dated as of December 19, 2019 (as

amended, restated or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto, and (ii) as further amended, restated, or otherwise modified from time to time), by and among Chesapeake, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto.

“Free Cash Flow” (a non-GAAP measure) means net cash provided by operating activities (GAAP) less cash capital expenditures.

“G&A” means general and administrative expenses.

“GAAP” means U.S. generally accepted accounting principles.

“General Unsecured Claim” means any Claim against any Debtor that is not otherwise paid in full during the Chapter 11 Cases pursuant to an order of the Bankruptcy Court and is not an Administrative Claim, a Priority Tax Claim, an Other Priority Claim, an Other Secured Claim, a Revolving Credit Facility Claim, a FLLO Term Loan Facility Claim, a Second Lien Notes Claim, an Unsecured Notes Claim, an Intercompany Claim, or a Section 510(b) Claim.

“LTIP” means the Chesapeake Energy Corporation 2021 Long-Term Incentive Plan.

“LNG” means liquefied natural gas.

“Marcellus Acquisition” means Chesapeake’s acquisition of Chief and associated non-operated interests held by affiliates of Radler and Tug Hill, Inc., which closed on March 9, 2022 with an effective date of January 1, 2022.

“MBbls” means thousand barrels.

“MMBbls” means million barrels.

“Mcf” means thousand cubic feet.

“Mcfe” means one thousand cubic feet of natural gas equivalent, with one barrel of oil or NGL converted to an equivalent volume of natural gas using the ratio of one barrel of oil or NGL to six Mcf of natural gas.

“MMcf” means million cubic feet.

“MMcfe” means million cubic feet of natural gas equivalent.

“New Common Stock” means the single class of common stock issued by Reorganized Chesapeake on the Effective Date.

“NGL” means natural gas liquids.

“NYMEX” means New York Mercantile Exchange.

“OPEC+” means Organization of the Petroleum Exporting Countries Plus.

“Petition Date” means June 28, 2020, the date on which the Debtors commenced the Chapter 11 Cases.

“Plan” means the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, attached as Exhibit A to the Confirmation Order.

“Present Value of Estimated Future Net Revenues or PV-10 (non-GAAP)” means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices calculated as the average natural gas and oil price during the preceding 12-month period prior to the end of the current reporting period, (determined as the unweighted arithmetic average of prices on the first day of each month within the 12-month period) and costs in effect at the determination date (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.

“~~Put Option Premium”~~Radler” means ~~a nonrefundable aggregate fee of $60 million, which represents 10 percent of the Rights Offering Amount, payable to the Backstop Parties in accordance with, and subject to the terms of the~~Radler 2000 Limited Partnership.

~~Backstop Commitment Agreement based on their respective backstop commitment percentages at the time such payment is made.~~

~~“Radler” means Radler 2000 Limited Partnership.~~

“Rights Offering” means the New Common Stock rights offering for the Rights Offering Amount consummated by the Debtors on the Effective Date.

“SEC” means United States Securities and Exchange Commission.

“Second Lien Notes” means the 11.500% senior notes due 2025 issued by Chesapeake pursuant to the Second Lien Notes Indenture.

“Second Lien Notes Claim” means any Claim on account of the Second Lien Notes.

“~~Tranche A Loans”~~SOFR” means ~~the fully revolving loans made under and on the terms set forth under the Exit Credit Facility which will be partially funded on the Effective Date, will have~~ a ~~scheduled maturity of 3 years from the Effective Date, and shall at all times be repaid prior~~rate equal to the ~~repayment~~secured overnight financing rate as administered by the SOFR Administrator, the Federal Reserve Bank of New York (or a successor administrator of the ~~Tranche B Loans.~~

“Tranche B Loans” means term loans made under and on the terms set forth under the Exit Credit Facility which will be fully funded on the Effective Date, will have a scheduled maturity of 4 years from the Effective Date, will be repaid or prepaid only after there are no Tranche A Loans outstanding, and once so prepaid or repaid, may not be reborrowed.

~~“Vine” means Vine Energy Inc.~~

~~“Vine Acquisition” means Chesapeake’s acquisition of Vine, which closed on November 1, 2021.~~secured overnight financing rate).

“Warrants” means collectively, the Class A Warrants, Class B Warrants and Class C Warrants.

“/Bbl” means per barrel.

“/Mcf” means per Mcf.

“/Mcfe” means per Mcfe.

~~“2021 Predecessor Period” means the period of January 1, 2021 through February 9, 2021.~~

~~“2021 Successor Period” means the period of February 10, 2021 through September 30, 2021.~~

~~“2021 Successor Quarter” means the three months ended September 30, 2021.~~

~~“2022 Successor Period” means the nine months ended September 30, 2022.~~

~~“2022 Successor Quarter” means the three months ended September 30, 2022.~~

Table of Contents

PART I. FINANCIAL INFORMATION


ITEM 1.			Condensed Consolidated Financial Statements

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

~~(Unaudited)~~

Successor
September 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 74 $ 905
Restricted cash 56 9
Accounts receivable, net 1,757 1,115
Short-term derivative assets 4 5
Other current assets 168 69
Total current assets 2,059 2,103
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties 11,437 7,682
Unproved properties 2,192 1,530
Other property and equipment 506 495
Total property and equipment 14,135 9,707
Less: accumulated depreciation, depletion and amortization (2,182) (908)
Property and equipment held for sale, net 1 3
Total property and equipment, net 11,954 8,802
Other long-term assets 76 104
Total assets $ 14,089 $ 11,009


($ in millions, except per share data)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	130	$	130
Restricted cash	67		62
Accounts receivable, net	864		1,438
Short-term derivative assets	464		34
Assets held for sale	862		819
Other current assets	242		215
Total current assets	2,629		2,698
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties	10,793		11,096
Unproved properties	2,002		2,022
Other property and equipment	498		500
Total property and equipment	13,293		13,618
Less: accumulated depreciation, depletion and amortization	(2,770)		(2,431)

Total property and equipment, net	10,523		11,187
Long-term derivative assets	122		47
Deferred income tax assets	973		1,351
Other long-term assets	344		185
Total assets	$	14,591	$	15,468

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	631	$	603
Accrued interest	40		42
Short-term derivative liabilities	25		432
Other current liabilities	1,202		1,627
Total current liabilities	1,898		2,704
Long-term debt, net	2,040		3,093
Long-term derivative liabilities	42		174
Asset retirement obligations, net of current portion	279		323
Other long-term liabilities	49		50
Total liabilities	4,308		6,344
Contingencies and commitments (Note 5)
Stockholders' equity:
Common stock, $0.01 par value, 450,000,000 shares authorized: 134,019,253 and 134,715,094 shares issued	1		1
Additional paid-in capital	5,729		5,724
Retained earnings	4,553		3,399
Total stockholders' equity	10,283		9,124
Total liabilities and stockholders' equity	$	14,591	$	15,468

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS – (Continued)~~STATEMENTS OF OPERATIONS

(Unaudited)

Successor
September 30, 2022 December 31, 2021
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 539 $ 308
Accrued interest 40 38
Short-term derivative liabilities 1,875 899
Other current liabilities 1,784 1,202
Total current liabilities 4,238 2,447
Long-term debt, net 2,717 2,278
Long-term derivative liabilities 419 249
Asset retirement obligations, net of current portion 350 349
Other long-term liabilities 18 15
Total liabilities 7,742 5,338
Contingencies and commitments (Note 7)
Stockholders' equity:
Successor common stock, $0.01 par value, 450,000,000 shares authorized: 121,334,663 and 117,917,349 shares issued 1 1
Successor additional paid-in capital 5,627 4,845
Retained earnings 719 825
Total stockholders' equity 6,347 5,671
Total liabilities and stockholders' equity $ 14,089 $ 11,009


($ in millions, except per share data)	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Revenues and other:
Natural gas, oil and NGL	$	1,453	$	1,914
Marketing	652		867
Natural gas and oil derivatives	930		(2,125)
Gains on sales of assets	335		279
Total revenues and other	3,370		935
Operating expenses:
Production	131		110
Gathering, processing and transportation	264		242
Severance and ad valorem taxes	69		63
Exploration	7		5
Marketing	651		851
General and administrative	35		26

Depreciation, depletion and amortization	390		409

Other operating expense, net	3		23
Total operating expenses	1,550		1,729
Income (loss) from operations	1,820		(794)
Other income (expense):
Interest expense	(37)		(32)

Other income	10		16
Total other income (expense)	(27)		(16)
Income (loss) before income taxes	1,793		(810)
Income tax expense (benefit)	404		(46)


Net income (loss) available to common stockholders	$	1,389	$	(764)
Earnings (loss) per common share:
Basic	$	10.31	$	(6.32)
Diluted	$	9.60	$	(6.32)
Weighted average common shares outstanding (in thousands):
Basic	134,742		120,805
Diluted	144,731		120,805

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CASH FLOWS

(Unaudited)

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Revenues and other:
Natural gas, oil and NGL $ 2,987 $ 1,170
Marketing 1,206 627
Natural gas and oil derivatives (1,029) (910)
Gains (losses) on sales of assets (2) 3
Total revenues and other 3,162 890
Operating expenses:
Production 121 80
Gathering, processing and transportation 286 219
Severance and ad valorem taxes 67 41
Exploration 2 2
Marketing 1,200 625
General and administrative 40 30
Depreciation, depletion and amortization 440 228
Other operating expense, net 1 3
Total operating expenses 2,157 1,228
Income (loss) from operations 1,005 (338)
Other income (expense):
Interest expense (52) (17)
Other income 4 —
Total other income (expense), net (48) (17)
Income (loss) before income taxes 957 (355)
Income tax expense (benefit) 74 (10)
Net income (loss) available to common stockholders $ 883 $ (345)
Earnings (loss) per common share:
Basic $ 7.29 $ (3.51)
Diluted $ 6.12 $ (3.51)
Weighted average common shares outstanding (in thousands):
Basic 121,150 98,221
Diluted 144,390 98,221


($ in millions)	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Cash flows from operating activities:
Net income (loss)	$	1,389	$	(764)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	390		409
Deferred income tax expense	378		—
Derivative (gains) losses, net	(930)		2,125
Cash payments on derivative settlements, net	(285)		(568)
Share-based compensation	7		4
Gains on sales of assets	(335)		(279)

Exploration	3		4

Other	9		(8)
Changes in assets and liabilities	263		(70)
Net cash provided by operating activities	889		853
Cash flows from investing activities:
Capital expenditures	(497)		(344)
Business combination, net	—		(2,006)
Contributions to investments	(39)		—
Proceeds from divestitures of property and equipment	931		403
Net cash provided by (used in) investing activities	395		(1,947)
Cash flows from financing activities:
Proceeds from New Credit Facility	1,000		—
Payments on New Credit Facility	(2,050)		—
Proceeds from Exit Credit Facility	—		1,565
Payments on Exit Credit Facility	—		(1,065)

Proceeds from warrant exercise	—		1

Cash paid to repurchase and retire common stock	(54)		(83)

Cash paid for common stock dividends	(175)		(210)
Net cash provided by (used in) financing activities	(1,279)		208
Net increase (decrease) in cash, cash equivalents and restricted cash	5		(886)
Cash, cash equivalents and restricted cash, beginning of period	192		914
Cash, cash equivalents and restricted cash, end of period	$	197	$	28

Cash and cash equivalents	$	130	$	19
Restricted cash	67		9
Total cash, cash equivalents and restricted cash	$	197	$	28

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CASH FLOWS – (Continued)

(Unaudited)

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Revenues and other:
Natural gas, oil and NGL $ 7,691 $ 2,615 $ 398
Marketing 3,296 1,443 239
Natural gas and oil derivatives (3,668) (1,604) (382)
Gains on sales of assets 298 9 5
Total revenues and other 7,617 2,463 260
Operating expenses:
Production 349 194 32
Gathering, processing and transportation 802 541 102
Severance and ad valorem taxes 187 106 18
Exploration 14 4 2
Marketing 3,279 1,440 237
General and administrative 102 69 21
Separation and other termination costs — 11 22
Depreciation, depletion and amortization 1,300 579 72
Impairments — 1 —
Other operating expense (income), net 32 1 (12)
Total operating expenses 6,065 2,946 494
Income (loss) from operations 1,552 (483) (234)
Other income (expense):
Interest expense (120) (47) (11)
Other income 29 31 2
Reorganization items, net — — 5,569
Total other income (expense), net (91) (16) 5,560
Income (loss) before income taxes 1,461 (499) 5,326
Income tax expense (benefit) 105 (10) (57)
Net income (loss) available to common stockholders $ 1,356 $ (489) $ 5,383
Earnings (loss) per common share:
Basic $ 11.03 $ (4.99) $ 550.35
Diluted $ 9.35 $ (4.99) $ 534.51
Weighted average common shares outstanding (in thousands):
Basic 122,924 98,040 9,781
Diluted 145,031 98,040 10,071
Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:


($ in millions)	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Supplemental cash flow information:

Interest paid, net of capitalized interest	$	41	$	31
Income taxes paid, net of refunds received	$	—	$	(5)

Supplemental disclosure of significant non-cash investing and financing activities:
Change in accrued drilling and completion costs	$	56	$	6

Common stock issued for business combination	$	—	$	764
Operating lease obligations recognized	$	48	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME (LOSS)~~STOCKHOLDERS’ EQUITY

(Unaudited)

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Net income (loss) $ 883 $ (345)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments — —
Other comprehensive income — —
Comprehensive income (loss) $ 883 $ (345)

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Net income (loss) $ 1,356 $ (489) $ 5,383
Other comprehensive income, net of
income tax:
Reclassification of losses on settled derivative instruments — — 3
Other comprehensive income — — 3
Comprehensive income (loss) $ 1,356 $ (489) $ 5,386


	Common Stock
($ in millions)	Shares	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity
Balance as of December 31, 2022	134,715,094	$	1	$	5,724	$	3,399	$	9,124
Share-based compensation	92,048	—		5		—		5
Issuance of common stock for warrant exercise	4,654	—		—		—		—
Repurchase and retirement of common stock	(792,543)	—		—		(60)		(60)
Net income	—	—		—		1,389		1,389
Dividends on common stock	—	—		—		(175)		(175)
Balance as of March 31, 2023	134,019,253	$	1	$	5,729	$	4,553	$	10,283

Balance as of December 31, 2021	117,917,349	$	1	$	4,845	$	825	$	5,671
Issuance of common stock for Marcellus Acquisition	9,442,185	—		764		—		764
Share-based compensation	23,169	—		5		—		5
Issuance of common stock for warrant exercise	669,669	—		1		—		1
Repurchase and retirement of common stock	(1,000,000)	—		—		(83)		(83)
Net loss	—	—		—		(764)		(764)
Dividends on common stock	—	—		—		(211)		(211)
Balance as of March 31, 2022	127,052,372	$	1	$	5,615	$	(233)	$	5,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Cash flows from operating activities:
Net income (loss) $ 1,356 $ (489) $ 5,383
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 1,300 579 72
Deferred income tax expense (benefit) 19 — (57)
Derivative losses, net 3,668 1,604 382
Cash payments on derivative settlements, net (2,845) (437) (17)
Share-based compensation 16 5 3
Gains on sales of assets (298) (9) (5)
Impairments — 1 —
Non-cash reorganization items, net — — (6,680)
Exploration 10 1 2
Other 19 10 45
Changes in assets and liabilities (170) (19) 851
Net cash provided by (used in) operating activities 3,075 1,246 (21)
Cash flows from investing activities:
Capital expenditures (1,299) (404) (66)
Business combination, net (1,967) — —
Proceeds from divestitures of property and equipment 409 9 —
Net cash used in investing activities (2,857) (395) (66)
Cash flows from financing activities:
Proceeds from Exit Credit Facility - Tranche A Loans 7,255 30 —
Payments on Exit Credit Facility - Tranche A Loans (6,805) (80) (479)
Payments on DIP Facility borrowings — — (1,179)
Proceeds from issuance of senior notes, net — — 1,000
Proceeds from issuance of common stock — — 600
Proceeds from warrant exercise 3 2 —
Debt issuance and other financing costs — (3) (8)
Cash paid to repurchase and retire common stock (667) — —
Cash paid for common stock dividends (788) (67) —
Other — (1) —
Net cash used in financing activities (1,002) (119) (66)
Net increase (decrease) in cash, cash equivalents and restricted cash (784) 732 (153)
Cash, cash equivalents and restricted cash, beginning of period 914 126 279
Cash, cash equivalents and restricted cash, end of period $ 130 $ 858 $ 126

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)~~

~~(Unaudited)~~

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Cash and cash equivalents $ 74 $ 849 $ 40
Restricted cash 56 9 86
Total cash, cash equivalents and restricted cash $ 130 $ 858 $ 126

~~Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:~~

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Supplemental cash flow information:
Cash paid for reorganization items, net $ — $ 65 $ 66
Interest paid, net of capitalized interest $ 107 $ 33 $ 13
Income taxes paid, net of refunds received $ 181 $ (3) $ —
Supplemental disclosure of significant
non-cash investing and financing activities:
Change in accrued drilling and completion costs $ 193 $ 25 $ (5)
Put option premium on equity backstop agreement $ — $ — $ 60
Common stock issued for business combination $ 764 $ — $ —
Operating lease obligations recognized $ 25 $ — $ —

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Preferred Stock Common Stock
Shares Amount Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity
Balance as of December 31, 2021 (Successor) — $ — 117,917,349 $ 1 $ 4,845 $ 825 $ — $ 5,671
Issuance of common stock for Marcellus Acquisition — — 9,442,185 — 764 — — 764
Share-based compensation — — 23,169 — 5 — — 5
Issuance of common stock for warrant exercise — — 669,669 — 1 — — 1
Repurchase and retirement of common stock — — (1,000,000) — — (83) — (83)
Net loss — — — — — (764) — (764)
Dividends on common stock — — — — — (211) — (211)
Balance as of March 31, 2022 (Successor) — $ — 127,052,372 $ 1 $ 5,615 $ (233) $ — $ 5,383
Share-based compensation — — 146,054 — 3 — — 3
Issuance of common stock for warrant exercise — — 166,606 — 1 — — 1
Issuance of reserved common stock and warrants — — 36,951 — — — — —
Repurchase and retirement of common stock — — (5,811,727) — — (515) — (515)
Net income — — — — — 1,237 — 1,237
Dividends on common stock — — — — — (301) — (301)
Balance as of June 30, 2022 (Successor) — $ — 121,590,256 $ 1 $ 5,619 $ 188 $ — $ 5,808
Share-based compensation — — 991 — 7 — — 7
Issuance of common stock for warrant exercise — — 493,016 — 1 — — 1
Repurchase and retirement of common stock — — (749,600) — — (69) — (69)
Net income — — — — — 883 — 883
Dividends on common stock — — — — — (283) — (283)
Balance as of September 30, 2022 (Successor) — $ — 121,334,663 $ 1 $ 5,627 $ 719 $ — $ 6,347

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)~~

~~(Unaudited)~~

Preferred Stock Common Stock
Shares Amount Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity
Balance as of December 31, 2020 (Predecessor) 5,563,358 $ 1,631 9,780,547 $ — $ 16,937 $ (23,954) $ 45 $ (5,341)
Share-based compensation — — 67 — 3 — — 3
Hedging activity — — — — — — 3 3
Net income — — — — — 5,383 — 5,383
Cancellation of Predecessor Equity (5,563,358) (1,631) (9,780,614) — (16,940) 18,571 (48) (48)
Issuance of Successor common stock — — 97,907,081 1 3,330 — — 3,331
Issuance of Successor Class A warrants — — — — 93 — — 93
Issuance of Successor Class B warrants — — — — 94 — — 94
Issuance of Successor Class C warrants — — — — 68 — — 68
Balance as of February 9, 2021 (Predecessor) — $ — 97,907,081 $ 1 $ 3,585 $ — $ — $ 3,586
Balance as of February 10, 2021 (Successor) — $ — 97,907,081 $ 1 $ 3,585 $ — $ — $ 3,586
Net income — — — — — 295 — 295
Balance as of March 31, 2021 (Successor) — $ — 97,907,081 $ 1 $ 3,585 $ 295 $ — $ 3,881
Share-based compensation — — 921 — 3 — — 3
Issuance of common stock for warrant exercise — — 46,035 — 2 — — 2
Net loss — — — — — (439) — (439)
Dividends on common stock — — — — — (34) — (34)
Balance as of June 30, 2021 (Successor) — $ — 97,954,037 $ 1 $ 3,590 $ (178) $ — $ 3,413
Share-based compensation — — 761 — 4 — — 4
Issuance of common stock for warrant exercise — — 6,218 — — — — —
Issuance of reserved common stock and warrants — — 325,715 — — — — —
Net loss — — — — — (345) — (345)
Dividends on common stock — — — — — (34) — (34)
Balance as of September 30, 2021 (Successor) — $ — 98,286,731 $ 1 $ 3,594 $ (557) $ — $ 3,038

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.			Basis of Presentation and Summary of Significant Accounting Policies

Description of Company

Chesapeake Energy Corporation (“~~Chesapeake”, “we”, “our”,~~Chesapeake,” “we,” “our,” “us” or the “Company”) is a natural gas and oil exploration and production company engaged in the acquisition, exploration and development of properties for the production of natural gas, oil and NGL from underground reservoirs. Our operations are located onshore in the United States. ~~As discussed in~~ ~~Note 2~~ below, we filed the Chapter 11 Cases on the Petition Date and subsequently operated as a debtor-in-possession, in accordance with applicable provisions of the Bankruptcy Code, until emergence on February 9, 2021. To facilitate our financial statement presentations, we refer to the post-emergence reorganized Company in these condensed consolidated financial statements and footnotes as the “Successor” for periods subsequent to February 9, 2021, and to the pre-emergence Company as “Predecessor” for periods on or prior to February 9, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Chesapeake were prepared in accordance with GAAP and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted.

This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to our financial position as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and our results of operations for the three months ended September 30, 2022 (“2022 Successor Quarter”), the nine months ended September 30, 2022 (“2022 Successor Period”), the three months ended September 30, 2021 (“2021 Successor Quarter”), the period of February 10, 2021 through September 30, 2021 (“2021 Successor Period”)March 31, 2023 and ~~the period of January 1, 2021 through February 9, 2021 (“2021 Predecessor Period”).~~March 31, 2022. Our annual report on Form 10-K for the year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. ~~The accompanying condensed consolidated financial statements~~For the time periods covered by this Form 10-Q, we did not have ~~been prepared assuming the Company will continue as a going concern.~~any changes or items impacting other comprehensive income.

Segments

Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for which separate operational financial information is available and is regularly evaluated by the chief operating decision maker for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only one reportable operating segment due to the similar nature of the exploration and production business across Chesapeake and its consolidated subsidiaries and the fact that our marketing activities are ancillary to our operations.

Restricted Cash

As of ~~September 30, 2022,~~March 31, 2023, we had restricted cash of ~~$56~~$67 million. Our restricted cash represents funds legally restricted for payment of certain convenience class unsecured claims following our emergence from bankruptcy, as well as for future payment of certain royalties.

~~Voluntary Filing under Chapter 11 Bankruptcy~~Assets Held for Sale

OnWe may market certain non-core natural gas and oil assets or other properties for sale. At the ~~Petition Date,~~end of each reporting period, we evaluate if these assets should be classified as held for sale. The held for sale criteria includes the ~~Debtors filed~~following: management commits to a plan to sell, the ~~Chapter 11 Cases under~~asset is available for immediate sale, an active program to locate a buyer exists, the ~~Bankruptcy Code in the Bankruptcy Court. On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration~~sale of the ~~Chapter 11 Cases under~~asset is probable and expected to be completed within a year, the ~~caption~~ ~~In re Chesapeake Energy Corporation, Case No. 20-33233. Subsidiaries with noncontrolling interests, consolidated variable interest entities~~asset is actively being marketed for sale and ~~certain de minimis subsidiaries (collectively,~~that it is unlikely that significant changes to the ~~“Non-Filing Entities”) were not part~~plan will be made. If each of the ~~bankruptcy filing. The Non-Filing Entities continued to operate in~~criteria are met, then the ~~ordinary course of business.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~The Bankruptcy Court confirmed the Plan~~assets and ~~entered the Confirmation Orderon January 16, 2021.The Debtors emerged from the Chapter 11 Cases on the Effective Date. The Company’s bankruptcy proceedings and related matters have been summarized below.~~

During the pendency of the Chapter 11 Cases, we operated our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court granted the first day relief we requested that was designed primarily to mitigate the impact of the Chapter 11 Cases on our operations, vendors, suppliers, customers and employees. As a result, we were able to conduct normal business activities and pay all associated obligations for the period following the Petition Date and were also authorized to pay mineral interest owner royalties, employee wages and benefits, and certain vendors and suppliers in the ordinary course for goods and services provided prior to the Petition Date. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business required the prior approval of the Bankruptcy Court.

Subject to certain specific exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed all judicial or administrative actions against us and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities ~~were subject to compromise and discharge under the Bankruptcy Code. The automatic stay was lifted on the Effective Date.~~

~~We have applied ASC 852,~~ ~~Reorganizations,~~ in preparing the unaudited condensed consolidated financial statements for the period ended February 9, 2021. ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses, realized gains and losses and provisions for losses that were realized or incurred during the bankruptcy proceedings, including gain on settlement of liabilities subject to compromise, losses related to executory contracts that have been approved for rejection by the Bankruptcy Court, and unamortized debt issuance costs, premiums and discounts associated with debt classified as held for sale. As of March 31, 2023, the asset and liabilities ~~subject~~held for sale are in connection with a portion of our remaining Eagle Ford assets for which we had entered into an agreement to ~~compromise, were recorded as reorganization items, net.~~sell to INEOS Energy. This transaction closed on April 28, 2023. See Note 3 ~~for more information regarding reorganization items.~~


2.			~~Chapter 11 Emergence~~

~~As described in~~ ~~Note 1~~, on the Petition Date, the Debtors filed the Chapter 11 Cases and on September 11, 2020, the Debtors filed the Plan, which was subsequently amended, and entered the Confirmation Order on January 16, 2021. The Debtors then emerged from bankruptcy upon effectiveness of the Plan on the Effective Date. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan.

~~Plan of Reorganization~~

~~In accordance with the Plan confirmed by the Bankruptcy Court, the following significant transactions occurred upon the Company’s emergence from bankruptcy on February 9, 2021:~~

•On the Effective Date, we issued 97,907,081 shares of New Common Stock, reserved 2,092,918 shares of New Common Stock for future issuance to eligible holders of Allowed Unsecured Notes Claims and Allowed General Unsecured Claims and reserved 37,174,210 shares of New Common Stock for issuance upon exercise of the Warrants, which were the result of the transactions described below. We also entered into a registration rights agreement, warrant agreements and amended our articles of incorporation and bylaws for the authorization of the New Common Stock and to provide registration rights thereunder, among other corporate governance actions. See ~~Note 11~~2 for further ~~discussion of our post-emergence equity.~~

•~~Each holder of an equity interest in the Predecessor, including Predecessor’s common and preferred stock, had such interest canceled, released, and extinguished without any distribution.~~

•Each holder of obligations under the pre-petition revolving credit facility received, at such holder's prior determined allocation, its pro rata share of either Tranche A Loans or Tranche B Loans, on a dollar for dollar basis.

•~~Each holder of obligations under the FLLO Term Loan Facility received its pro rata share of 23,022,420 shares of New Common Stock.~~discussion.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

•Each holder of an Allowed Second Lien Notes Claim received its pro rata share of 3,635,118 shares of New Common Stock, 11,111,111 Class A Warrants to purchase 11,111,111 shares of New Common Stock, 12,345,679 Class B Warrants to purchase 12,345,679 shares of New Common Stock, and 6,858,710 Class C Warrants to purchase 6,858,710 shares of New Common Stock.

•~~Each holder of an Allowed Unsecured Notes Claim received its pro rata share of 1,311,089 shares of New Common Stock and 2,473,757 Class C Warrants to purchase 2,473,757 shares of New Common Stock.~~

•Each holder of an Allowed General Unsecured Claim received its pro rata share of 231,112 shares of New Common Stock and 436,060 Class C Warrants to purchase 436,060 shares of New Common Stock; provided that to the extent such Allowed General Unsecured Claim is a Convenience Claim, such holder instead received its pro rata share of $10 million, which pro rata share shall not exceed five percent of such Convenience Claim.

•~~Participants in the Rights Offering extending to the applicable classes under the Plan received 62,927,320 shares of New Common Stock.~~

•In connection with the Rights Offering described above, the Backstop Parties under the Backstop Commitment Agreement received 6,337,031 shares of New Common Stock in respect to the Put Option Premium, and 442,991 shares of New Common Stock were issued in connection with the backstop obligation thereunder to purchase unsubscribed shares of the New Common Stock.

•~~2,092,918 shares of New Common Stock and 3,948,893 Class C Warrants were reserved for future issuance to eligible holders of Allowed Unsecured Notes Claims and Allowed General Unsecured Claims.The reserved New Common Stock and Class C Warrants will be issued on a pro rata basis upon the determination of the allowed portion of all disputed General Unsecured Claims and Unsecured Notes Claims.~~

•~~The 2021 Long-Term Incentive Plan (the “LTIP”) was approved with a share reserve equal to 6,800,000 shares of New Common Stock.~~

•Each holder of an Allowed Other Secured Claim will receive, at the Company's option and in consultation with the Required Consenting Stakeholders (as defined in the Plan): (a) payment in full in cash; (b) the collateral securing its secured claim; (c) reinstatement of its secured claim; or (d) such other treatment that renders its secured claim unimpaired in accordance with Section 1124 of the Bankruptcy Code.

•~~Each holder of an Allowed Other Priority Claim will receive cash up to the allowed amount of its claim.~~

Additionally, pursuant to the Plan confirmed by the Bankruptcy Court, the Company’s post-emergence Board of Directors is comprised of seven directors, including the Company’s Chief Executive Officer, Domenic J. Dell’Osso Jr., the Company’s Executive Chairman, Michael Wichterich, and five non-employee directors, Timothy S. Duncan, Benjamin C. Duster, IV, Sarah Emerson, Matthew M. Gallagher and Brian Steck.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)


3.			~~Fresh Start Accounting~~

~~Fresh Start Accounting~~

In connection with our emergence from bankruptcy and in accordance with ASC 852, we qualified for and applied fresh start accounting on the Effective Date. We were required to apply fresh start accounting because (i) the holders of existing voting shares of the Company prior to its emergence received less than 50% of the voting shares of the Company outstanding following its emergence from bankruptcy and (ii) the reorganization value of our assets immediately prior to confirmation of the Plan of approximately $6.8 billion was less than the post-petition liabilities and allowed claims of $13.2 billion.

In accordance with ASC 852, with the application of fresh start accounting, the Company allocated its reorganization value to its individual assets based on their estimated fair value in conformity with FASB ASC Topic 820 - ~~Fair Value Measurements~~ ~~and FASB ASC Topic 805 -~~ ~~Business Combinations~~. Accordingly, the consolidated financial statements after February 9, 2021 are not comparable with the consolidated financial statements as of or prior to that date. The Effective Date fair values of the Successor’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheet of the Predecessor.

~~Reorganization Value~~

Reorganization value is derived from an estimate of enterprise value, or fair value of the Company’s interest-bearing debt and stockholders’ equity. Under ASC 852, reorganization value generally approximates fair value of the entity before considering liabilities and is intended to approximate the amount a willing buyer would pay for the assets immediately after the effects of a restructuring. As set forth in the disclosure statement, amended for updated pricing, and approved by the Bankruptcy Court, the enterprise value of the Successor was estimated to be between $3.5 billion and $4.9 billion. With the assistance of third-party valuation advisors, we determined the enterprise value and corresponding implied equity value of the Successor using various valuation approaches and methods, including: (i) income approach using a calculation of present value of future cash flows based on our financial projections, (ii) the market approach using selling prices of similar assets and (iii) the cost approach. For GAAP purposes, the Company valued the Successor’s individual assets, liabilities and equity instruments and determined an estimate of the enterprise value within the estimated range. Management concluded that the best estimate of enterprise value was $4.85 billion. Specific valuation approaches and key assumptions used to arrive at reorganization value, and the value of discrete assets and liabilities resulting from the application of fresh start accounting, are described below in greater detail within the valuation process.

The enterprise value and corresponding implied equity value are dependent upon achieving the future financial results set forth in our valuation using an asset-based methodology of estimated proved reserves, undeveloped properties, and other financial information, considerations and projections, applying a combination of the income, cost and market approaches as of the fresh start reporting date of February 9, 2021. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the financial projections, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, there is no assurance that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~The following table reconciles the enterprise value to the implied fair value of the Successor’s equity as of the Effective Date:~~


	~~February 9, 2021~~
~~Enterprise Value~~	$	~~4,851~~
~~Plus: Cash and cash equivalents(a)~~	48
~~Less: Fair value of debt~~	~~(1,313)~~
~~Successor equity value~~	$	~~3,586~~

~~____________________________________________~~

~~(a)~~Cash and cash equivalents includes $8 million that was initially classified as restricted cash as of the Effective Date but subsequently released from escrow and returned to the Successor. Restricted cash exclusive of the $8 million is not included in the table above.

~~The following table reconciles the enterprise value to the reorganization value as of the Effective Date:~~


	~~February 9, 2021~~
~~Enterprise Value~~	$	~~4,851~~
~~Plus: Cash and cash equivalents(a)~~	48
~~Plus: Current liabilities~~	~~1,582~~
~~Plus: Asset retirement obligations (non-current portion)~~	~~236~~
~~Plus: Other non-current liabilities~~	97
~~Reorganization value of Successor assets~~	$	~~6,814~~

~~Valuation Process~~

The fair values of our natural gas and oil properties, other property and equipment, other long-term assets, long-term debt, asset retirement obligations and warrants were estimated as of the Effective Date.

~~Natural gas and oil properties.~~ The Company’s principal assets are its natural gas and oil properties, which are accounted for under the successful efforts accounting method. The Company determined the fair value of its natural gas and oil properties based on the discounted future net cash flows expected to be generated from these assets. Discounted cash flow models by operating area were prepared using the estimated future revenues and operating costs for all proved developed properties and undeveloped properties comprising the proved and unproved reserves. Significant inputs associated with the calculation of discounted future net cash flows include estimates of (i) recoverable reserves, (ii) production rates, (iii) future operating and development costs, (iv) future commodity prices escalated by an inflationary rate after five years, adjusted for differentials, and (v) a market-based weighted average cost of capital by operating area. The Company utilized NYMEX strip pricing, adjusted for differentials, to value the reserves. The NYMEX strip pricing inputs used are classified as Level 1 fair value assumptions and all other inputs are classified as Level 3 fair value assumptions. The discount rates utilized were derived using a weighted average cost of capital computation, which included an estimated cost of debt and equity for market participants with similar geographies and asset development type by operating area.

~~Other property and equipment.~~ The fair value of other property and equipment such as buildings, land, computer equipment, and other equipment was determined using the replacement cost method under the cost approach which considers historical acquisition costs for the assets adjusted for inflation, as well as factors in any potential obsolescence based on the current condition of the assets and the ability of those assets to generate cash flow.

~~Long-term debt.~~ A market approach, based upon quotes from major financial institutions, was used to measure the fair value of the $500 million aggregate principal amount of 5.50% Senior Notes due 2026 (the “2026 Notes”)

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

and $500 million aggregate principal amount of 5.875% Senior Notes due 2029 (the “2029 Notes” and, together with the 2026 Notes, the “Notes”). The carrying value of borrowings under our Exit Credit Facility approximated fair value as the terms and interest rates are based on prevailing market rates.

~~Asset retirement obligations.~~ The fair value of the Company’s asset retirement obligations was revalued based upon estimated current reclamation costs for our assets with reclamation obligations, an appropriate long-term inflation adjustment, and our revised credit adjusted risk-free rate. The credit adjusted risk-free rate was based on an evaluation of an interest rate that equates to a risk-free interest rate adjusted for the effect of our credit standing.

~~Warrants.~~ The fair values of the Warrants issued upon the Effective Date were estimated using a Black-Scholes model, a commonly used option-pricing model. The Black-Scholes model was used to estimate the fair value of the warrants with an implied stock price of $20.52; initial exercise price per share of $27.63, $32.13 and $36.18 for Class A, Class B and Class C Warrants, respectively; expected volatility of 58% estimated using volatilities of similar entities; risk-free rate using a 5-year Treasury bond rate; and an expected annual dividend yield which was estimated to be zero.

~~Condensed Consolidated Balance Sheet~~

The following condensed consolidated balance sheet is as of February 9, 2021. This condensed consolidated balance sheet includes adjustments that reflect the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”) as of the Effective Date. The explanatory notes following the table below provide further details on the adjustments, including the assumptions and methods used to determine fair value for its assets, liabilities and warrants.

Predecessor Reorganization Adjustments Fresh Start Adjustments Successor
Assets
Current assets:
Cash and cash equivalents $ 243 $ (203) (a) $ — $ 40
Restricted cash — 86 (b) — 86
Accounts receivable, net 861 (18) (c) — 843
Short-term derivative assets — — — —
Other current assets 66 (5) (d) — 61
Total current assets 1,170 (140) — 1,030
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties 25,794 — (21,108) (o) 4,686
Unproved properties 1,546 — (1,063) (o) 483
Other property and equipment 1,755 — (1,256) (o) 499
Total property and equipment 29,095 — (23,427) (o) 5,668
Less: accumulated depreciation, depletion and amortization (23,877) — 23,877 (o) —
Property and equipment held for sale, net 9 — (7) (o) 2
Total property and equipment, net 5,227 — 443 (o) 5,670
Other long-term assets 198 — (84) (p) 114
Total assets $ 6,595 $ (140) $ 359 $ 6,814

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Predecessor Reorganization Adjustments Fresh Start Adjustments Successor
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable $ 391 $ 24 (e) $ — $ 415
Current maturities of long-term debt, net 1,929 (1,929) (f) — —
Accrued interest 4 (4) (g) — —
Short-term derivative liabilities 398 — — 398
Other current liabilities 645 124 (h) — 769
Total current liabilities 3,367 (1,785) — 1,582
Long-term debt, net — 1,261 (i) 52 (q) 1,313
Long-term derivative liabilities 90 — — 90
Asset retirement obligations, net of current portion 139 — 97 (r) 236
Other long-term liabilities 5 2 (j) — 7
Liabilities subject to compromise 9,574 (9,574) (k) — —
Total liabilities 13,175 (10,096) 149 3,228
Contingencies and commitments (Note 7)
Stockholders’ equity (deficit):
Predecessor preferred stock 1,631 (1,631) (l) — —
Predecessor common stock — — — —
Predecessor additional paid-in capital 16,940 (16,940) (l) — —
Successor common stock — 1 (m) — 1
Successor additional paid-in-capital — 3,585 (m) — 3,585
Accumulated other comprehensive income 48 — (48) (s) —
Accumulated deficit (25,199) 24,941 (n) 258 (t) —
Total stockholders’ equity (deficit) (6,580) 9,956 210 3,586
Total liabilities and stockholders’ equity (deficit) $ 6,595 $ (140) $ 359 $ 6,814

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Reorganization Adjustments~~

~~(a)The table below reflects the sources and uses of cash on the Effective Date from implementation of the Plan:~~


~~Sources:~~
~~Proceeds from issuance of the Notes~~	$	~~1,000~~
~~Proceeds from Rights Offering~~	~~600~~
~~Proceeds from refunds of interest deposit for the Notes~~	5
~~Total sources of cash~~	$	~~1,605~~
~~Uses:~~
~~Payment of roll-up of DIP Facility balance~~	$	~~(1,179)~~
~~Payment of Exit Credit Facility - Tranche A Loan~~	~~(479)~~
~~Transfers to restricted cash for professional fee reserve~~	~~(76)~~
~~Transfers to restricted cash for convenience claim distribution reserve~~	~~(10)~~
~~Payment of professional fees~~	~~(31)~~
~~Payment of DIP Facility interest and fees~~	~~(12)~~
~~Payment of FLLO alternative transaction fee~~	~~(12)~~
~~Payment of the Notes fees funded out of escrow~~	~~(8)~~
~~Payment of RBL interest and fees~~	~~(1)~~
~~Total uses of cash~~	$	~~(1,808)~~
~~Net cash used~~	$	~~(203)~~

~~(b)Represents the transfer of funds to a restricted cash account for purposes of funding the professional fee reserve and the convenience claim distribution reserve.~~

~~(c)Reflects the removal of an insurance receivable associated with a discharged legal liability.~~

~~(d)Reflects the collection of an interest deposit for the senior unsecured notes.~~

~~(e)Changes in accounts payable include the following:~~


~~Accrual of professional service provider success fees~~	$	38
~~Accrual of convenience claim distribution reserve~~	10
~~Accrual of professional service provider fees~~	5
~~Reinstatement of accounts payable from liabilities subject to compromise~~	2
~~Payment of professional fees~~	~~(31)~~
~~Net impact to accounts payable~~	$	24

~~(f)Reflects payment of the pre-petition credit facility for $1.179 billion and transfer of the Tranche A and Tranche B Loans to long-term debt for $750 million.~~

~~(g)Reflect payments of accrued interest and fees on the DIP Facility.~~

~~(h)Changes in other current liabilities include the following:~~


~~Reinstatement of other current liabilities from liabilities subject to compromise~~	$	~~191~~
~~Accrual of the Notes fees~~	2
~~Settlement of Put Option Premium through issuance of Successor Common Stock~~	~~(60)~~
~~Payment of DIP Facility fees~~	~~(9)~~
~~Net impact to other current liabilities~~	$	~~124~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~(i)Changes in long-term debt include the following:~~


~~Issuance of the Notes~~	$	~~1,000~~
~~Issuance of Tranche A and Tranche B Loans~~	~~750~~
~~Payments on Tranche A Loans~~	~~(479)~~
~~Debt issuance costs for the Notes~~	~~(10)~~
~~Net impact to long-term debt, net~~	$	~~1,261~~

~~(j)~~ ~~Reflects reinstatement of a long-term lease liability.~~

~~(k)~~ ~~On the Effective Date, liabilities subject to compromise were settled in accordance with the Plan as follows:~~


~~Liabilities subject to compromise pre-emergence~~	$	~~9,574~~
~~To be reinstated on the Effective Date:~~
~~Accounts payable~~	$	~~(2)~~
~~Other current liabilities~~	~~(191)~~
~~Other long-term liabilities~~	~~(2)~~
~~Total liabilities reinstated~~	$	~~(195)~~
~~Consideration provided to settle amounts per the Plan or Reorganization:~~
~~Issuance of Successor common stock associated with the Rights Offering and Backstop Commitment and settlement of the Put Option Premium~~	$	~~(2,311)~~
~~Proceeds from issuance of Successor common stock associated with the Rights Offering and Backstop Commitment~~	~~600~~
~~Issuance of Successor common stock to FLLO Term Loan holders, incremental to the Rights Offering and Backstop Commitment~~	~~(783)~~
~~Issuance of Successor common stock to Second Lien Note holders, incremental to the Rights Offering and Backstop Commitment~~	~~(124)~~
~~Issuance of Successor common stock to unsecured note holders~~	~~(45)~~
~~Issuance of Successor common stock to general unsecured claims~~	~~(8)~~
~~Fair value of Class A Warrants~~	~~(93)~~
~~Fair value of Class B Warrants~~	~~(94)~~
~~Fair value of Class C Warrants~~	~~(68)~~
~~Proceeds to holders of general unsecured claims~~	~~(10)~~
~~Total consideration provided to settle amounts per the Plan~~	$	~~(2,936)~~
~~Gain on settlement of liabilities subject to compromise~~	$	~~6,443~~

~~(l)Pursuant to the Plan, as of the Effective Date, all equity interests in Predecessor, including Predecessor’s common and preferred stock, were canceled without any distribution.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~(m)~~Reflects the Successor equity including the issuance of 97,907,081 shares of New Common Stock, 11,111,111 shares of Class A Warrants, 12,345,679 shares of Class B Warrants and 9,768,527 shares of Class C Warrants pursuant to the Plan.


~~Issuance of Successor equity associated with the Rights Offering and Backstop Commitment~~	$	~~2,371~~
~~Issuance of Successor equity to holders of the FLLO Term Loan, incremental to the Rights Offering and Backstop Commitment~~	~~783~~
~~Issuance of Successor equity to holders of the Second Lien Notes, incremental to the Rights Offering and Backstop Commitment~~	~~124~~
~~Issuance of Successor equity to holders of the unsecured senior notes~~	45
~~Issuance of Successor equity to holders of allowed general unsecured claims~~	8
~~Fair value of Class A warrants~~	93
~~Fair value of Class B warrants~~	94
~~Fair value of Class C warrants~~	68
~~Total change in Successor common stock and additional paid-in capital~~	~~3,586~~
~~Less: par value of Successor common stock~~	~~(1)~~
~~Change in Successor additional paid-in capital~~	$	~~3,585~~

~~(n)~~ ~~Reflects the cumulative net impact of the effects on accumulated deficit as follows:~~


~~Gain on settlement of liabilities subject to compromise~~	$	~~6,443~~
~~Accrual of professional service provider success fees~~	~~(38)~~
~~Accrual of professional service provider fees~~	~~(5)~~
~~Surrender of other receivable~~	~~(18)~~
~~Payment of FLLO alternative transaction fee~~	~~(12)~~
~~Total reorganization items, net~~	~~6,370~~
~~Cancellation of predecessor equity~~	~~18,571~~
~~Net impact on accumulated deficit~~	$	~~24,941~~

~~Fresh Start Adjustments~~

~~(o)~~Reflects fair value adjustments to our (i) proved natural gas and oil properties, (ii) unproved properties, (iii) other property and equipment and (iv) property and equipment held for sale, and the elimination of accumulated depletion, depreciation and amortization.

~~(p)Reflects the fair value adjustment to record historical contracts at their fair values.~~

~~(q)Reflects the fair value adjustments to the 2026 Notes and 2029 Notes for $22 million and $30 million, respectively.~~

~~(r)Reflects the adjustment to our asset retirement obligations using assumptions as of the Effective Date, including an inflation factor of 2% and an average credit-adjusted risk-free rate of 5.18%.~~

~~(s)~~Reflects the fair value adjustment to eliminate the accumulated other comprehensive income of $9 million related to hedging settlements offset by the elimination of $57 million of income tax effects which has resulted in the recording of an income tax benefit of $57 million. See ~~Note 10~~ ~~for a discussion of income taxes.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~(t)Reflects the net cumulative impact of the fresh start adjustments on accumulated deficit as follows:~~


~~Fresh start adjustments to property and equipment~~	$	~~443~~
~~Fresh start adjustments to other long-term assets~~	~~(84)~~
~~Fresh start adjustments to long-term debt~~	~~(52)~~
~~Fresh start adjustments to long-term asset retirement obligations~~	~~(97)~~
~~Fresh start adjustments to accumulated other comprehensive income~~	~~(9)~~
~~Total fresh start adjustments impacting reorganizations items, net~~	~~201~~
~~Income tax effects on accumulated other comprehensive income~~	57
~~Net impact to accumulated deficit~~	$	~~258~~

~~Reorganization Items, Net~~

We incurred significant expenses, gains and losses associated with the reorganization, primarily the gain on settlement of liabilities subject to compromise, write-off of unamortized debt issuance costs and related unamortized premiums and discounts, debt and equity financing fees, provision for allowed claims and legal and professional fees incurred subsequent to the Chapter 11 filings for the restructuring process. The accrual for allowed claims primarily represents damages from contract rejections and settlements attributable to the midstream savings requirement as stipulated in the Plan. While the claims reconciliation process is ongoing, we do not believe any existing unresolved claims will result in a material adjustment to the financial statements. The amount of these items, which were incurred in reorganization items, net within our accompanying unaudited condensed consolidated statements of operations, have significantly affected our statements of operations.

We did not have any reorganization items, net for the 2022 Successor Quarter, the 2022 Successor Period, the 2021 Successor Quarter or the 2021 Successor Period. The following table summarizes the components in reorganization items, net included in our unaudited condensed consolidated statements of operations:


	~~Predecessor~~
	~~Period from January 1, 2021 through February 9, 2021~~
~~Gains on the settlement of liabilities subject to compromise~~	$	~~6,443~~
~~Accrual for allowed claims~~	~~(1,002)~~
~~Gain on fresh start adjustments~~	~~201~~
~~Gain from release of commitment liabilities~~	55
~~Professional service provider fees and other~~	~~(60)~~
~~Success fees for professional service providers~~	~~(38)~~
~~Surrender of other receivable~~	~~(18)~~
~~FLLO alternative transaction fee~~	~~(12)~~
~~Total reorganization items, net~~	$	~~5,569~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


4.2.			Natural Gas and Oil Property Transactions

Marcellus Acquisition

On March 9, 2022, we ~~completed~~closed the Marcellus Acquisition for total consideration of approximately $2.77 billion, consisting of approximately $2 billion in cash, including working capital adjustments and approximately 9.4 million shares of our common stock, to acquire high quality producing assets and a deep inventory of premium drilling locations in the prolific Marcellus Shale in Northeast Pennsylvania. The Marcellus Acquisition was indebtedness free, effective as of January 1, 2022, and was subject to customary purchase price adjustments. We funded the cash portion of the consideration with cash on hand and $914 million of borrowings under the Company’s Exit Credit Facility. ~~See~~During the ~~Note 6~~first three months of 2022, we recognized approximately $23 million of costs related to our Marcellus Acquisition, which included consulting fees, financial advisory fees, legal fees and change in control expense in accordance with Chief’s existing employment agreements. These acquisition-related costs are included within other operating expense, net within our condensed consolidated statements of operations. ~~for further discussion of debt.~~

~~Preliminary~~ Marcellus Acquisition Purchase Price Allocation

We have accounted for the Marcellus Acquisition as a business combination, using the acquisition method. The following table represents the ~~preliminary~~ allocation of the total purchase price to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, valuation of pre-acquisition contingencies and final appraisals of assets acquired and liabilities assumed. We ~~expect to complete the purchase price allocation during the 12-month period following~~finalized the acquisition ~~date,~~accounting for this transaction during which time the value of the assets and liabilities may be revised as appropriate. During the 2022 Successor Quarter, we recognized measurement period adjustments of $39 million to both restricted cash and current liabilities.

2022.


	~~Preliminary~~ Purchase Price Allocation
Consideration:
Cash	$	2,000
Fair value of Chesapeake’s common stock issued in the merger(a)	764
Working capital adjustments	6
Total consideration	$	2,770

Fair Value of Liabilities Assumed:
Current liabilities	$	459


Other long-term liabilities	129
Amounts attributable to liabilities assumed	$	588

Fair Value of Assets Acquired:
Cash, cash equivalents and restricted cash	$	39
Other current assets	218
Proved natural gas and oil properties	2,309
Unproved properties	788
Other property and equipment	1
Other long-term assets	3
Amounts attributable to assets acquired	$	3,358

Total identifiable net assets	$	2,770

(a)The fair value of our common stock is a Level 1 input, as our stock price is a quoted price in an active market as of the acquisition date.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Natural Gas and Oil Properties

For the Marcellus Acquisition, we applied applicable guidance, under which an acquirer should recognize the identifiable assets acquired and the liabilities assumed on the acquisition date at fair value. The fair value estimate of proved and unproved natural gas and oil properties as of the acquisition date was based on estimated natural gas and oil reserves and related future net cash flows discounted using a weighted average cost of capital, including estimates of future production rates and future development costs. We utilized NYMEX strip pricing adjusted for inflation to value the reserves. We then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the natural gas and oil properties acquired. Additionally, the fair value estimate of proved and unproved natural gas and oil properties was corroborated by utilizing a market approach, which considers recent comparable transactions for similar assets.

The inputs used to value natural gas and oil properties require significant judgment and estimates made by management and represent Level 3 inputs.

Marcellus Acquisition Revenues and Expenses Subsequent to Acquisition

WeFor the period from March 10, 2022 to March 31, 2022, we included in our condensed consolidated statements of operations natural gas, oil and NGL revenues of ~~$959 million, marketing revenues of $20~~$59 million, net losses on natural gas and oil derivatives of ~~$542~~$200 million, and direct operating expenses of ~~$329~~$30 million, including depreciation, depletion and amortization related to the Marcellus Acquisition ~~businesses for the period from March 10, 2022 (the date immediately following the completion of the Marcellus Acquisition) through September 30, 2022.~~businesses.

~~Vine Acquisition~~

On November 1, 2021, we acquired Vine, an energy company focused on the development of natural gas properties in the over-pressured stacked Haynesville and Mid-Bossier shale plays in Northwest Louisiana pursuant to a definitive agreement with Vine dated August 10, 2021, for total consideration of approximately $1.5 billion, consisting of approximately 18.7 million shares of our common stock and $90 million in cash. In conjunction with the Vine Acquisition, Vine’s Second Lien Term Loan was repaid and terminated for $163 million, inclusive of a $13 million make whole premium with cash on hand due to the agreement containing a change in control provision making the term loan callable upon closing. Vine’s reserve based loan facility, which had no borrowings as of November 1, 2021, was terminated at the time of the acquisition. Additionally, Vine’s 6.75% Senior Notes, with a principal amount of $950 million, were assumed by the Company. See ~~Note 6~~ ~~for additional discussion of the assumed debt. We funded the cash portion of the consideration with cash on hand.~~

~~Vine Purchase Price Allocation~~

We have accounted for the Vine Acquisition as a business combination, using the acquisition method. The following table represents the allocation of the total purchase price of Vine to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date. We finalized the acquisition accounting for this transaction as of September 30, 2022, which resulted in measurement period adjustments of $19 million to both deferred tax liabilities and unproved properties. See ~~Note 10~~ ~~for additional information regarding the change to deferred tax liabilities.~~

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


	~~Purchase Price Allocation~~
~~Consideration:~~
~~Cash~~	$	~~253~~
~~Fair value of Chesapeake’s common stock issued in the merger~~	~~1,231~~
~~Restricted stock unit replacement awards~~	6
~~Total consideration~~	$	~~1,490~~

~~Fair Value of Liabilities Assumed:~~
~~Current liabilities~~	$	~~765~~
~~Long-term debt~~	~~1,021~~
~~Deferred tax liabilities~~	30
~~Other long-term liabilities~~	~~272~~
~~Amounts attributable to liabilities assumed~~	$	~~2,088~~

~~Fair Value of Assets Acquired:~~
~~Cash and cash equivalents~~	$	59
~~Other current assets~~	~~206~~
~~Proved natural gas and oil properties~~	~~2,181~~
~~Unproved properties~~	~~1,099~~
~~Other property and equipment~~	1
~~Other long-term assets~~	32
~~Amounts attributable to assets acquired~~	$	~~3,578~~

~~Total identifiable net assets~~	$	~~1,490~~

~~Natural Gas and Oil Properties~~

For the Vine Acquisition, we applied applicable guidance, under which an acquirer should recognize the identifiable assets acquired and the liabilities assumed on the acquisition date at fair value. The fair value estimate of proved and unproved natural gas and oil properties as of the acquisition date was based on estimated natural gas and oil reserves and related future net cash flows discounted using a weighted average cost of capital, including estimates of future production rates and future development costs. We utilized NYMEX strip pricing adjusted for inflation to value the reserves. We then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the natural gas and oil properties acquired. Additionally, the fair value estimate of proved and unproved natural gas and oil properties was corroborated by utilizing a market approach, which considers recent comparable transactions for similar assets.

~~The inputs used to value natural gas and oil properties require significant judgment and estimates made by management and represent Level 3 inputs.~~

~~Financial Instruments and Other~~

~~The fair value measurements of long-term debt were estimated based on a market approach using estimates provided by an independent investment data services firm and represent Level 2 inputs.~~

~~Restricted Stock Unit Replacement Awards~~

Included in consideration for the Vine Acquisition is approximately $6 million related to pre-combination service recognized on Vine’s restricted stock unit (“RSU”) awards. For RSUs that were accelerated or transitioned at the time of the merger, we recognized expense for the portion of the award that was accelerated and included in consideration the portion of the award related to pre-combination service.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Vine Revenues and Expenses Subsequent to Acquisition~~

We included in our condensed consolidated statements of operations natural gas, oil and NGL revenues of $1,480 million, net losses on natural gas and oil derivatives of $846 million, direct operating expenses of $680 million, including depreciation, depletion and amortization, and other expense of $30 million, related to the Vine business for the nine months ended September 30, 2022.

~~Combined~~ Pro Forma Financial Information

As the ~~Vine~~Marcellus Acquisition closed on ~~November 1, 2021,~~March 9, 2022, all activity in ~~2022~~2023 is included in Chesapeake’s condensed consolidated statements of operations for the ~~2022 Successor Quarter and the 2022 Successor Period.~~first three months of 2023. The following unaudited pro forma financial information is based on our historical ~~condensed~~ consolidated financial statements adjusted to reflect as if the Marcellus Acquisition ~~and Vine Acquisition had each~~ occurred on ~~February 10, 2021, the date Chesapeake emerged from bankruptcy. See~~ ~~Note 2~~ ~~for additional information on the bankruptcy.~~January 1, 2022. The information below reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the estimated tax impact of the pro forma adjustments.

~~Successor~~

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022

Revenues

~~7,617~~935

Net ~~income~~loss available to common stockholders

~~1,252~~ (868)

~~Earnings~~Loss per common share:

Basic

~~10.00~~ (6.83)

Diluted

~~8.50~~ (6.83)

Successor
Three Months Ended September 30, 2021 Period from February 10, 2021 through
September 30, 2021
Revenues $ 510 $ 2,254
Net loss available to common stockholders $ (1,159) $ (1,732)
Loss per common share:
Basic $ (9.15) $ (13.70)
Diluted $ (9.15) $ (13.70)

Eagle Ford Divestitures

In January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for approximately $1.425 billion, subject to customary closing adjustments. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of $60 million per year for the next three years, with $45 million to be paid in the fourth year following the transaction close date. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $55 million of the deferred consideration is reflected within other current assets and $125 million is reflected within other long-term assets on the condensed consolidated balance sheets as of March 31, 2023. The divestiture, which closed on March 20, 2023, resulted in a gain of approximately $335 million based on the difference between the carrying value of the assets and consideration received. As of December 31, 2022, approximately $811 million of property and equipment, net and $8 million of other assets were classified as assets held for sale on the condensed consolidated balance sheets. Additionally, approximately $65 million of derivative liabilities, $57 million of asset retirement obligations and $22 million of other liabilities were classified as held for sale and included within other current liabilities on the condensed consolidated balance sheets as of December 31, 2022.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

In February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for approximately $1.4 billion, subject to customary closing adjustments. This transaction closed on April 28, 2023 and we received proceeds of approximately $1.055 billion. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of approximately $56 million per year for the next four years. In February 2023, we ceased depreciation on the assets associated with the sale. We classified approximately $814 million of property and equipment, net, $22 million of right of use lease assets, and $26 million of other assets as held for sale included within current assets held for sale on the condensed consolidated balance sheets as of March 31, 2023. Additionally, approximately $53 million of asset retirement obligations liabilities, $22 million of lease liabilities and $16 million of other liabilities were classified as held for sale and included within other current liabilities on the condensed consolidated balance sheets as of March 31, 2023.

Powder River Divestiture

OnIn January ~~24,~~ 2022, Chesapeake signed an agreement to sell its Powder River Basin assets in Wyoming to Continental Resources, Inc. ~~(NYSE: CLR)~~ for approximately $450 million, subject to customary closing adjustments. The divestiture, which closed on March 25, 2022, resulted in the recognition of a gain of approximately ~~$298~~$293 million, which included ~~$18~~$13 million of post-close adjustments, based on the difference between the carrying value of the assets and the cash received.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


5.3.			Earnings Per Share

Basic earnings (loss) per common share is computed by dividing the net income (loss) ~~attributable~~available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is calculated in the same manner but includes the impact of potentially dilutive securities. Potentially dilutive securities ~~during the Successor Periods below consist~~consists of issuable shares related to warrants, unvested ~~RSUs,~~restricted stock units (“RSUs”), and unvested performance share units (“PSUs”) and during the Predecessor Period have historically consisted of unvested RSUs, contingently issuable shares related to preferred stock and convertible senior notes unless their effect was antidilutive..

The reconciliations between basic and diluted earnings (loss) per share are as follows:

Successor Predecessor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Numerator
Net income (loss), basic and diluted $ 883 $ (345) $ 1,356 $ (489) $ 5,383
Denominator (in thousands)
Weighted average common shares outstanding, basic 121,150 98,221 122,924 98,040 9,781
Effect of potentially dilutive securities
Preferred stock — — — — 290
Warrants 22,794 — 21,692 — —
Restricted stock units 396 — 368 — —
Performance share units 50 — 47 — —
Weighted average common shares outstanding, diluted 144,390 98,221 145,031 98,040 10,071
Earnings (loss) per common share:
Basic $ 7.29 $ (3.51) $ 11.03 $ (4.99) $ 550.35
Diluted $ 6.12 $ (3.51) $ 9.35 $ (4.99) $ 534.51

~~Successor~~


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Numerator
Net income (loss) available to common stockholders, basic and diluted	$	1,389	$	(764)

Denominator (in thousands)
Weighted average common shares outstanding, basic	134,742		120,805
Effect of potentially dilutive securities
Warrants	9,560		—
Restricted stock units	380		—
Performance share units	49		—
Weighted average common shares outstanding, diluted	144,731		120,805

Earnings (loss) per common share:
Basic	$	10.31	$	(6.32)
Diluted	$	9.60	$	(6.32)

During the ~~2022 Successor Quarter and 2022 Successor Period,~~first three months of 2023, the diluted earnings per share calculation excludes the effect of ~~1,191,877~~789,458 reserved shares of common stock and ~~2,248,726~~1,489,337 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met for such shares to be considered dilutive ~~shares during the 2022 Successor Quarter and 2022 Successor Period.~~

During the 2021 Successor Quarter and the 2021 Successor Period, the diluted loss per share calculation excludes the effect of 1,767,203 reserved shares of common stock and 3,334,277 reserved Class C warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met to be considered dilutive shares during the 2021 Successor Quarter and the 2021 Successor Period. Additionally, as both the 2021 Successor Quarter and the 2021 Successor Period had a net loss, the diluted loss per share calculation excludes the antidilutive effect, calculated using the treasury stock method, ofshares.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~14,774,330~~During the first three months of 2022, the diluted loss per share calculation excludes the effect of 1,228,828 reserved shares of common stock and ~~12,851,577~~2,318,446 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met for such shares to be considered dilutive shares. Additionally, as the first three months of 2022 had a net loss, the diluted loss per share calculation excludes the antidilutive effect, calculated using the treasury stock method, of 19,621,344 issuable shares related to warrants, ~~247,220 and 135,350~~457,680 shares of restricted stock units, and ~~5,479 and 3,508~~47,458 shares related to performance share ~~units, respectively.~~

~~Predecessor~~

We had the option to settle conversions of the 5.50% convertible senior notes due 2026 with cash, shares or common stock or any combination thereof. As the price of our common stock was below the conversion threshold level for any time during the conversion period, there was no impact to diluted earnings per share.units.


6.4.			Debt

Our long-term debt consisted of the following as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		Successor									March 31, 2023				December 31, 2022
		September 30, 2022				December 31, 2021					Carrying Amount		Fair Value(a)		Carrying Amount		Fair Value(a)
		Carrying Amount		Fair Value(a)		Carrying Amount		Fair Value(a)
Exit Credit Facility - Tranche A Loans		$	450	$	450	$	—	$	—
Exit Credit Facility - Tranche B Loans		221		221		221		221
New Credit Facility										New Credit Facility	$	—	$	—	$	1,050	$	1,050
5.50% senior notes due 2026	5.50% senior notes due 2026	500		479		500		526		5.50% senior notes due 2026	500		492		500		485
5.875% senior notes due 2029	5.875% senior notes due 2029	500		462		500		535		5.875% senior notes due 2029	500		476		500		475
6.75% senior notes due 2029	6.75% senior notes due 2029	950		906		950		1,031		6.75% senior notes due 2029	950		948		950		917
Premiums on senior notes	Premiums on senior notes	104		—		116		—		Premiums on senior notes	97		—		100		—
Debt issuance costs	Debt issuance costs	(8)		—		(9)		—		Debt issuance costs	(7)		—		(7)		—

Total long-term debt, net	Total long-term debt, net	$	2,717	$	2,518	$	2,278	$	2,313	Total long-term debt, net	$	2,040	$	1,916	$	3,093	$	2,927

(a)The carrying value of borrowings under our ~~Exit~~New Credit Facility approximate fair value as the interest rates are based on prevailing market rates; therefore, they are a Level 1 fair value measurement. For all other debt, a market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value.

~~Successor Debt~~

Our post-emergence exit financing consists of the Exit Credit Facility, which includes a reserve-based revolving credit facility and a non-revolving loan facility, the Notes and the Vine Notes (as defined below).

~~Exit~~New Credit Facility. ~~On the Effective Date, pursuant to the terms of the Plan, the Company, as borrower,~~In December 2022, we entered into a senior secured reserve-based credit agreement (the ~~“Credit~~“New Credit Agreement”) with the lenders and issuing banks party thereto (the “Lenders”), and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacity, the “Administrative Agent”), providing for a reserve-based credit facility (the “New Credit Facility”) with an initial borrowing base of ~~$2.5~~$3.5 billion and aggregate commitments of $2.0 billion. The ~~borrowing base will be redetermined semiannually on or around May 1 and November 1 of each year. The aggregate initial elected commitments of the lenders under the Exit~~New Credit Facility ~~were $1.75 billion of Tranche A Loans and $221 million of fully funded Tranche B Loans.~~

matures in December 2027. The ~~Exit~~New Credit Facility provides for a $200 million sublimit ~~of the aggregate commitments that are~~ available for the issuance of letters of ~~credit. The Exit~~credit and a $50 million sublimit available for swingline loans.

Initially, the obligations under the New Credit Facility ~~bears interest at~~are guaranteed by certain of Chesapeake’s subsidiaries (the “Guarantors”), and the ~~ABR (alternate base rate) or LIBOR, at our election, plus an applicable margin (ranging from 2.25–3.25% per annum for ABR loans~~New Credit Facility is secured by substantially all of the assets owned by the Company and ~~3.25–4.25% per annum for LIBOR loans, subject~~the Guarantors (subject to ~~a 1.00% LIBOR floor)~~customary exceptions), ~~depending~~including mortgages on not less than 85% of the ~~percentage~~total PV-9 of the borrowing base ~~then being utilized.~~properties evaluated in the most recent reserve report (where PV-9 is the net present value, discounted at 9% per annum, of the estimated future net revenues). The ~~Tranche A Loans mature three years after the Effective Date~~borrowing base will be redetermined semi-annually in or around April and the Tranche B Loans mature four years after the Effective Date. The Tranche B Loans can be repaid if no Tranche A Loans are outstanding. Our borrowings under the Exit Credit Facility bore interest at an average interest rateOctober of ~~6.0% during the 2022 Successor Period.~~

~~The Credit Agreement contains financial covenants that require~~each year, with one interim “wildcard” redetermination available to each of the Company and the ~~guarantors party thereto, on a consolidated basis,~~Administrative Agent, the latter at the direction of the Required Lenders (as defined in the New Credit Agreement), between scheduled redeterminations. Our borrowing base was reaffirmed in April 2023, and the next scheduled redetermination will be in or around October 2023. The New Credit Agreement contains restrictive covenants that limit Chesapeake and its subsidiaries’ ability to, among other things but subject to exceptions customary to reserve-based credit facilities: (i) incur additional indebtedness, (ii) make investments, (iii) enter into mergers; (iv) make or declare dividends; (v) repurchase or redeem certain indebtedness; (vi) enter into certain hedges; (vii) incur liens; (viii) sell assets; and (ix) engage in certain transactions with affiliates. The New Credit Agreement requires Chesapeake to maintain ~~(i)~~compliance with the following financial ratios (“Financial Covenants”): (A) a ~~first lien leverage~~current ratio, which is the ratio of ~~not more than 2.75~~Chesapeake’s and its restricted subsidiaries’ consolidated current assets (including unused commitments under the New Credit Facility but excluding certain non-cash assets) to ~~1:00, (ii) a total leverage ratio~~their consolidated current liabilities (excluding the current portion of ~~not more than 3.50 to 1:00, (iii) a current ratio~~long-term debt and certain non-cash liabilities), of not less than 1.00 to ~~1:00 and (iv) at any time additional secured debt~~1.00; (B) a net leverage ratio, which is ~~outstanding, an asset coverage~~the ratio of ~~not less than 1.50~~total indebtedness (less unrestricted cash up to ~~1:00,~~a specified threshold) to Consolidated EBITDAX (as defined ~~as PV-10 of proved~~in the Credit Agreement) for the

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~~developed producing~~prior four fiscal quarters, of not greater than 3.50 to 1.00 and (C) a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the proved reserves to Chesapeake’s and its restricted subsidiaries’ total ~~secured debt.~~indebtedness of not less than 1.50 to 1.00 (“PV-9 Coverage Ratio”).

Borrowings under the New Credit Agreement may be alternate base rate loans or term SOFR loans, at our election. Interest is payable quarterly for alternate base rate loans and at the end of the applicable interest period for term SOFR loans. Term SOFR loans bear interest at term SOFR plus an applicable rate ranging from 175 to 275 basis points per annum, depending on the percentage of the commitments utilized, plus an additional 10 basis points per annum credit spread adjustment. Alternate base rate loans bear interest at a rate per annum equal to the greatest of: (i) the prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted term SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 75 to 175 basis points per annum, depending on the percentage of the commitments utilized. Chesapeake also pays a commitment fee on unused commitment amounts under the Credit Facility ranging from 37.5 to 50 basis points per annum, depending on the percentage of the commitments utilized.

The New Credit Facility is subject to customary events of default, remedies, and cure rights for credit facilities of this nature.

Borrowings under the New Credit Facility bore interest, inclusive of related fees under the credit agreement, at an average interest rate of 7.4% during the first three months of 2023. The Company has no additional secured debt outstanding as of ~~September 30, 2022.~~

The Credit Agreement also contains customary affirmative and negative covenants, including, among other things, as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments, and other customary covenants.

The Company is required to pay a commitment fee of 0.50% per annum on the average daily unused portion of the current aggregate commitments under the Tranche A Loans. The Company is also required to pay customary letter of credit and fronting fees.

~~Outstanding Senior Notes.~~ On February 2, 2021, Chesapeake Escrow Issuer LLC, then an indirect wholly owned subsidiary of the Company, issued $500 million aggregate principal amount of its 2026 Notes and $500 million aggregate principal amount of its 2029 Notes. The Notes included a $52 million premium to reflect fair value adjustments at the date of emergence.

~~The Notes are guaranteed on a senior unsecured basis by each of the Company’s subsidiaries that guarantee the Exit Credit Facility.~~

~~The Notes were issued pursuant to an indenture, dated as of February 5, 2021, among the Issuer, the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee.~~

~~Interest on the Notes is payable semi-annually, on February 1 and August 1 of each year to holders of record on the immediately preceding January 15 and July 15.~~

~~Vine Senior Notes.~~ As a result of the completion of the Vine Acquisition, the Company and certain of its subsidiaries entered into a supplemental indenture pursuant to which the Company assumed the obligations under Vine’s $950 million aggregate principal amount of 6.75% senior notes due 2029 (the “Vine Notes”) issued under the indenture dated April 7, 2021 with Wilmington Trust, National Association, as Trustee (the “Vine Indenture”). The Vine Notes included a $71 million premium to reflect fair value adjustments at the date of acquisition.

The Company and certain of its subsidiaries have agreed to guarantee such obligations under the Vine Indenture. Additionally, certain subsidiaries of Vine entered into a supplemental indenture to the Company’s existing indenture, dated February 5, 2021 with Deutsche Bank Trust Company Americas as trustee (the “CHK Indenture”), pursuant to which such subsidiaries of Vine have agreed to guarantee obligations under the CHK Indenture.

~~Interest on the Vine Notes is payable semi-annually, on April 15 and October 15 of each year to holders of record on the immediately preceding April 1 and October 1.~~

The Notes and the Vine Notes are the Company’s senior unsecured obligations. Accordingly, they rank (i) equal in right of payment to all existing and future senior unsecured indebtedness, (ii) effectively subordinate in right of payment to all existing and future secured indebtedness, including indebtedness under the Exit Credit Facility, to the extent of the value of the collateral securing such indebtedness, (iii) structurally subordinate in right of payment to all existing and future indebtedness and other liabilities of any future subsidiaries that do not guarantee the Notes and any entity that is not a subsidiary that does not guarantee the Notes and (iv) senior in right of payment to all future subordinated indebtedness. Each guarantee of the Notes by a guarantor is a general, unsecured, senior obligation of such guarantor. Accordingly, the guarantees (i) rank equally in right of payment with all existing and future senior indebtedness of such guarantor (including such guarantor’s guarantee of indebtedness under the Exit Credit Facility), (ii) are subordinated to all existing and future secured indebtedness of such guarantor, including such guarantor’s guarantee of indebtedness under our Exit Credit Facility, to the extent of the value of the collateral of such guarantor securing such secured indebtedness, (iii) are structurally subordinated to all indebtedness and other liabilities of any future subsidiaries of such guarantor that do not guarantee the notes and (iv) rank senior in right of payment to all future subordinated indebtedness of such guarantor.

~~Phase-Out of LIBOR~~

In March ~~2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848). The purpose of ASU 2020-04 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide~~

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migration away from Interbank Offered Rates such as LIBOR, which is expected to be phased out for most U.S. dollar settings on June 30, 2023, to alternative reference rates. ASU 2020-04 applies only to contracts, hedging relationships, debt arrangements and other transactions that reference a benchmark reference rate expected to be discontinued because of reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 and can be applied prospectively to contract modifications through December 31, ~~2022. The adoption of this guidance will not have a material impact on our condensed consolidated financial statements and related disclosures.~~2023.


7.5.			Contingencies and Commitments

Contingencies

~~Chapter 11 Proceedings~~

~~Commencement of the Chapter 11 Cases automatically stayed the proceedings~~Business Operations and actions against us that are referenced below, in addition to actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases. See ~~Note 2~~ ~~for additional information.~~

Litigation and Regulatory Proceedings

We ~~were~~are involved in, ~~a number of litigation~~ and ~~regulatory proceedings as of the Petition Date. Many of these proceedings were~~expect to continue to be involved in, ~~early stages,~~various lawsuits and ~~many of them sought damages~~disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and ~~penalties, the amount of which is indeterminate.~~ contract actions.

Our total accrued liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates, and our final liabilities may ultimately be materially different.

We are involved in, and expect to continue to be involved in, various lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. The majority of the Company’s prepetition legal proceedings were settled during the Chapter 11 Cases or will be resolved in connection with the claims reconciliation process before the Bankruptcy ~~Court.~~Court, together with actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. Any allowed claim related to such ~~prepetition~~ litigation will be treated in accordance with the Plan. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is indeterminate.

Environmental Contingencies

The nature of the natural gas and oil business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property.

We were recently dismissed as a defendant from numerous lawsuits in Oklahoma alleging that we and other companies engaged in activities that have caused earthquakes. The lawsuits sought compensation for injury to real and personal property, diminution of property value, economic losses due to business interruption, interference with the use and enjoyment of property, annoyance and inconvenience, personal injury and emotional distress. In addition, they sought the reimbursement of insurance premiums and the award of punitive damages, attorneys’ fees, costs, expenses and interest. Any allowed claim related to such prepetition litigation will be treated in accordance with the Plan.

Other Matters

Based on management’s current assessment, we are of the opinion that no pending or threatened lawsuit or dispute relating to our business operations is likely to have a material adverse effect on our future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates.

Commitments

Gathering, Processing and Transportation Agreements

We have contractual commitments with midstream service companies and pipeline carriers for future gathering, processing and transportation of natural gas, oil and NGL to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to gathering, processing and transportation agreements are not recorded as obligations in the accompanying condensed consolidated balance sheets; however, they are reflected in our estimates of proved reserves.

The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:


		Successor			March 31, 2023
		September 30, 2022
Remainder of 2022		$	151
2023		546
Remainder of 2023				Remainder of 2023	$	431
2024	2024	514		2024	558
2025	2025	444		2025	483
2026	2026	403		2026	444
2027-2036		2,094
2027				2027	409
2028-2036				2028-2036	1,835
Total	Total	$	4,152	Total	$	4,160

In addition, we have ~~entered into~~ long-term agreements for certain natural gas gathering and related services within specified acreage dedication areas in exchange for cost-of-service based fees redetermined annually, or tiered fees based on volumes delivered relative to scheduled volumes. Future gathering fees may vary with the applicable agreement.

Other Commitments

As part of our normal course of business, we enter into various agreements providing, or otherwise arranging for, financial or performance assurances to third parties on behalf of our wholly owned guarantor subsidiaries. These agreements may include future payment obligations or commitments regarding operational performance that effectively guarantee our subsidiaries’ future performance.

In connection with acquisitions and divestitures, our purchase and sale agreements generally provide indemnification to the counterparty for liabilities incurred as a result of a breach of a representation or warranty by the indemnifying party and/or other specified matters. These indemnifications generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or cannot be quantified at the time of entering into or consummating a particular transaction. For divestitures of natural gas and oil properties, our purchase and sale agreements may require the return of a portion of the proceeds we receive as a result of uncured title or environmental defects.

While executing our strategic priorities, we have incurred certain cash charges, including contract termination charges, financing extinguishment costs and charges for unused natural gas transportation and gathering capacity.

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6.			Other Current Liabilities

Other current liabilities as of March 31, 2023 and December 31, 2022 are detailed below:


	March 31, 2023		December 31, 2022
Revenues and royalties due others	$	538	$	734
Accrued drilling and production costs	250		253
Accrued hedging costs	4		109
Accrued compensation and benefits	34		72
Other accrued taxes	70		84
Operating leases	85		86
Joint interest prepayments received	37		34
Current liabilities held for sale(a)	91		144
Other	93		111
Total other current liabilities	$	1,202	$	1,627

(a)Current liabilities held for sale are associated with the divestiture transactions related to our Eagle Ford assets. See Note 2 for additional information.


7.			Revenue

The following table shows revenue disaggregated by operating area and product type:


	Three Months Ended March 31, 2023
	Natural Gas		Oil		NGL		Total
Marcellus	$	617	$	—	$	—	$	617
Haynesville	402		—		—		402
Eagle Ford	23		373		38		434
Natural gas, oil and NGL revenue	$	1,042	$	373	$	38	$	1,453

Marketing revenue	$	328	$	287	$	37	$	652


	Three Months Ended March 31, 2022
	Natural Gas		Oil		NGL		Total
Marcellus	$	609	$	—	$	—	$	609
Haynesville	652		—		—		652
Eagle Ford	47		450		57		554
Powder River Basin	20		66		13		99
Natural gas, oil and NGL revenue	$	1,328	$	516	$	70	$	1,914

Marketing revenue	$	408	$	395	$	64	$	867

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8.			~~Other Current Liabilities~~

~~Other current liabilities as of September 30, 2022 and December 31, 2021 are detailed below:~~

Successor
September 30, 2022 December 31, 2021
Revenues and royalties due others $ 938 $ 617
Accrued drilling and production costs 324 142
Accrued hedging costs 114 113
Accrued compensation and benefits 74 91
Other accrued taxes 156 86
Operating leases 36 29
Joint interest prepayments received 23 14
Other 119 110
Total other current liabilities $ 1,784 $ 1,202


9.			~~Revenue~~

~~The following table shows revenue disaggregated by operating area and product type:~~

Successor
Three Months Ended September 30, 2022
Natural Gas Oil NGL Total
Marcellus $ 1,324 $ — $ — $ 1,324
Haynesville 1,093 — — 1,093
Eagle Ford 79 437 54 570
Natural gas, oil and NGL revenue $ 2,496 $ 437 $ 54 $ 2,987
Marketing revenue $ 827 $ 328 $ 51 $ 1,206

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Successor
Three Months Ended September 30, 2021
Natural Gas Oil NGL Total
Marcellus $ 383 $ — $ — $ 383
Haynesville 207 — — 207
Eagle Ford 53 379 55 487
Powder River Basin 21 58 14 93
Natural gas, oil and NGL revenue $ 664 $ 437 $ 69 $ 1,170
Marketing revenue $ 240 $ 326 $ 61 $ 627

Successor
Nine Months Ended September 30, 2022
Natural Gas Oil NGL Total
Marcellus $ 3,085 $ — $ — $ 3,085
Haynesville 2,733 — — 2,733
Eagle Ford 211 1,390 173 1,774
Powder River Basin 20 66 13 99
Natural gas, oil and NGL revenue $ 6,049 $ 1,456 $ 186 $ 7,691
Marketing revenue $ 1,872 $ 1,231 $ 193 $ 3,296

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Predecessor
Period from January 1, 2021 through February 9, 2021
Natural Gas Oil NGL Total
Marcellus $ 119 $ — $ — $ 119
Haynesville 53 — — 53
Eagle Ford 17 159 17 193
Powder River Basin 7 20 6 33
Natural gas, oil and NGL revenue $ 196 $ 179 $ 23 $ 398
Marketing revenue $ 78 $ 141 $ 20 $ 239

Accounts Receivable

Our accounts receivable are primarily from purchasers of natural gas, oil and NGL and from exploration and production companies that own interests in properties we operate. This industry concentration could affect our overall exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our counterparties, and we generally require letters of credit or parent guarantees for receivables from parties deemed to have sub-standard credit, unless the credit risk can otherwise be mitigated. We utilize an allowance method in accounting for bad debt based on historical trends in addition to specifically identifying receivables that we believe may be uncollectible.

Accounts receivable as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are detailed below:


		Successor
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Natural gas, oil and NGL sales	Natural gas, oil and NGL sales	$	1,477	$	922	Natural gas, oil and NGL sales	$	592	$	1,171
Joint interest	Joint interest	268		158		Joint interest	260		246
Other	Other	14		38		Other	15		24
Allowance for doubtful accounts	Allowance for doubtful accounts	(2)		(3)		Allowance for doubtful accounts	(3)		(3)
Total accounts receivable, net	Total accounts receivable, net	$	1,757	$	1,115	Total accounts receivable, net	$	864	$	1,438


~~10.~~8.			Income Taxes

We estimate our annual effective tax rate (“AETR”) for continuing operations in recording our interim quarterly income tax provision for the various jurisdictions in which we operate. The tax effects of statutory rate changes, significant unusual or infrequently occurring items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of our estimated AETR as such items are recognized as discrete items in the quarter in which they occur. Our estimated AETR ~~for~~during the first three months of 2023 was 22.5% as a result of projecting current and deferred federal and state income taxes and a partial valuation allowance against our anticipated net deferred asset position at December 31, 2023.

Our estimated AETR during the first three months of 2022 ~~Successor Period is 5.9%~~was 5.7% as a result of projecting current federal and state income taxes and ~~a full valuation allowance against our anticipated net deferred asset position at December 31, 2022.~~

~~Our estimated AETR for the 2021 Successor Period was 2.0% as a result of~~ maintaining a full valuation allowance against our net deferred asset position. ~~The income~~Although we projected a current federal and state tax ~~provision for~~liability, a benefit was recorded during the ~~2021 Predecessor Period was determined based on actual results for~~first three months of 2022 due to the ~~period ended February 9, 2021, including those resulting from fresh start accounting. The effective tax rate for the 2021 Predecessor Period was (1.1%) which resulted from the elimination~~application of the AETR to the book net loss before income ~~tax effects associated with hedging settlements from accumulated other comprehensive income as part~~taxes during the first three months of fresh start accounting. We recorded an income tax benefit of $57 million in the 2021 Predecessor Period for the elimination of such income tax effects. Any changes to our deferred tax assets and liabilities for the 2021 Predecessor Period (whether resulting from Reorganization Adjustments, Fresh Start Adjustments or otherwise) were completely offset with a corresponding adjustment to our valuation allowance which resulted in the low

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2022.

~~effective tax rate. Accordingly, there are no balances shown for deferred tax assets or liabilities in the condensed consolidated balance sheet table shown in~~ ~~Note 3~~.

As of December 31, ~~2021,~~2022, we were in a net deferred tax asset position and anticipate being in a net deferred tax asset position as of December 31, ~~2022.~~2023. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that some of our deferred tax assets will not be realized. As such, a ~~full~~partial valuation allowance was recorded against our net deferred tax asset position for federal and state purposes as of ~~September 30, 2022~~March 31, 2023 and December 31, 2021. A significant piece of objectively verifiable negative evidence evaluated is the cumulative loss incurred throughout the last several quarters. Should future results of operations demonstrate a trend of profitability, additional weight may be placed upon other evidence, such as forecasts of future taxable income. Additionally, future events and new evidence, such as the integration and realization of profit from recently acquired assets, could lead to increased weight being placed upon future forecasts and the conclusion that some or all of the deferred tax assets are more likely than not to be realizable. Therefore, we believe that there is a possibility that some or all of the valuation allowance could be released in the foreseeable future.

Our ability to utilize net operating loss (“NOL”) carryforwards, disallowed business interest carryforwards, tax credits and possibly other tax attributes to reduce future taxable income and federal income tax is subject to various limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The utilization of such attributes may be subject to an annual limitation under Section 382 of the Code should transactions involving our equity result in a cumulative shift of more than 50% in the beneficial ownership of our stock during any three-year testing period (an “Ownership Change”).

As a result of emergence from bankruptcy on February 9, 2021, the Company did experience an Ownership Change. We did not qualify for the exception under Section 382(l)(5) of the Code, and therefore an annual limitation was determined under Section 382(l)(6) of the Code, which is based on the post-emergence value of our equity multiplied by the adjusted federal long-term rate in effect for the month in which the ownership change occurred. The amount of the annual limitation has been computed to be $54 million. The limitation applies to our NOL carryforwards, disallowed business interest carryforwards and general business credits until such attributes expire or are fully utilized. As we believe we were in an overall net unrealized built-in loss position at the Effective Date, the limitation also applies to any recognized built-in losses incurred for a period of five years but only to the extent of the overall net unrealized built-in loss. Recognized built-in losses include a portion of our tax depreciation, depletion, and amortization deductions along with a portion of our realized hedging losses. We incurred sufficient recognized built-in losses during the 2021 tax year such that we have no further restriction on the company’s deductions for such items. Some states impose similar limitations on tax attribute utilization upon experiencing an ownership change.

In Chapter 11 bankruptcy cases, the cancellation of debt income (“CODI”) realized upon emergence from bankruptcy is excludible from taxable income but results in a reduction of tax attributes in accordance with the attribute reduction and ordering rules of Section 108 of the Code. The amount of our CODI was $5 billion, all of which reduced our NOL carryforwards. As a result of the Section 382 limitation, $593 million of federal NOLs remaining after the CODI reduction were estimated to expire before they would become utilizable and, as such, were removed from our deferred tax assets. The states we operate in generally have similar rules for attribute reduction and Section 382 limitation which resulted in the reduction of certain of our state NOL carryforwards.

On November 1, 2021, we completed the acquisition of Vine. For federal income tax purposes, the transaction qualified as a tax-free merger under Section 368 of the Code and, as a result, we acquired carryover tax basis in Vine’s assets and liabilities. In the 2021 Successor Period, we recorded a $49 million net deferred tax liability determined through business combination accounting. Upon the completion of Vine’s tax returns in the 2022 Successor Period, the net deferred tax liability was adjusted to $30 million. As a result of this adjustment to the deferred tax liability, we increased our valuation allowance and recorded $19 million of income tax expense in the 2022 Successor Period.2022.

On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022, ~~(“IRA”),~~ which includes provisions for a 15% corporate alternative minimum tax on book income for companies whose average book income exceeds $1 billion for any three consecutive years preceding the tax year and a 1% excise tax on stock buybacks. These changes are generally in effect for tax years beginning after December 31, 2022. We ~~are in~~do not currently project that we will be subject to the ~~process of evaluating~~alternative minimum tax on book income for the ~~potential~~2023 tax period, and the impact of the ~~IRA.~~1% excise tax was immaterial during the first three months of 2023.

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~~11.~~9.			Equity

~~New Common Stock~~

~~As discussed in~~ ~~Note 2~~, on the Effective Date, we issued an aggregate of 97,907,081 shares of New Common Stock, par value $0.01 per share, to the holders of allowed claims, and 2,092,918 shares of New Common Stock were reserved for future distributions under the Plan. During the 2022 Successor Period, 36,951 reserved shares were issued to resolve allowed General Unsecured Claims.

On November 1, 2021 we completed the Vine Acquisition and issued 18,709,399 shares of New Common Stock. On March 9, 2022, we completed the Marcellus Acquisition and issued 9,442,185 shares of New Common Stock. See further discussion of both acquisitions in ~~Note 4~~.

Dividends

In May 2021, we initiated a new annual dividend on our shares of common stock, expected to be paid quarterly. ~~The following table summarizes our~~During the first three months of 2023 and 2022, we made dividend payments ~~in the 2022 Successor Period.~~

Payment Date Stockholders of Record Date Dividend Payment Rate Per Share
March 22, 2022 March 7, 2022 $ 210 $ 1.7675
June 2, 2022 May 19, 2022 $ 298 $ 2.34
September 1, 2022 August 17, 2022 $ 280 $ 2.32
of $175 million ($1.29 per share) and $210 million ($1.7675 per share), respectively.

On ~~November 1, 2022,~~May 2, 2023, we declared a quarterly dividend payable of ~~$3.16~~$1.18 per share, which will be paid on ~~December 1, 2022~~June 6, 2023 to stockholders of record at the close of business on ~~November 15, 2022.~~May 18, 2023. The dividend consists of a base quarterly dividend in the amount of $0.55 per share and a variable quarterly dividend in the amount of ~~$2.61~~$0.63 per share.

Share Repurchase Program

As of December 2, 2021, the Company was authorized to purchase up to $1$1.0 billion of the Company’s common stock and/or warrants under a share repurchase program. In June 2022, our Board of Directors authorized an expansion of the share repurchase program by $1.0 billion, bringing the total authorized share repurchase amount to $2.0 billion for stock and/or warrants. The share repurchase program will expire on December 31, 2023.

In March 2022, we commenced our share repurchase ~~program and~~program. During the first three months of 2023, we repurchased 0.8 million shares of common stock for an aggregate price of $60 million, inclusive of shares for which cash settlement occurred in early April. During the first three months of 2022, we repurchased 1 million shares of common stock for an aggregate price of $83 million. ~~In June 2022, we~~The repurchased ~~5.8 million~~ shares of common stock for an aggregate price of $515 million, inclusive of shares for which cash settlement occurred in early July. During the 2022 Successor Quarter, we repurchased 0.75 million shares of common stock for an aggregate price of $69 million. The shares of common stock that were repurchased during the 2022 Successor Period were retired and recorded as a reduction to common stock and retained earnings. All share repurchases made after January 1, 2023, are subject to a 1% excise tax on share repurchases, as enacted under the Inflation Reduction Act of 2022. We are able to net this 1% excise tax on share repurchases against the issuance of shares of our common stock. The impact of this 1% excise tax was immaterial during the first three months of 2023.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Warrants

Class A Warrants Class B Warrants
Class C Warrants(a)
Outstanding as of December 31, 2021 10,856,852 12,313,273 11,388,371
Converted into New Common Stock(b)
(1,036,606) (22,392) (13,845)
Outstanding as of March 31, 2022 9,820,246 12,290,881 11,374,526
Converted into New Common Stock(b)
(68,300) (111) (161,849)
Issued for General Unsecured Claims — — 69,720
Outstanding as of June 30, 2022 9,751,946 12,290,770 11,282,397
Converted into New Common Stock(b)
(500,450) (31) (97,403)
Outstanding as of September 30, 2022 9,251,496 12,290,739 11,184,994


	Class A Warrants	Class B Warrants	Class C Warrants(a)
Outstanding as of December 31, 2022	4,495,004	4,404,564	4,006,229
Converted into New Common Stock(b)	(3,000)	(1,000)	(170)

Outstanding as of March 31, 2023	4,492,004	4,403,564	4,006,059

_________________________________________

(a)As of ~~September 30, 2022,~~March 31, 2023, we had ~~2,248,726~~1,489,337 of reserved Class C Warrants.

(b)During the ~~2022 Successor Period,~~first three months of 2023, we issued ~~1,329,292~~4,654 shares of New Common Stock as a result of Warrant exercises.

~~As discussed in~~ ~~Note 2~~, on the Effective Date, we issued 11,111,111 Class A Warrants, 12,345,679 Class B Warrants and 9,768,527 Class C Warrants that are initially exercisable for one share of New Common Stock per Warrant at initial exercise prices of $27.63, $32.13 and $36.18 per share, respectively, subject to adjustments pursuant to the terms of the Warrants. The Warrants are exercisable from the Effective Date until February 9, 2026. The Warrants contain customary anti-dilution adjustments in the event of any stock split, reverse stock split, reclassification, stock dividend or other distributions. The exercise prices of the Warrants were adjusted to prevent the dilution of rights for the effects of the quarterly dividend distribution on September 1, 2022, and the adjusted exercise prices are $25.10, $29.18, and $32.86 per share for the Class A, Class B and Class C Warrants, respectively. Additionally, we have recalculated the number of shares of New Common Stock issuable upon the exercise of each of the Class A, Class B and Class C Warrants, respectively, and as a result, 1.12 shares are issuable upon the exercise of a Class A, Class B or Class C Warrant.

On August 18, 2022, we announced exchange offers relating to our outstanding Class A Warrants, Class B Warrants and Class C Warrants. The exchange offers expired on October 7, 2022 and resulted in the issuance of 16,305,984 shares of our New Common Stock in exchange for the cancellation of (i) 4,752,207 Class A Warrants, (ii) 7,879,030 Class B Warrants and (iii) 7,252,004 Class C Warrants. Under the exchange offers, the Warrants were exchanged in a cashless transaction and were converted to shares of our New Common Stock at a ratio of 0.8636 for Class A Warrants, 0.8224 for Class B Warrants and 0.7890 for Class C Warrants, respectively.

~~Chapter 11 Proceedings~~

~~Upon emergence from Chapter 11 on February 9, 2021, as discussed in~~ ~~Note 2, Predecessor common stock and preferred stock were canceled and released under the Plan without receiving any recovery on account thereof.~~


~~12.~~10.			Share-Based Compensation

~~As discussed in~~ ~~Note 2~~, on the Effective Date, our Predecessor common stock was canceled and New Common Stock was issued. Accordingly, our then existing share-based compensation awards were also canceled, which resulted in the recognition of any previously unamortized expense related to the canceled awards on the date of cancellation. Share-based compensation for the Predecessor and Successor Periods is not comparable.

~~Successor Share-Based Compensation~~

~~As of~~On the Effective Date, the Board of Directors adopted the 2021 Long-Term Incentive Plan (the “LTIP”) with a share reserve equal to 6,800,000 shares of New Common Stock. The LTIP provides for the grant of RSUs, restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Restricted Stock Units. InDuring the ~~2021 and 2022 Successor Periods,~~first three months of 2023, we granted RSUs to employees and non-employee directors under the LTIP, which will vest over a three-year period. The fair value of RSUs is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in unvested RSUs is presented below:

Unvested Restricted Stock Units Weighted Average Grant Date Fair Value Per Share
(in thousands)
Unvested as of December 31, 2021 775 $ 46.77
Granted 520 $ 76.38
Vested (293) $ 47.78
Forfeited (103) $ 53.63
Unvested as of September 30, 2022 899 $ 62.78

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)


	Unvested Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Unvested as of December 31, 2022	957	$	68.91
Granted	414	$	71.66
Vested	(137)	$	74.36
Forfeited	(12)	$	59.85
Unvested as of March 31, 2023	1,222	$	69.31

The aggregate intrinsic value of RSUs that vested during the ~~2022 Successor Period~~first three months of 2023 was approximately ~~$26~~$10 million based on the stock price at the time of vesting.

As of ~~September 30, 2022,~~March 31, 2023, there was approximately ~~$45~~$73 million of total unrecognized compensation expense related to unvested RSUs. The expense is expected to be recognized over a weighted average period of approximately ~~2.22~~2.72 years.

Performance Share Units. InDuring the ~~2021 and 2022 Successor Periods,~~first three months of 2023, we granted PSUs to senior management under the LTIP, which will generally vest over a three-year period and will be settled in shares. The performance criteria include total shareholder return (“TSR”) and relative TSR (“rTSR”), and could result in a total payout between 0% - 200% ~~of the target units. For the PSUs granted in 2021, the performance criteria also include share price hurdles which could result in a total payout between 0% - 100%~~ of the target units. The fair value of the PSUs was measured on the grant date using a Monte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria.

The following table presents the assumptions used in the valuation of the PSUs granted in ~~2022.~~2023.


Assumption	TSR, rTSR
Risk-free interest rate	~~2.00~~3.85	%
Volatility	~~70.2~~64.4	%

A summary of the changes in unvested PSUs is presented below:


		Unvested Performance Share Units	Weighted Average Grant Date Fair Value Per Share			Unvested Performance Share Units	Weighted Average Grant Date Fair Value Per Share
		(in thousands)				(in thousands)
Unvested as of December 31, 2021		183	$	66.12
Unvested as of December 31, 2022					Unvested as of December 31, 2022	276	$	88.28
Granted	Granted	133	$	109.65	Granted	131	$	78.78
Vested	Vested	—	$	—	Vested	—	$	—
Forfeited	Forfeited	(35)	$	59.09	Forfeited	—	$	—
Unvested as of September 30, 2022		281	$	87.56
Unvested as of March 31, 2023					Unvested as of March 31, 2023	407	$	85.23

As of ~~September 30, 2022~~March 31, 2023, there was approximately ~~$18~~$23 million of total unrecognized compensation expense related to unvested PSUs. The expense is expected to be recognized over a weighted average period of approximately ~~2.23~~2.26 years.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Predecessor Share-Based Compensation~~

Our Predecessor share-based compensation program consisted of RSUs, stock options, PSUs and cash restricted stock units (“CRSUs”) granted to employees and RSUs granted to non-employee directors under our long-term incentive plans. The RSUs and stock options were equity-classified awards and the PSUs and CRSUs were liability-classified awards.

~~Restricted Stock Units.~~ ~~We granted RSUs to employees and non-employee directors. A summary of the changes in unvested RSUs is presented below:~~

Unvested
Restricted Stock Units Weighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of December 31, 2020 1 $ 616.57
Granted — $ —
Vested — $ —
Forfeited/canceled (1) $ 611.47
Unvested as of February 9, 2021 — $ —

~~Stock Options.~~ In the year ended December 31, 2020, we granted members of management stock options that vested ratably over a three-year period. Each stock option award had an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expired seven years to ten years from the date of grant.

We utilized the Black-Scholes option-pricing model to measure the fair value of stock options. The expected life of an option was determined using the simplified method. Volatility assumptions were estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate was based on the U.S. Treasury rate in effect at the time of the grant over the expected life of the option. The dividend yield was based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option.

~~The following table provides information related to stock option activity:~~

Number of
Shares
Underlying
Options Weighted
Average
Exercise Price Per Share
Weighted
Average
Contract Life in Years
Aggregate
Intrinsic
Value(a)
(in thousands)
Outstanding as of December 31, 2020 20 $ 1,429.11 4.27 $ —
Granted — $ —
Exercised — $ — $ —
Expired (1) $ 741.86
Forfeited/canceled (19) $ 1,452.40
Outstanding as of February 9, 2021 — $ — — $ —
Exercisable as of February 9, 2021 — $ — — $ —

~~(a)The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.~~

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~Restricted Stock Units, Stock Option,~~RSU and PSU Compensation.

We recognized the following compensation costs, net of actual forfeitures, related to RSUs ~~stock options,~~ and PSUs for the periods presented:
Successor Predecessor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
General and administrative expenses $ 5 $ 2 $ 14 $ 4 $ 3
Natural gas and oil properties 1 1 3 2 —
Production expense 1 1 2 1 —
Total RSU, stock option and PSU compensation $ 7 $ 4 $ 19 $ 7 $ 3


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
General and administrative expenses	$	6	$	3
Natural gas and oil properties	1		1
Production expense	1		—
Total RSU and PSU compensation	$	8	$	4
Related income tax benefit	$	1	$	—


~~13.~~11.			Derivative and Hedging Activities

We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. These commodity derivative financial instruments include financial price swaps, basis protection swaps, collars, three-way collars ~~options~~ and ~~swaptions.~~options. All of our natural gas and oil derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty. We do not intend to hold or issue derivative financial instruments for speculative trading purposes and have elected not to designate any of our derivative instruments for hedge accounting treatment.

As of December 31, 2022, approximately $65 million of derivative liabilities (notional volume of 9.6 bcf of natural gas and notional volume of 4.8 mmbbls of oil) were classified as liabilities held for sale. These derivative instruments were novated to WildFire Energy I LLC upon completion of the sale of a portion of our Eagle Ford assets on March 20, 2023. See Note 2 for more details.

The estimated fair values of our natural gas and oil derivative instrument assets (liabilities) as of March 31, 2023 and December 31, 2022 are provided below:


	March 31, 2023			December 31, 2022
	Notional Volume	Fair Value		Notional Volume	Fair Value
Natural gas (Bcf):
Fixed-price swaps	369	$	(2)	382	$	(494)
Collars	706	571		721	49
Three-way collars	3	1		4	(2)
Call options	—	—		18	(22)
Basis protection swaps	624	(62)		652	(32)
Total natural gas	1,702	508		1,777	(501)
Oil (MMBbls):
Fixed-price swaps	—	—		1	(32)
Collars	2	10		2	7
Basis protection swaps	4	1		6	1
Total oil	6	11		9	(24)
Total estimated fair value		$	519		$	(525)

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~The estimated fair values of our natural gas and oil derivative instrument assets (liabilities) as of September 30, 2022 and December 31, 2021 are provided below:~~

Successor
September 30, 2022 December 31, 2021
Notional Volume Fair Value Notional Volume Fair Value
Natural gas (Bcf):
Fixed-price swaps 449 $ (1,413) 637 $ (675)
Collars 547 (664) 205 (82)
Three-way collars 10 (29) — —
Call options 18 (63) 18 (17)
Swaptions 7 (19) — —
Basis protection swaps 398 16 252 (11)
Total natural gas 1,429 (2,172) 1,112 (785)
Oil (MMBbls):
Fixed-price swaps 4 (136) 13 (356)
Collars 6 23 — —
Basis protection swaps 10 (5) 9 (2)
Total oil 20 (118) 22 (358)
Total estimated fair value $ (2,290) $ (1,143)

~~Effect of Derivative Instruments – Condensed Consolidated Balance Sheets~~

The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 on a gross basis and after same-counterparty netting:


		Gross Fair Value(a)		Amounts Netted in the Consolidated Balance Sheets		Net Fair Value Presented in the Consolidated Balance Sheets			Gross Fair Value(a)		Amounts Netted in the Condensed Consolidated Balance Sheets		Net Fair Value Presented in the Condensed Consolidated Balance Sheets
Successor
As of September 30, 2022

As of March 31, 2023								As of March 31, 2023
Commodity Contracts:	Commodity Contracts:							Commodity Contracts:
Short-term derivative asset	Short-term derivative asset	$	118	$	(114)	$	4	Short-term derivative asset	$	602	$	(138)	$	464
Long-term derivative asset	Long-term derivative asset	28		(28)		—		Long-term derivative asset	178		(56)		122
Short-term derivative liability	Short-term derivative liability	(1,989)		114		(1,875)		Short-term derivative liability	(163)		138		(25)
Long-term derivative liability	Long-term derivative liability	(447)		28		(419)		Long-term derivative liability	(98)		56		(42)
Total derivatives	Total derivatives	$	(2,290)	$	—	$	(2,290)	Total derivatives	$	519	$	—	$	519

As of December 31, 2021
As of December 31, 2022								As of December 31, 2022
Commodity Contracts:	Commodity Contracts:							Commodity Contracts:
Short-term derivative asset	Short-term derivative asset	$	56	$	(51)	$	5	Short-term derivative asset	$	200	$	(166)	$	34
Long-term derivative asset								Long-term derivative asset	87		(40)		47
Short-term derivative liability	Short-term derivative liability	(950)		51		(899)		Short-term derivative liability	(598)		166		(432)
Long-term derivative liability	Long-term derivative liability	(249)		—		(249)		Long-term derivative liability	(214)		40		(174)
Total derivatives	Total derivatives	$	(1,143)	$	—	$	(1,143)	Total derivatives	$	(525)	$	—	$	(525)

(a)These financial assets (liabilities) are measured at fair value on a recurring basis utilizing significant other observable inputs; see further discussion on fair value measurements below.

~~Table of Contents~~

~~CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Fair Value

The fair value of our derivatives is based on third-party pricing models, which utilize inputs that are either readily available in the public market, such as natural gas, oil and NGL forward curves and discount rates, or can be corroborated from active markets or broker quotes, and, as such, are classified as Level 2. These values are compared to the values given by our counterparties for reasonableness. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives.

Credit Risk Considerations

Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we enter into derivative contracts only with counterparties that are highly rated or deemed by us to have acceptable credit strength and deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of ~~September 30, 2022,~~March 31, 2023, our natural gas and oil derivative instruments were spread among 1312 counterparties.

Hedging Arrangements

Certain of our hedging arrangements are with counterparties that ~~are~~were also lenders (or affiliates of lenders) under our ~~Exit~~New Credit Facility. The contracts entered into with these counterparties are secured by the same collateral that secures the ~~Exit~~New Credit Facility. The counterparties’ obligations must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us exceed defined thresholds. As of ~~September 30, 2022,~~March 31, 2023, we did not have any cash or letters of credit posted as collateral for our commodity derivatives.

~~Effect~~

Table of ~~Derivative Instruments – Accumulated Other Comprehensive Income~~

A reconciliation of the changes in accumulated other comprehensive income in our condensed consolidated statements of stockholders’ equity related to our terminated cash flow hedges is presented below:

Predecessor
Period from January 1, 2021 through February 9, 2021
Before Tax After Tax
Balance, beginning of period $ (12) $ 45
Losses reclassified to income(a)
3 3
Fresh start adjustments 9 9
Elimination of tax effects — (57)
Balance, end of period $ — $ —

~~(a)These losses were included as a component of total natural gas and oil derivatives.~~Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Our accumulated other comprehensive loss balance represented the net deferred loss associated with commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months were yet to occur. The remaining deferred gain or loss amounts were to be recognized in earnings in the month for which the original contract months were to occur. In connection with our adoption of fresh start accounting we recorded a fair value adjustment to eliminate the accumulated other comprehensive income related to hedging settlements including the elimination of tax effects. See ~~Note 3~~ for a discussion of fresh start accounting adjustments. We did not have any changes or items impacting other comprehensive income for the 2022 Successor Quarter, the 2022 Successor Period, the 2021 Successor Quarter or the 2021 Successor Period.


~~14.~~12.			~~Other Operating Expense (Income), Net~~Investments

Momentum Sustainable Ventures LLC.During the fourth quarter of 2022, ~~Successor Period, we recognized~~Chesapeake entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project (“CCUS”), which will gather natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon capture portion of the project anticipates capturing and permanently sequestering up to 2.0 million tons per annum of CO2. The natural gas gathering pipeline in-service is projected for the fourth quarter of 2024, and the carbon sequestration portion of the project is subject to regulatory approvals. We have a 35% interest in the project and have approximately ~~$40~~$290 million remaining in our commitment to the project through the end of ~~costs related to our Marcellus Acquisition, which included integration costs, consulting fees, financial advisory fees, legal fees~~2024. We have accounted for this investment as an equity method investment, and ~~change in control expense in accordance with Chief’s existing employment agreements.~~its carrying value as of March 31, 2023 and December 31, 2022 was $56 million and $18 million, respectively.

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ITEM 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations


Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, liquidity, results of operations and certain other factors that may affect our future results. The following discussion should be read together with the condensed consolidated financial statements included in Item 1 of Part I of this report and the consolidated financial statements included in Item 8 of our ~~2021~~202 2 Form 10-K.

We are an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce natural gas, oil and NGL from underground reservoirs. We own a large ~~and geographically diverse~~ portfolio of onshore U.S. unconventional natural gas and liquids assets, including interests in approximately ~~8,300 gross~~7,200 natural gas and oil wells as of ~~September 30, 2022.~~March 31, 2023. Our natural gas resource plays are the Marcellus Shale in the northern Appalachian Basin in Pennsylvania (“Marcellus”) and the Haynesville/Bossier Shales in northwestern Louisiana (“Haynesville”). Our liquids-rich resource play is in the Eagle Ford Shale in South Texas (“Eagle Ford”)~~, and in~~. In August 2022, we announced that we ~~view~~viewed the assets ~~within the~~in Eagle Ford as non-core to our future capital allocation ~~strategy and will be reducing our activity in the Eagle Ford going forward, while considering potential transactions~~strategy. In January 2023, we entered into an agreement to ~~divest~~sell a portion of our Eagle Ford ~~assets.~~assets to WildFire Energy I LLC for $1.425 billion and closed the transaction on March 20, 2023. Additionally, in February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion and closed the transaction on April 28, 2023.

Our strategy is to create ~~stockholder~~shareholder value ~~by generating sustainable Free Cash Flow from~~through the responsible development of our ~~natural gas and oil development and production activities, enhancing our scale, and returning~~ significant ~~cash~~resource plays while continuing to ~~our stockholders.~~be a leading provider of affordable, reliable, low carbon energy to the United States. We continue to focus on improving margins through operating efficiencies and financial discipline and improving our ~~Environmental, Social, and Governance (“ESG”)~~ESG performance. To accomplish these goals, we intend to allocate our human resources and capital expenditures to projects we believe offer the highest cash return on capital invested, to deploy leading drilling and completion technology throughout our portfolio, and to take advantage of acquisition and divestiture opportunities to strengthen our portfolio. We also intend to continue to dedicate capital to projects that reduce the environmental impact of our natural gas and oil producing activities. We continue to seek opportunities to reduce cash costs (production, gathering, processing and transportation and general and administrative)~~per one thousand cubic feet of natural gas equivalent production,~~, through operational efficiencies ~~by, among other things,~~and improving our production volumes from existing wells.

Leading a responsible energy future is foundational to Chesapeake's success. Our core values and culture demand we continuously evaluate the environmental impact of our operations and work diligently to improve our ESG performance across all facets of our Company. Our path to ~~leading a responsible~~answering the call for affordable, reliable, low carbon energy ~~future~~ begins with our ~~initiative~~goal to achieve ~~net-zero direct~~net zero greenhouse gas emissions (Scope 1 and 2) by ~~2035, which we announced in February 2021.~~2035. To meet this challenge, we have set meaningful ~~initial~~ goals including:

•Eliminate routine flaring from all new wells completed from 2021 forward, and enterprise-wide by 2025;

•Reduce our methane intensity to ~~0.09%~~0.02% by ~~2025;~~2025 (achieved approximately 0.05% in 2022); and

•Reduce our GHG intensity to ~~5.5~~3.0 metric tons CO2 equivalent per thousand barrel of oil equivalent by ~~2025.~~2025 (achieved approximately 3.9 in 2022).

~~We achieved our interim goals for both intensity measures by exiting 2021 with a 0.07% methane intensity and a 4.5 GHG intensity, respectively.~~ In July 2021, we announced our plan to receive independent certification of our natural gas production under the MiQ methane standard and EO100™ Standard for Responsible Energy Development. ~~Our~~By the end of 2022, we had received certifications for all our operated gas assets in Haynesville ~~assets were certified~~and Marcellus as responsibly sourced gas at the end of 2021, and our legacy Marcellus assets (excluding assets acquired in the Marcellus Acquisition) received dual certification as responsibly sourced gas at the end of the second quarter of 2022. We anticipate that the remaining Marcellus assets will receive dual certification by the end of 2022.gas. The MiQ certification ~~will provide~~provides a verified approach to tracking our commitment to reduce our methane intensity, as well as ~~support~~supporting our overall objective of achieving net-zero ~~direct~~Scope 1 and 2 greenhouse gas emissions by 2035.

Our results of operations as reported in our condensed consolidated financial statements for the 2022 Successor Quarter, 2022 Successor Period, 2021 Successor Quarter, 2021 Successor Period and 2021 Predecessor Period are in accordance with GAAP. Although GAAP requires that we report on our results for the periods January 1, 2021 through February 9, 2021 (the 2021 Predecessor Period) and February 10, 2021 through September 30, 2021 (the 2021 Successor Period) separately, management views our operating results for the nine months ended September 30, 2021 by combining the results of the 2021 Predecessor Period and the 2021

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Successor Period because management believes such presentation provides the most meaningful comparison of our results to prior periods. We are not able to compare the 40 days from January 1, 2021 through February 9, 2021 operating results to any of the previous periods reported in the condensed consolidated financial statements and do not believe reviewing this period in isolation would be useful in identifying any trends in, or reaching any conclusions regarding, our overall operating performance. We believe the key performance indicators, such as operating revenues and expenses for the 2021 Successor Period combined with the 2021 Predecessor Period, provide more meaningful comparisons to other periods and are useful in understanding operational trends. Additionally, there were no changes in policies between the periods, and any material impacts as a result of fresh start accounting were included within the discussion of these changes. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison of our results to prior periods. As the majority of our production profile consists of natural gas, we have converted the following results of operations, including prior periods, from a per barrel of oil equivalent, to a per one thousand cubic feet of natural gas equivalent, referred to, on such a converted basis, as Mcfe.

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Recent Developments

~~Acquisitions~~Acquisition

On March 9, 2022, we ~~completed~~closed our Marcellus Acquisition pursuant to definitive agreements with Chief, Radler and Tug Hill, Inc. dated January 24, 2022. ~~On November 1, 2021, we completed our Vine Acquisition pursuant to a definitive agreement with Vine dated August 10, 2021. These transactions strengthen~~This transaction strengthened Chesapeake’s competitive position, meaningfully increasing our operating cash flows and adding high quality producing assets and a deep inventory of premium drilling locations, while preserving the strength of our balance sheet.

~~Divestiture~~Divestitures

On March 25, 2022, we ~~completed~~closed the sale of our Powder River Basin assets in Wyoming to Continental Resources, Inc. for $450 million in cash, subject to post-closing adjustments, which resulted in the recognition of a gain of approximately ~~$298~~$293 million.

On January 17, 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion, subject to post-closing adjustments. This transaction closed on March 20, 2023 and resulted in the recognition of a gain of approximately $335 million.

On February 17, 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion, subject to post-closing adjustments. This transaction closed on April 28, 2023, and we received proceeds of approximately $1.055 billion. As of March 31, 2023, the assets and liabilities associated with this transaction were classified as held for sale.

Investments - Momentum Sustainable Ventures LLC

During the fourth quarter of 2022, we entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project, which will gather natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon capture portion of the project anticipates capturing and permanently sequestering up to 2.0 million tons per annum of CO2. The natural gas gathering pipeline in-service is projected for the fourth quarter of 2024, and the carbon sequestration portion of the project is subject to regulatory approvals. Through the end of the first quarter of 2023, we have made total capital contributions of $56 million to the project.

Repurchases of Equity Securities and Dividends

In June 2022, our Board of Directors authorized an increase in the size of our share repurchase program from $1.0 billion to up to $2.0 billion in aggregate value of our common stock and/or warrants. ~~As of September 30, 2022,~~During the three months ended March 31, 2023, we ~~had~~ repurchased approximately ~~7.6~~0.8 million shares of our common stock pursuant to the share repurchase program and had ~~$1,333~~$867 million available under the share repurchase ~~program.~~program, as of March 31, 2023. In addition, we ~~have~~ paid dividends of approximately ~~$788~~$175 million, in aggregate, on our common stock induring the 2022 Successor Period. In August 2022, we increased our quarterly base dividend by 10% to $0.55 per share beginning with the dividend that was paid on September 1, 2022. During October 2022, we repurchased 4.0 million shares of our common stock for an aggregate price of approximately $400 million. As of October 28, 2022, we had approximately $0.9 billion remaining under our share repurchase program.

~~Warrant Exchange Offer~~

In August 2022, we also announced exchange offers relating to our outstanding Class A Warrants, Class B Warrants, and Class C Warrants. The exchange offers expired in October 2022 and resulted in the issuance of 16,305,984 shares of our common stock in exchange for the cancellation of (i) 4,752,207 Class A Warrants, or approximately 51.4% of the outstanding Class A Warrants, (ii) 7,879,030 Class B Warrants, or approximately 64.1% of the outstanding Class B Warrants, and (iii) 7,252,004 Class C Warrants, or approximately 64.8% of the outstanding Class C Warrants. As of October 28, 2022, 4,498,767 Class A Warrants, 4,408,490 Class B Warrants and 4,604,457 Class C Warrants remain outstanding.

~~COVID-19 Pandemic and Impact on Global Demand for Natural Gas and Oil~~

~~The global spread of COVID-19 and its variants created, and continues to create, significant volatility, uncertainty, and economic disruption during 2020, 2021 and into 2022~~. The ongoing pandemic has resulted in widespread adverse impacts on the global economy and on our customers and other parties with whom we have business relations. To date, we have experienced limited operational impacts as a result of COVID-19 or related

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governmental restrictions. While we cannot predict the full impact that COVID-19 and its variants, or the related significant disruption and volatility in the natural gas and oil markets will have on our business, cash flows, liquidity, financial condition and results of operations, we believe demand is recovering and prices will continue to be positively impacted in the near term. For additional discussion regarding risks associated with the COVID-19 pandemic, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2021 Form 10-K~~ ~~and Part I, Item 1A “Risk Factors” in our~~ ~~2021 Form 10-K~~.three months ended March 31, 2023.

Russia’s Invasion of Ukraine; Volatility in Natural Gas, Oil and NGL Prices; ~~and~~ Inflationary Cost Pressures and Potential Economic Downturns

In late February 2022, Russia launched a military invasion against Ukraine. ~~Sustained conflict and disruption in the region is likely in the near term, and the longer-term duration of the war is uncertain.~~ The Russian invasion has caused, and could intensify, volatility in natural gas, oil and NGL prices, ~~driving a sharp upward spike in the short term,~~ and may have an impact on global growth prospects, which could in turn affect demand for natural gas and oil. ~~The global market~~This overall uncertainty resulted in stronger commodity prices during much of 2022. Toward the end of 2022, markets began to stabilize, and this, coupled with a milder winter, has resulted in an observed decline in pricing in early 2023. Our 2023 estimated cash flow is ~~also currently~~partially protected from commodity price volatility due to our current hedge positions that cover approximately 55% to 65% of our projected natural gas volumes for the remainder of 2023.

In addition to the recent weakening in commodity prices, the industry is experiencing inflationary ~~pressures,~~pressure, including increased demand for oilfield service equipment, rising fuel costs, ~~a tightening steel market~~ and labor ~~and supply chain~~ shortages, which could result in increases to our operating and capital costs that are not fixed. Uncertainty regarding a potential economic

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downturn or recession in certain regions, or globally, may introduce new pressures or accelerate or intensify the pressures currently facing the industry. We ~~are monitoring the situation~~continue to monitor these situations and ~~assessing its~~assess their impact on our business, including our business partners and customers. For additional discussion regarding risks associated with price volatility and economic deterioration, see Part I, Item 1A “Risk Factors” in our 2022 Form 10-K.

COVID-19 Pandemic and Impact on Global Demand for Natural Gas and Oil

The global spread of COVID-19 created significant volatility, uncertainty, and economic disruption commencing in 2020, and threatens to continue to do so in 2023. While we cannot predict the full impact that COVID-19 and its variants, or the related disruption and volatility in the natural gas and oil markets may have on our business, cash flows, liquidity, financial condition and results of operations, we believe our cost structure and liquidity position us well to address continued price and demand volatility. For additional discussion regarding risks and impacts associated with the COVID-19 pandemic, see Part I, Item 1A “Risk Factors” in our 2022 Form 10-K.


Liquidity and Capital Resources

Liquidity Overview

~~For the 2022 Successor Period, our~~Our primary sources of capital resources and liquidity ~~have consisted of~~are internally generated cash flows from operations and borrowings under our ~~Exit Credit Facility,~~credit agreements, and our primary uses of cash ~~have been~~are for the development of our natural gas and oil properties, acquisitions of additional natural gas ~~and oil~~ properties and return of value to stockholders through dividends and equity repurchases. Historically, our primary sources of capital resources and liquidity have consisted of internally generated cash flows from operations, borrowings under certain credit agreements and dispositions of non-core assets. Our ability to issue additional indebtedness, dispose of assets or access the capital markets was substantially limited during the Chapter 11 Cases and required court approval in most instances. Accordingly, our liquidity in the 2021 Predecessor Period depended mainly on cash generated from operations and available funds under certain credit agreements.

We believe we have emerged from the Chapter 11 Cases as a fundamentally stronger company, built to generate sustainable Free Cash Flow with a strengthened balance sheet, geographically diverse asset base and continuously improving ESG performance. As a result of the Chapter 11 Cases, we reduced our total indebtedness by $9.4 billion by issuing equity in a reorganized entity to the holders of our FLLO Term Loan, Second Lien Notes, unsecured notes and allowed general unsecured claimants.

We believe our cash flow from operations, proceeds from our recent Eagle Ford divestitures, cash on hand and borrowing capacity under the ~~Exit~~New Credit Facility, as discussed below, will provide sufficient liquidity during the next 12 months and the foreseeable future. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$1,340 million~~$2.1 billion of liquidity available, including ~~$74~~$130 million of cash on hand and ~~$1,266 million~~$2.0 billion of aggregate unused borrowing capacity available under the ~~Exit~~New Credit Facility. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$450 million of~~no outstanding borrowings under our ~~Exit~~New Credit ~~Facility – Tranche A Loans and $221 million in borrowings under our Exit Credit Facility – Tranche B Loans.~~Facility. See Note 6 4 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of our debt obligations, including the carrying and fair value of our senior notes.

~~Dividend~~Dividends

~~With our strong liquidity position, we initiated a new dividend strategy in the 2021 Successor Period.~~ We paid dividends of ~~$788~~$175 million on our common stock induring the ~~2022 Successor Period.~~first three months of 2023. See Note 11 9 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of the Board ~~of Directors~~ and will depend on the Company’s financial results, cash requirements, future prospects

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and other relevant factors. The Company’s ability to pay dividends to its stockholders is restricted by (i) Oklahoma corporate law, (ii) its Certificate of Incorporation, (iii) the terms and provisions of the credit agreement governing its New Credit ~~Agreement~~Facility and (iv) the terms and provisions of the indentures governing its 5.50% Senior Notes due 2026, 5.875% Senior Notes ~~5.875%~~due 2029 ~~Notes~~ and 6.75% Senior Notes due ~~2029 assumed in the Vine Acquisition.~~2029.

Derivative and Hedging Activities

Our results of operations and cash flows are impacted by changes in market prices for natural gas, oil and NGL. We enter into various derivative instruments to mitigate a portion of our exposure to commodity price declines, but these transactions may also limit our cash flows in periods of rising commodity prices. Our natural gas, oil and NGL derivative activities, when combined with our sales of natural gas, oil and NGL, allow us to better predict the total revenue we expect to receive. See Item 3. Quantitative and Qualitative Disclosures About Market Risk included in ~~Item 1 of~~ Part I of this report for further discussion on the impact of commodity price risk on our financial position.

Contractual Obligations and Off-Balance Sheet Arrangements

As of ~~September 30, 2022,~~March 31, 2023, our material contractual obligations ~~included~~include repayment of senior notes, ~~outstanding borrowings and interest payment obligations under the Exit Credit Facility,~~ derivative obligations, asset retirement obligations, lease obligations, capital commitments relating to our investments,

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undrawn letters of credit and various other commitments we enter into in the ordinary course of business that could result in future cash obligations. In addition, we have contractual commitments with midstream companies and pipeline carriers for future gathering, processing and transportation of natural gas, oil and NGL to move certain of our production to market. ~~Estimated~~The estimated gross undiscounted future commitments under these agreements were approximately $4.2 billion as of ~~September 30, 2022.~~March 31, 2023. As discussed above, we ~~estimate the~~believe our existing sources of ~~our capital~~liquidity will ~~continue to~~ be ~~adequate~~sufficient to fund our near and long-term contractual obligations. See Notes 6 4, 75, 1 1 and 1312 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

~~Post-Emergence Debt~~New Credit Facility

On ~~the Effective Date, pursuant to the terms of the Plan,~~December 9, 2022, the Company, as borrower, entered into a senior secured reserve-based credit agreement ~~(the “Credit Agreement”)~~ providing for the ~~Exit~~New Credit Facility which features an initial borrowing base of ~~$2.5~~$3.5 billion and aggregate commitments of $2.0 billion. ~~The~~Subject to certain exceptions, the borrowing base will be redetermined ~~semiannually on~~semi-annually in or around ~~May 1~~April and ~~November 1~~October of each year. The ~~aggregate initial elected commitments of the lenders under the Exit Credit Facility is $1.75 billion of revolving Tranche A Loans and $221 million of fully funded Tranche B Loans.~~

~~The Exit~~New Credit Facility provides for a $200 million sublimit ~~of the aggregate commitments that are~~ available for the issuance of letters of ~~credit.~~credit and a $50 million sublimit available for swingline loans. Borrowings under the credit agreement may be alternate base rate loans or term SOFR loans, at the Company’s election. The ~~Exit~~New Credit Facility ~~bears interest at~~contains certain features that, upon receipt and maintenance of investment grade ratings from S&P, Moody’s and/or Fitch and the ~~ABR (alternate base rate)~~satisfaction of certain other conditions, result in the removal or ~~LIBOR, at our election, plus an applicable margin (ranging from 2.25–3.25% per annum for ABR loans~~relaxation of specified negative and ~~3.25–4.25% per annum for LIBOR loans, subject to a 1.00% LIBOR floor), depending on the percentage~~financial covenants, among other favorable adjustments. See Note 4 of the borrowing base then being utilized. The Tranche A Loans mature 3 years after the Effective Date and the Tranche B Loans mature 4 years after the Effective Date. The Tranche B Loans can be repaid if no Tranche A Loans are outstanding. Our borrowings under the Exit Credit Facility bore interest at an average interest ratenotes to our condensed consolidated financial statements included in Item 1 of ~~6.0% during the 2022 Successor Period.~~

~~On February 2, 2021, the Company issued $500 million aggregate principal amount~~Part I of its 2026 Notes and $500 million aggregate principal amount of its 2029 Notes. The offering of the Notes was part of a series of exit financing transactions undertaken in connection with the Debtors’ Chapter 11 Cases and meant to provide the exit financing originally intended to be provided by the Exit Term Loan Facility pursuant to the Commitment Letter.

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~~Assumption and Repayment of Vine Debt~~

~~In conjunction with the Vine Acquisition, Vine’s Second Lien Term Loan was repaid and terminated~~this report for $163 million inclusive of a $13 million make whole premium with cash on hand due to the agreement containing a change in control provision making the term loan callable upon closing. Vine’s reserve based loan facility, which had no borrowings as of November 1, 2021, was terminated at the time of the acquisition. Additionally, Vine’s 6.75% Senior Notes with a principal amount of $950 million were assumed by the Company.further discussion.

Capital Expenditures

For the year ending December 31, ~~2022,~~2023, we currently expect to bring or have online approximately ~~195~~145 to ~~235~~165 gross wells across 1110 to 1612 rigs and plan to invest between approximately ~~$1.75 billion to $1.95~~$1.765 – $1.835 billion in capital expenditures. We expect that approximately ~~75%~~85% of our ~~2022~~2023 capital expenditures will be directed toward our natural gas assets. We currently plan to fund our ~~2022~~2023 capital program through cash on hand, expected cash flow from our operations and borrowings under our ~~Exit~~New Credit Facility. We may alter or change our plans with respect to our capital program and expected capital expenditures based on developments in our business, our financial position, our industry, or any of the markets in which we operate.

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Sources and (Uses) of ~~Funds~~Cash and Cash Equivalents

The following table presents the sources and uses of our cash and cash equivalents for the periods ~~presented.~~presented:

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Cash provided by (used in) operating activities $ 3,075 $ 1,246 $ (21)
Proceeds from Exit Credit Facility - Tranche A Loans, net 450 — —
Proceeds from issuance of senior notes — — 1,000
Proceeds from issuance of common stock — — 600
Proceeds from warrant exercise 3 2 —
Proceeds from divestitures of property and equipment 409 9 —
Total sources of cash and cash equivalents $ 3,937 $ 1,257 $ 1,579


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Cash provided by operating activities	$	889	$	853
Proceeds from divestitures of property and equipment	931		403

Proceeds from Exit Credit Facility, net	—		500

Proceeds from warrant exercise	—		1
Capital expenditures	(497)		(344)
Business combination, net	—		(2,006)
Contributions to investments	(39)		—
Payments on New Credit Facility, net	(1,050)		—


Cash paid to repurchase and retire common stock	(54)		(83)
Cash paid for common stock dividends	(175)		(210)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	5	$	(886)

Cash ~~Flows~~Flow from Operating Activities

Cash provided by operating activities was ~~$3,075~~$889 million inand $853 million during the first three months of 2023 and 2022, ~~Successor Period, cash provided by operating activities was $1,246 million in the 2021 Successor Period and cash used in operating activities was $21 million in the 2021 Predecessor Period.~~respectively. The increase induring the ~~2022 Successor Period~~first three months of 2023 is primarily due to ~~higher~~increased sales volumes in Marcellus primarily due to the Marcellus Acquisition and timing of cash receipts, partially offset by lower prices for the natural gas, oil and NGL we sold and increased volumes sold due to the Vine and Marcellus Acquisitions. The cash used in the 2021 Predecessor Period was primarily due to the payment of professional fees related to the Chapter 11 Cases.sold. Cash flows from operations are largely affected by the same factors that affect our net income, excluding various non-cash items, such as depreciation, depletion and amortization, certain impairments, gains or losses on sales of assets, deferred income taxes and mark-to-market changes in our open derivative instruments. See further discussion below under Results of Operations.

Proceeds from ~~Exit Credit Facility - Tranche A Loans, net~~

In the 2022 Successor Period, we borrowed a net $450 million on the Exit Credit Facility - Tranche A Loans. We funded a portion of the Marcellus Acquisition with borrowings under the Company’s Exit Credit Facility. A portion of the borrowings were repaid with internally generated cash from operating activities.

~~Proceeds from Issuance of Senior Notes and Common Stock~~

In the 2021 Predecessor Period, we issued $500 million aggregate principal amount of 5.50% 2026 Notes and $500 million aggregate principal amount of 5.875% 2029 Notes for total proceeds of $1.0 billion. Additionally, upon emergence from Chapter 11, we issued 62,927,320 shares of New Common Stock in exchange for $600 million of cash as agreed upon in the Plan.

~~Proceeds from~~ Divestitures of Property and Equipment

InDuring the first three months of 2023, we sold a portion of our Eagle Ford assets to WildFire Energy I LLC. During the first three months of 2022, ~~Successor Period,~~ we sold our Powder River Basin assets to Continental Resources, Inc. See Note 42 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

Proceeds from Exit Credit Facility, net

During the first three months of 2022, we borrowed a net $500 million on the Exit Credit Facility to fund a portion of the Marcellus Acquisition.

Capital Expenditures

Our capital expenditures increased during the first three months of 2023 compared to the first three months of 2022, primarily as a result of increased drilling and completion activity across all operating areas, as well as inflation-related cost increases for goods and services.

Business Combination

During the first three months of 2022, we closed the Marcellus Acquisition for approximately $2 billion and 9.4 million shares of our common stock. See Note 2 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

Contributions to Investments

During the first three months of 2023, contributions to investments primarily consisted of $39 million, which we contributed to our investment with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture project. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

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Payments on New Credit Facility, net

~~Uses~~During the first three months of ~~Funds~~

~~The following table presents~~2023, we made net repayments of $1,050 million on the ~~uses~~New Credit Facility, utilizing a portion of the divestiture proceeds from the sale of a portion of our Eagle Ford assets and also from internally generated cash ~~and cash equivalents for the Successor and Predecessor periods:~~

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Natural Gas and Oil Expenditures:
Capital expenditures $ 1,299 $ 404 $ 66
Other Uses of Cash and Cash Equivalents:
Business combination, net 1,967 — —
Payments on Exit Credit Facility - Tranche A Loans, net — 50 479
Payments on DIP Facility borrowings — — 1,179
Debt issuance and other financing costs — 3 8
Cash paid to repurchase and retire common stock 667 — —
Cash paid for common stock dividends 788 67 —
Other — 1 —
Total other uses of cash and cash equivalents 3,422 121 1,666
Total uses of cash and cash equivalents $ 4,721 $ 525 $ 1,732

~~Capital Expenditures~~

Our capital expenditures significantly increased in the 2022 Successor Period compared to the combined 2021 Successor and Predecessor Periods primarily as a result of increased drilling and completion activity in Haynesville and Marcellus, following the Vine Acquisition and Marcellus Acquisition, respectively.

~~Business Combination~~

~~In the 2022 Successor Period, we completed the Marcellus Acquisition for approximately~~ ~~$2 billion~~ ~~and~~ ~~9.4 million~~ ~~shares of our common stock. See~~ ~~Note 4~~ ~~of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.~~

~~Payments on DIP Facility Borrowings~~

~~On the Effective Date, the DIP Facility was terminated, and the holders of obligations under the DIP Facility received payment in full in cash;~~ provided ~~that, to the extent such lender under the DIP Facility was also a lender under the Exit Credit Facility, such lender’s allowed DIP claims were first reduced dollar-for-dollar and satisfied~~ by ~~the amount of its Exit RBL Loans provided as of the Effective Date.~~operating activities.

Cash Paid to Repurchase and Retire Common Stock

In March 2022, we commenced our share repurchase ~~program and~~program. During the first three months of 2023, we repurchased 10.8 million shares ~~of our common stock~~ for an aggregate price of ~~$83 million. In June 2022, we repurchased 5.8 million shares of our common stock for an aggregate price of $515~~$60 million, which is inclusive of shares for which cash settlement occurred in early ~~July.~~April 2023. During the first three months of 2022, ~~Successor Quarter,~~ we repurchased ~~0.75~~1 million shares of ~~our~~ common stock for an aggregate price of ~~$69~~$83 million. The repurchased shares of common stock ~~that were repurchased during the 2022 Successor Period~~ were retired and recorded as a reduction to common stock and retained earnings.

Cash Paid for Common Stock Dividends

As part of our dividend program, we paid common stock base dividends of ~~$182~~$75 million and common stock variable dividends of ~~$606~~$100 million induring the ~~2022 Successor Period. See~~ ~~Note 11~~first three months of ~~the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.~~2023.

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Results of Operations

Natural Gas, Oil and NGL Production and Average Sales Prices


		Successor
		Three Months Ended September 30, 2022									Three Months Ended March 31, 2023
		Natural Gas		Oil		NGL		Total			Natural Gas		Oil		NGL		Total
		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe
Marcellus	Marcellus	1,987	7.25	—	—	—	—	1,987	7.25	Marcellus	1,974	3.47	—	—	—	—	1,974	3.47
Haynesville	Haynesville	1,605	7.40	—	—	—	—	1,605	7.40	Haynesville	1,549	2.88	—	—	—	—	1,549	2.88
Eagle Ford	Eagle Ford	121	7.04	50	94.62	16	37.53	516	11.99	Eagle Ford	128	1.97	54	76.82	16	26.71	546	8.82

Total	Total	3,713	7.31	50	94.62	16	37.53	4,108	7.90	Total	3,651	3.17	54	76.82	16	26.71	4,069	3.97

Average NYMEX Price										Average NYMEX Price		3.42		76.13
Average Realized Price (including realized derivatives)										Average Realized Price (including realized derivatives)		2.74		66.79		26.71		3.45
		Successor
		Three Months Ended September 30, 2021									Three Months Ended March 31, 2022
		Natural Gas		Oil		NGL		Total			Natural Gas		Oil		NGL		Total
		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe
Marcellus	Marcellus	1,302	3.20	—	—	—	—	1,302	3.20	Marcellus	1,452	4.66	—	—	—	—	1,452	4.66
Haynesville	Haynesville	589	3.81	—	—	—	—	589	3.81	Haynesville	1,625	4.46	—	—	—	—	1,625	4.46
Eagle Ford	Eagle Ford	140	4.07	59	70.36	18	33.32	599	8.83	Eagle Ford	129	4.04	52	95.00	16	41.09	540	11.44
Powder River Basin	Powder River Basin	53	4.33	9	69.31	3	44.53	128	7.91	Powder River Basin	41	5.45	8	95.18	3	53.96	102	10.66
Total	Total	2,084	3.46	68	70.22	21	35.14	2,618	4.86	Total	3,247	4.54	60	95.02	19	43.05	3,719	5.72

Average NYMEX Price										Average NYMEX Price		4.95		94.29
Average Realized Price (including realized derivatives)										Average Realized Price (including realized derivatives)		3.08		65.64		43.05		3.96
		Successor
		Nine Months Ended September 30, 2022
		Natural Gas		Oil		NGL		Total
		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe
Marcellus		1,801	6.27	—	—	—	—	1,801	6.27
Haynesville		1,624	6.16	—	—	—	—	1,624	6.16
Eagle Ford		127	6.10	51	100.11	16	40.40	526	12.35
Powder River Basin		13	5.45	2	95.18��	1	53.96	34	10.66
Total		3,565	6.21	53	99.87	17	41.14	3,985	7.07

		Successor
		Period from February 10, 2021 through September 30, 2021
		Natural Gas		Oil		NGL		Total
		MMcf per day	$/Mcf	MBbl per day	$/Bbl	MBbl per day	$/Bbl	MMcfe per day	$/Mcfe
Marcellus		1,289	2.57	—	—	—	—	1,289	2.57
Haynesville		552	3.11	—	—	—	—	552	3.11
Eagle Ford		142	3.83	63	66.41	19	27.36	630	8.28
Powder River Basin		55	3.94	10	65.02	3	36.91	133	7.25
Total		2,038	2.84	73	66.23	22	28.85	2,604	4.31

Natural Gas, Oil and NGL Sales


	Three Months Ended March 31, 2023
	Natural Gas		Oil		NGL		Total
Marcellus	$	617	$	—	$	—	$	617
Haynesville	402		—		—		402
Eagle Ford	23		373		38		434

Total natural gas, oil and NGL sales	$	1,042	$	373	$	38	$	1,453

	Three Months Ended March 31, 2022
	Natural Gas		Oil		NGL		Total
Marcellus	$	609	$	—	$	—	$	609
Haynesville	652		—		—		652
Eagle Ford	47		450		57		554
Powder River Basin	20		66		13		99
Total natural gas, oil and NGL sales	$	1,328	$	516	$	70	$	1,914

Natural gas, oil and NGL sales during the first three months of 2023 decreased $461 million compared to the first three months of 2022. Lower average prices, which were consistent with the downward trend in index prices for all products, drove a $512 million decrease during the first three months of 2023. Additionally, the Powder River Basin divestiture and lower sales volumes in Haynesville resulted in decreases of $99 million and $19 million, respectively. Partially offsetting these decreases was an increase of $162 million due to increased sales volumes in

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Predecessor
Period from January 1, 2021 through February 9, 2021
Natural Gas Oil NGL Total
MMcf per day $/Mcf MBbl per day $/Bbl MBbl per day $/Bbl MMcfe per day $/Mcfe
Marcellus 1,233 2.42 — — — — 1,233 2.42
Haynesville 543 2.44 — — — — 543 2.44
Eagle Ford 165 2.57 74 53.37 18 23.94 721 6.71
Powder River Basin 61 2.92 10 51.96 4 34.31 144 5.71
Total 2,002 2.45 84 53.21 22 25.92 2,641 3.77

~~Natural Gas, Oil and NGL Sales~~

Successor
Three Months Ended September 30, 2022
Natural Gas Oil NGL Total
Marcellus $ 1,324 $ — $ — $ 1,324
Haynesville 1,093 — — 1,093
Eagle Ford 79 437 54 570
Total natural gas, oil and NGL sales $ 2,496 $ 437 $ 54 $ 2,987
Successor
Three Months Ended September 30, 2021
Natural Gas Oil NGL Total
Marcellus $ 383 $ — $ — $ 383
Haynesville 207 — — 207
Eagle Ford 53 379 55 487
Powder River Basin 21 58 14 93
Total natural gas, oil and NGL sales $ 664 $ 437 $ 69 $ 1,170
Successor
Nine Months Ended September 30, 2022
Natural Gas Oil NGL Total
Marcellus $ 3,085 $ — $ — $ 3,085
Haynesville 2,733 — — 2,733
Eagle Ford 211 1,390 173 1,774
Powder River Basin 20 66 13 99
Total natural gas, oil and NGL sales $ 6,049 $ 1,456 $ 186 $ 7,691

~~Table of Contents~~

Successor
Period from February 10, 2021 through
September 30, 2021
Natural Gas Oil NGL Total
Marcellus $ 772 $ — $ — $ 772
Haynesville 401 — — 401
Eagle Ford 127 971 119 1,217
Powder River Basin 51 144 30 225
Total natural gas, oil and NGL sales $ 1,351 $ 1,115 $ 149 $ 2,615
Predecessor
Period from January 1, 2021 through February 9, 2021
Natural Gas Oil NGL Total
Marcellus $ 119 $ — $ — $ 119
Haynesville 53 — — 53
Eagle Ford 17 159 17 193
Powder River Basin 7 20 6 33
Total natural gas, oil and NGL sales $ 196 $ 179 $ 23 $ 398
Non-GAAP Combined
Nine Months Ended September 30, 2021
Natural Gas Oil NGL Total
Marcellus $ 891 $ — $ — $ 891
Haynesville 454 — — 454
Eagle Ford 144 1,130 136 1,410
Powder River Basin 58 164 36 258
Total natural gas, oil and NGL sales $ 1,547 $ 1,294 $ 172 $ 3,013

~~Natural gas, oil and NGL sales in the 2022 Successor Quarter increased $1,817 million compared~~Marcellus, primarily due to the ~~2021 Successor Quarter. The~~Marcellus Acquisition in March 2022, and an increase ~~includes $1,146~~of $7 million due to increased sales volumes in Haynesville and Marcellus, which is primarily related to the Vine and Marcellus Acquisitions in November 2021 and March 2022, respectively. The increase due to volumes is partially offset by an $89 million decrease in Eagle Ford ~~primarily due to a natural decline in production. The increase in~~ sales also includes $853 million due to higher average prices received. The higher average prices are consistent with the upward trend in index prices for all products throughout the 2022 Successor Quarter. The increases noted above are partially offset by a $93 million decrease due to the Powder River Basin divestiture in March 2022.

Natural gas, oil and NGL sales in the 2022 Successor Period increased $4,678 million compared to the combined 2021 Successor and Predecessor Periods. The increase includes $2,698 million due to increased sales volumes in Haynesville and Marcellus, which is primarily related to the Vine and Marcellus Acquisitions in November 2021 and March 2022, respectively. The increase due to volumes is partially offset by a $389 million decrease in Eagle Ford primarily due to a natural decline in production. The increase in sales also includes $2,528 million due to higher average prices received. The higher average prices are consistent with the upward trend in index prices for all products throughout the 2022 Successor Period. The increases noted above are partially offset by a $159 million decrease due to the Powder River Basin divestiture in March 2022.

~~Table of Contents~~

volumes.

Production Expenses

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
$/Mcfe $/Mcfe
Marcellus $ 22 0.12 $ 9 0.08
Haynesville 38 0.26 13 0.24
Eagle Ford 61 1.28 49 0.89
Powder River Basin — — 9 0.73
Total production expenses $ 121 0.32 $ 80 0.33


		Successor						Predecessor			Non-GAAP Combined
		Nine Months Ended September 30, 2022			Period from February 10, 2021 through September 30, 2021			Period from January 1, 2021 through February 9, 2021			Nine Months Ended September 30, 2021				Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
				$/Mcfe			$/Mcfe			$/Mcfe			$/Mcfe				$/Mcfe			$/Mcfe
Marcellus	Marcellus	$	54	0.11	$	23	0.08	$	4	0.08	$	27	0.08	Marcellus	$	24	0.13	$	13	0.10
Haynesville	Haynesville	109		0.25	30		0.23	4		0.19	34		0.22	Haynesville	47		0.34	32		0.22
Eagle Ford	Eagle Ford	176		1.22	120		0.82	21		0.71	141		0.80	Eagle Ford	60		1.23	55		1.15
Powder River Basin	Powder River Basin	10		0.94	21		0.68	3		0.56	24		0.66	Powder River Basin	—		—	10		0.94
Total production expenses	Total production expenses	$	349	0.32	$	194	0.32	$	32	0.30	$	226	0.32	Total production expenses	$	131	0.36	$	110	0.33

Production expenses induring the ~~2022 Successor Quarter~~first three months of 2023 increased ~~$41~~$21 million as compared to the ~~2021 Successor Quarter.~~first three months of 2022. The increase was primarily due to ~~the Vine Acquisition~~an increase in ~~November 2021 and the Marcellus Acquisition in March 2022, as well as additional~~saltwater disposal expenses, workovers and other preventative maintenance in Eagle ~~Ford. The increase was~~Ford and Haynesville, as well as the Marcellus Acquisition in March 2022. These increases were partially offset by the divestiture of the Powder River ~~Basin.~~

Production expenses in the 2022 Successor Period increased $123 million as compared to the combined 2021 Successor and Predecessor Periods. The increase was primarily due to the Vine Acquisition in November 2021 and the Marcellus AcquisitionBasin assets in March ~~2022, as well as additional workovers and other preventative maintenance in Eagle Ford. The increase was partially offset by the divestiture of the Powder River Basin.~~

~~Table of Contents~~

2022.

Gathering, Processing and Transportation Expenses

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
$/Mcfe $/Mcfe
Marcellus $ 106 0.58 $ 83 0.69
Haynesville 89 0.60 28 0.51
Eagle Ford 91 1.91 85 1.53
Powder River Basin — — 23 1.99
Total gathering, processing and
transportation expenses $ 286 0.76 $ 219 0.91

Successor Predecessor Non-GAAP Combined
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021 Nine Months Ended September 30, 2021
$/Mcfe $/Mcfe $/Mcfe $/Mcfe
Marcellus $ 282 0.57 $ 204 0.68 $ 34 0.70 $ 238 0.68
Haynesville 240 0.54 64 0.50 11 0.49 75 0.50
Eagle Ford 258 1.80 211 1.44 45 1.55 256 1.45
Powder River Basin 22 2.32 62 2.00 12 2.09 74 2.01
Total gathering, processing and
transportation expenses $ 802 0.74 $ 541 0.89 $ 102 0.96 $ 643 0.90


	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
			$/Mcfe			$/Mcfe
Marcellus	$	111	0.62	$	71	0.54
Haynesville	68		0.49	65		0.45
Eagle Ford	85		1.73	84		1.73
Powder River Basin	—		—	22		2.32
Total GP&T	$	264	0.72	$	242	0.72

Gathering, processing and transportation expenses induring the ~~2022 Successor Quarter~~first three months of 2023 increased ~~$67~~$22 million as compared to the ~~2021 Successor Quarter. Haynesville increased $61 million primarily due to the Vine Acquisition in November 2021.~~first three months of 2022. Marcellus increased ~~$35~~$40 million, primarily due to the Marcellus Acquisition in March 2022, ~~partially offset by~~while the divestiture of the Powder River Basin assets in March 2022 resulted in a decrease of $12 million primarily due to lower rates. Eagle Ford increased $6 million primarily due to increased rates, partially offset by reduced volumes primarily due to a natural decline in production. Powder River Basin decreased by $23 million due to the divestiture in March 2022.

Gathering, processing and transportation expenses in the 2022 Successor Period increased $159 million as compared to the combined 2021 Successor and Predecessor Periods. Haynesville increased $165 million primarily due to the Vine Acquisition in November 2021. Marcellus increased $82 million primarily due to the Marcellus Acquisition in March 2022, partially offset by a decrease of $38 million primarily due to lower rates. Eagle Ford increased $2 million primarily due to increased rates, partially offset by reduced volumes primarily due to a natural decline in production. Powder River Basin decreased by $52 million due to the divestiture in March 2022.$22 million.

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Severance and Ad Valorem Taxes

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
$/Mcfe $/Mcfe
Marcellus $ 5 0.03 $ 2 0.02
Haynesville 24 0.17 5 0.09
Eagle Ford 38 0.81 25 0.45
Powder River Basin — — 9 0.76
Total severance and ad valorem taxes $ 67 0.18 $ 41 0.17


		Successor						Predecessor			Non-GAAP Combined
		Nine Months Ended September 30, 2022			Period from February 10, 2021 through September 30, 2021			Period from January 1, 2021 through February 9, 2021			Nine Months Ended September 30, 2021				Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
				$/Mcfe			$/Mcfe			$/Mcfe			$/Mcfe				$/Mcfe			$/Mcfe
Marcellus	Marcellus	$	13	0.03	$	6	0.02	$	1	0.01	$	7	0.02	Marcellus	$	5	0.03	$	4	0.03
Haynesville	Haynesville	48		0.11	12		0.09	2		0.09	14		0.09	Haynesville	34		0.24	12		0.09
Eagle Ford	Eagle Ford	115		0.80	67		0.45	13		0.45	80		0.45	Eagle Ford	30		0.60	36		0.75
Powder River Basin	Powder River Basin	11		1.09	21		0.69	2		0.48	23		0.65	Powder River Basin	—		—	11		1.09
Total severance and ad valorem taxes	Total severance and ad valorem taxes	$	187	0.17	$	106	0.17	$	18	0.17	$	124	0.17	Total severance and ad valorem taxes	$	69	0.19	$	63	0.19

Severance and ad valorem taxes induring the ~~2022 Successor Quarter~~first three months of 2023 increased ~~$26~~$6 million as compared to the ~~2021 Successor Quarter. Improved pricing and increases~~first three months of 2022. Legislative action led to changes in the Haynesville ~~statutory~~ severance and ad valorem tax rates, which resulted in an increase of $20 million during the ~~2022 Successor Quarter drove $19 million~~first three months of ~~the increase, and an additional $16 million increase was the result of the Vine and Marcellus Acquisitions.~~2023. These increases were partially offset by ~~a $9~~an $11 million decrease attributable to the divestiture of the Powder River ~~Basin.~~

Severance and ad valorem taxes in the 2022 Successor Period increased $63 million as compared to the combined 2021 Successor and Predecessor Periods. Improved pricing and increases to the Haynesville statutory severance tax rates in the 2022 Successor Period drove $46 million of the increase, and an additional $29 million increase was the result of the Vine and Marcellus Acquisitions. These increases were partially offset by a $12 million decrease attributable to the divestiture of the Powder River Basin.Basin assets.

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Adjusted Gross Margin by Operating Area

The tables below present the adjusted gross margin for each of our operating areas. Adjusted gross margin is defined as natural gas, oil and NGL sales less production expenses, gathering, processing and transportation expenses, and severance and ad valorem taxes. Adjusted gross margin is a non-GAAP measure, and a reconciliation of gross margin to adjusted gross margin is presented within the “Non-GAAP Measures” section of this Item 2.

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
$/Mcfe $/Mcfe
Marcellus $ 1,191 6.52 $ 289 2.41
Haynesville 942 6.37 161 2.97
Eagle Ford 380 7.99 328 5.96
Powder River Basin — — 52 4.43
Adjusted gross margin $ 2,513 6.64 $ 830 3.45


		Successor						Predecessor			Non-GAAP Combined
		Nine Months Ended September 30, 2022			Period from February 10, 2021 through September 30, 2021			Period from January 1, 2021 through February 9, 2021			Nine Months Ended September 30, 2021				Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
				$/Mcfe			$/Mcfe			$/Mcfe			$/Mcfe				$/Mcfe			$/Mcfe
Marcellus	Marcellus	$	2,736	5.56	$	539	1.79	$	80	1.63	$	619	1.77	Marcellus	$	477	2.69	$	521	3.99
Haynesville	Haynesville	2,336		5.26	295		2.29	36		1.67	331		2.20	Haynesville	253		1.81	543		3.70
Eagle Ford	Eagle Ford	1,225		8.53	819		5.57	114		4.00	933		5.32	Eagle Ford	259		5.26	379		7.81
Powder River Basin	Powder River Basin	56		6.31	121		3.88	16		2.58	137		3.68	Powder River Basin	—		—	56		6.31
Adjusted gross margin	Adjusted gross margin	$	6,353	5.84	$	1,774	2.93	$	246	2.34	$	2,020	2.84	Adjusted gross margin	$	989	2.70	$	1,499	4.48

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Natural Gas and Oil Derivatives

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Natural gas derivatives - realized losses $ (1,096) $ (163)
Natural gas derivatives - unrealized losses (110) (681)
Total losses on natural gas derivatives $ (1,206) $ (844)
Oil derivatives - realized losses $ (132) $ (128)
Oil derivatives - unrealized gains 309 62
Total gains (losses) on oil derivatives 177 (66)
Total losses on natural gas and oil derivatives $ (1,029) $ (910)

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Natural gas derivatives - realized gains (losses) $ (2,381) $ (179) $ 6
Natural gas derivatives - unrealized losses (1,046) (985) (179)
Total losses on natural gas derivatives $ (3,427) $ (1,164) $ (173)
Oil derivatives - realized losses $ (480) $ (302) $ (19)
Oil derivatives - unrealized gains (losses) 239 (138) (190)
Total losses on oil derivatives (241) (440) (209)
Total losses on natural gas and oil derivatives $ (3,668) $ (1,604) $ (382)


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Natural gas derivatives - realized losses	$	(140)	$	(428)
Natural gas derivatives - unrealized gains (losses)	1,021		(1,372)
Total gains (losses) on natural gas derivatives	$	881	$	(1,800)

Oil derivatives - realized losses	$	(49)	$	(159)
Oil derivatives - unrealized gains (losses)	98		(166)
Total gains (losses) on oil derivatives	49		(325)
Total gains (losses) on natural gas and oil derivatives	$	930	$	(2,125)

See Note 131 1 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of our derivative activity.

General and Administrative Expenses


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022

Total G&A, net	$	35	$	26
G&A, net per Mcfe	$	0.09	$	0.08

Total general and administrative expenses, net during the first three months of 2023 increased $9 million compared to the first three months of 2022, primarily due to adjustments in employee benefits and compensation as well as increases in other corporate expenses.

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~~General and Administrative Expenses~~

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Gross compensation and benefits $ 75 $ 68
Non-labor 34 24
Allocations and reimbursements (69) (62)
Total G&A, net $ 40 $ 30
G&A, net per Mcfe $ 0.11 $ 0.12

Successor Predecessor
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021
Gross compensation and benefits $ 219 $ 162 $ 32
Non-labor 89 60 12
Allocations and reimbursements (206) (153) (23)
Total G&A, net $ 102 $ 69 $ 21
G&A, net per Mcfe $ 0.09 $ 0.11 $ 0.20

Gross compensation and benefits and non-labor expenses during the 2022 Successor Quarter and 2022 Successor Period increased $17 million and $42 million compared to the 2021 Successor Quarter and the combined 2021 Successor and Predecessor Periods, respectively, primarily due to adjustments in employee benefits and compensation and timing of stock award grants as well as increases in transaction-related fees.

Allocations and reimbursements during the 2022 Successor Quarter and the 2022 Successor Period increased $7 million and $30 million compared to the 2021 Successor Quarter and the combined 2021 Successor and Predecessor Periods, respectively, primarily due to increased drilling and production activity due to the Vine and Marcellus Acquisitions.

~~Separation and Other Termination Costs~~

During the 2021 Successor Period and 2021 Predecessor Period, we recognized $11 million and $22 million, respectively, of separation and other termination costs related to one-time termination benefits for certain employees. We did not recognize any separation and other termination costs for the 2022 Successor Quarter, 2022 Successor Period or 2021 Successor Quarter.

Depreciation, Depletion and Amortization


		Successor								Predecessor
		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Period from February 10, 2021 through September 30, 2021		Period from January 1, 2021 through February 9, 2021			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
DD&A	DD&A	$	440	$	228	$	1,300	$	579	$	72	DD&A	$	390	$	409
DD&A per Mcfe	DD&A per Mcfe	$	1.16	$	0.95	$	1.19	$	0.95	$	0.68	DD&A per Mcfe	$	1.06	$	1.22

The absolute and per unit ~~increases~~decreases in depreciation, depletion and amortization for the ~~2022 Successor Quarter and 2022 Successor Period~~first three months of 2023 compared to the ~~2021 Successor Quarter and the combined 2021 Successor and Predecessor Periods, respectively,~~first three months of 2022, are primarily related to our Eagle Ford divestitures, partially offset by an increase related to the ~~result of the Vine and~~ Marcellus ~~Acquisitions.~~Acquisition in March 2022. We cease recording depreciation on assets that are classified as held for sale.

~~Table of Contents~~

Other Operating Expense, ~~(Income),~~ Net


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Other operating expense, net	$	3	$	23

During the first three months of 2022, ~~Successor Period,~~ we recognized approximately ~~$40~~$23 million of costs related to our Marcellus Acquisition, which included ~~integration costs,~~ consulting fees, financial advisory fees, legal fees and change in control expense in accordance with Chief’s existing employment agreements.

Interest Expense

Successor
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Interest expense on debt $ 49 $ 19
Other 13 —
Amortization of premium, discount, issuance costs and other (1) 1
Capitalized interest (9) (3)
Total interest expense $ 52 $ 17


		Successor								Predecessor
		Nine Months Ended September 30, 2022				Period from February 10, 2021 through September 30, 2021				Period from January 1, 2021 through February 9, 2021			Three Months Ended March 31, 2023			Three Months Ended March 31, 2022

Interest expense on debt	Interest expense on debt			$	131			$	50				$	11	Interest expense on debt			$	46	$	38
Other		13				—				—
Amortization of premium, discount, issuance costs and other		(2)				4				—

Amortization of premium, issuance costs and other												Amortization of premium, issuance costs and other	(2)			(1)
Capitalized interest	Capitalized interest	(22)				(7)				—		Capitalized interest	(7)			(5)
Total interest expense	Total interest expense	$	120			$	47			$	11	Total interest expense	$	37		$	32

The increase in total interest expense induring the ~~2022 Successor Quarter and 2022 Successor Period~~first three months of 2023 compared to the ~~2021 Successor Quarter and the combined 2021 Successor and Predecessor Periods, respectively,~~first three months of 2022 was primarily due to ~~the increase in~~higher average debt outstanding ~~debt obligations~~ between periods. In November 2021, we assumed Vine’s $950 million of senior notes as part of the Vine Acquisition, and during the 2022 Successor Quarter and 2022 Successor Period, we had increased borrowings under our Exit Credit Facility, as part of the Marcellus acquisition, compared to the 2021 Successor Quarter and the combined 2021 Successor and Predecessor Periods, respectively. During the 2022 Successor Quarter and 2022 Successor Period, borrowings under the Exit Credit Facility had an average interest rate of 6.6% and 6.0%, respectively. Additionally, $12 million of interest expense was recorded during the 2022 Successor Quarter pertaining to a tax interest assessment.

~~Table of Contents~~

~~Reorganization Items, Net~~


	~~Predecessor~~
	~~Period from January 1, 2021 through February 9, 2021~~
~~Gains on the settlement of liabilities subject to compromise~~	$	~~6,443~~
~~Accrual for allowed claims~~	~~(1,002)~~
~~Gain on fresh start adjustments~~	~~201~~
~~Gain from release of commitment liabilities~~	55
~~Professional service provider fees and other~~	~~(60)~~
~~Success fees for professional service providers~~	~~(38)~~
~~Surrender of other receivable~~	~~(18)~~
~~FLLO alternative transaction fee~~	~~(12)~~
~~Total reorganization items, net~~	$	~~5,569~~

~~In the 2021 Predecessor Period, we recorded a net gain of $5.569 billion in reorganization items, net related to the Chapter 11 Cases. See~~ ~~Note 2~~ ~~and~~ ~~Note 3~~ of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of the Chapter 11 Cases and for discussion of adoption of fresh start accounting. We did not have any reorganization items, net for the 2022 Successor Quarter, the 2022 Successor Period, the 2021 Successor Quarter or the 2021 Successor Period.

Income Taxes

Income tax expense ~~of $105~~was $404 million ~~was recorded~~ for the ~~2022 Successor Period.~~first three months of 2023. Of this amount, ~~$84~~$26 million iswas the result of projecting current federal and state income taxes, ~~and $19 million is related to an increase to the valuation allowance~~predominately as a result of taxable gains on closed divestitures, and the ~~adjustment~~remainder is related to ~~the~~projections of deferred ~~tax liability determined through business combination accounting for the acquisition of Vine.~~federal and state income taxes. An income tax benefit of ~~$10~~$46 million was recorded ~~for~~during the ~~2021 Successor Period and an income~~first three months of 2022. A tax benefit ~~of $57 million~~ was recorded ~~for~~during the ~~2021 Predecessor Period.~~first three months of 2022 due to the application of our estimated annual effective tax rate to the book net loss before income taxes recorded during the first three months of 2022. Our effective income tax was 22.5% and 5.7% during the first three months of 2023 and 2022, respectively. The fluctuation in the effective tax rate ~~was 7.2% for~~is mainly because we are no longer maintaining a full valuation allowance against our deferred tax assets during the ~~2022 Successor Period, 2.0% for~~first three months of 2023 as we were during the ~~2021 Successor Period, and (1.1%) for the 2021 Predecessor Period.~~first three months of 2022. Our effective tax rate can also fluctuate as a result of the impact of discrete items, state income taxes and permanent differences. See Note 1 08 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of income taxes.

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Non-GAAP Measures

Management uses adjusted gross margin to assess our operating results and financial performance across assets and periods. We define adjusted gross margin as natural gas, oil and NGL sales less production expenses, gathering, processing and transportation expenses, and severance and ad valorem taxes.

Adjusted gross margin is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Additionally, adjusted gross margin may not be comparable to similarly titled measures used by other companies. We exclude depreciation, depletion and amortization from the calculation of adjusted gross margin as depreciation, depletion and amortization are non-cash expenses that do not necessarily reflect present-day performance. The ~~tables~~table below ~~reconcile~~reconciles gross margin, as defined by GAAP, to adjusted gross margin.


		Successor
		Three Months Ended September 30, 2022		Three Months Ended September 30, 2021			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022

Gross margin (GAAP)	Gross margin (GAAP)							Gross margin (GAAP)
Natural gas, oil and NGL sales	Natural gas, oil and NGL sales	$	2,987	$	1,170	Natural gas, oil and NGL sales	$	1,453	$	1,914
Less:	Less:					Less:
Production		(121)		(80)
Gathering, processing and transportation		(286)		(219)
Production expenses						Production expenses	(131)		(110)
Gathering, processing and transportation expenses						Gathering, processing and transportation expenses	(264)		(242)
Severance and ad valorem taxes	Severance and ad valorem taxes	(67)		(41)		Severance and ad valorem taxes	(69)		(63)
Depreciation, depletion and amortization	Depreciation, depletion and amortization	(440)		(228)		Depreciation, depletion and amortization	(390)		(409)
Gross margin (GAAP)	Gross margin (GAAP)	2,073		602		Gross margin (GAAP)	599		1,090
Add back: Depreciation, depletion and amortization	Add back: Depreciation, depletion and amortization	440		228		Add back: Depreciation, depletion and amortization	390		409
Adjusted gross margin (Non-GAAP)	Adjusted gross margin (Non-GAAP)	$	2,513	$	830	Adjusted gross margin (Non-GAAP)	$	989	$	1,499

Successor Predecessor Non-GAAP Combined
Nine Months Ended September 30, 2022 Period from February 10, 2021 through
September 30, 2021 Period from January 1, 2021 through February 9, 2021 Nine Months Ended September 30, 2021
Gross margin (GAAP)
Natural gas, oil and NGL sales $ 7,691 $ 2,615 $ 398 $ 3,013
Less:
Production (349) (194) (32) (226)
Gathering, processing and transportation (802) (541) (102) (643)
Severance and ad valorem taxes (187) (106) (18) (124)
Depreciation, depletion and amortization (1,300) (579) (72) (651)
Gross margin (GAAP) 5,053 1,195 174 1,369
Add back: Depreciation, depletion and amortization 1,300 579 72 651
Adjusted gross margin (Non-GAAP) $ 6,353 $ 1,774 $ 246 $ 2,020

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Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include our current expectations or forecasts of future events, including matters relating to the continuing effects of the impact of inflation and commodity price volatility resulting from Russia’s invasion of Ukraine, COVID-19 and related supply chain constraints, and the impact of each on our business, financial condition, results of operations and cash flows, the potential effects of the Plan on our operations, management, and employees, actions by, or disputes among or between, members of OPEC+ and other foreign oil-exporting countries, market factors, market prices, our ability to meet debt service requirements, our ability to continue to pay cash dividends, the amount and timing of any cash dividends, and our ESG initiatives. Forward-looking and other statements in this Form 10-Q regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. ~~In this context, forward-looking~~Forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as "expect," “could,” “may,” "anticipate," "intend," "plan," “ability,” "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “guidance,” “outlook,” “opportunity” or “strategy.”

Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

•the ~~ability to execute on our business strategy following emergence from bankruptcy;~~

•~~the~~ impact of inflation and commodity price volatility resulting from Russia’s invasion of Ukraine, COVID-19 and related labor and supply chain constraints, along with the ~~effect~~effects of the current global economic environment, including impacts from higher interest rates and recent bank closures and liquidity concerns at certain financial institutions, on our business, financial condition, employees, contractors, vendors and the global demand for natural gas and oil and U.S. and on world financial markets;

•risks related to the Vine Acquisition, including our ability to successfully integrate the business of Vine into the Company and achieve the expected synergies from the Vine Acquisition within the expected timeframe;

•risks related to the Marcellus Acquisition, including our ability to successfully integrate the business of Chief into the Company and achieve the expected synergies from the Marcellus Acquisition within the expected timeframe;

•our ability to comply with the covenants under the credit agreement for our ~~Exit~~New Credit Facility and other indebtedness;

•risks related to acquisitions or dispositions, or potential acquisitions or dispositions;

•our ability to realize anticipated cash cost reductions;

•the volatility of natural gas, oil and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles;

•a deterioration in general economic, business or industry conditions;

•uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;

•our ability to replace reserves and sustain production;

•drilling and operating risks and resulting liabilities;

•our ability to generate profits or achieve targeted results in drilling and well operations;

•the limitations our level of indebtedness may have on our financial flexibility;

•our ability to achieve and maintain ESG ~~certifications/goals;~~certifications, goals and commitments;

•our inability to access the capital markets on favorable terms;

•the availability of cash flows from operations and other funds to fund cash dividends and repurchases of equity securities, to finance reserve replacement costs and/or satisfy our debt obligations;

•write-downs of our natural gas and oil asset carrying values due to low commodity prices;

~~Table of Contents~~

•charges incurred in response to market conditions;

•limited control over properties we do not operate;

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•leasehold terms expiring before production can be established;

•commodity derivative activities resulting in lower prices realized on natural gas, oil and NGL sales;

•the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations;

•potential OTC derivatives regulations limiting our ability to hedge against commodity price fluctuations;

•adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims;

•our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used;

•pipeline and gathering system capacity constraints and transportation interruptions;

•legislative, regulatory and ESG initiatives, addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal;

•terrorist activities and/or cyber-attacks adversely impacting our operations;

•an interruption in operations at our headquarters due to a catastrophic event;

•federal and state tax proposals affecting our industry;

•competition in the natural gas and oil exploration and production industry;

•negative public perceptions of our industry;

•effects of purchase price adjustments and indemnity obligations;

•the ability to execute on our business strategy following emergence from bankruptcy; and

•other factors that are described under Risk Factors in Item 1A of our ~~2021~~202 2 Form 10-K ~~and~~ ~~Risk Factors~~ ~~in Item 1A of Part II of this report.~~.

We caution you not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the filing date, and we undertake no obligation to update this information. We urge you to carefully review and consider the disclosures in this report and our other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business.


Information About Us

Investors should note that we make available, free of charge on our website at chk.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also ~~furnish quarterly, annual, and current reports for certain of our subsidiaries free of charge on our website at chk.com. We also~~ post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. We may use the Investors section of our website to communicate with investors. It is possible that the financial and other information posted on the Investors section of our website could be deemed to be material information. Documents and information on our website are not incorporated by reference herein.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including Chesapeake, that file electronically with the SEC.

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ITEM 3.			Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our exposure to market risk. The term market risk relates to our risk of loss arising from adverse changes in natural gas, oil and NGL prices and interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

Commodity Price Risk

Our results of operations and cash flows are impacted by changes in market prices for natural gas, oil and NGL, which have historically been volatile. To mitigate a portion of our exposure to adverse price changes, we enter into various derivative instruments. Our natural gas, oil and NGL derivative activities, when combined with our sales of natural gas, oil and NGL, allow us to predict with greater certainty the revenue we will receive. We believe our derivative instruments continue to be highly effective in achieving our risk management objectives.

We determine the fair value of our derivative instruments utilizing established index prices, volatility curves and discount factors. These estimates are compared to counterparty valuations for reasonableness. Derivative transactions are also subject to the risk that counterparties will be unable to meet their obligations. This non-performance risk is considered in the valuation of our derivative instruments, but to date has not had a material impact on the values of our derivatives. Future risk related to counterparties not being able to meet their obligations has been partially mitigated under our commodity hedging arrangements that require counterparties to post collateral if their obligations to us are in excess of defined thresholds. The values we report in our financial statements are as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. See Note 131 1 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of the fair value measurements associated with our derivatives.

~~For the 2022 Successor Period,~~Our natural gas, oil and NGL ~~revenue,~~revenues during the first three months of 2023, excluding any effect of our derivative instruments, were ~~$6,049~~$1,042 million, ~~$1,456~~$373 million and ~~$186~~$38 million, respectively. Based on production, natural gas, oil and NGL revenue for the ~~2022 Successor Period~~first three months of 2023 would have increased or decreased by approximately ~~$605~~$104 million, ~~$146~~$37 million, and ~~$19~~$4 million, respectively, for each 10% increase or decrease in prices. As of ~~September 30, 2022,~~March 31, 2023, the fair values of our natural gas and oil derivatives were net ~~liabilities~~assets of ~~$2,172~~$508 million and ~~$118~~$11 million, respectively. A 10% increase in forward natural gas prices would decrease the valuation of natural gas derivatives by approximately ~~$459~~$256 million. A 10% decrease in forward natural gas prices would increase the valuation of natural gas derivatives by approximately ~~$454~~$260 million. A 10% increase in forward oil prices would decrease the valuation of oil derivatives by approximately ~~$71~~$8 million. A 10% decrease in forward oil prices would increase the valuation of oil derivatives by approximately ~~$71~~$9 million. See Note 131 1 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further information on our open derivative positions.

Interest Rate Risk

Our exposure to interest rate changes relates primarily to borrowings under our New Credit Facility for the first three months of 2023 and the Exit Credit Facility for the ~~2022 and 2021 Successor Periods and pre-petition revolving credit facility and DIP Facility for the 2021 Predecessor Period.~~first three months of 2022. Interest is payable on borrowings under ~~the Exit Credit Facility, pre-petition revolving~~each respective credit facility ~~and DIP Facility~~ based on floating rates. See Note 6 4 of the notes to our condensed consolidated financial statements included in Item 1 of Part 1 of this report for additional information. As of ~~September 30, 2022,~~March 31, 2023, we ~~had $450 million in~~did not have any outstanding borrowings under our ~~Exit~~New Credit Facility - Tranche A Loans and $221 million under our Exit Credit Facility - Tranche B Loans. A 1.0% increase in interest rates based on the variable borrowings as of September 30, 2022 would result in an increase in our interest expense of approximately $7 million per year.Facility.

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ITEM 4.			Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of ~~September 30, 2022~~March 31, 2023 that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1.			Legal Proceedings

~~Chapter 11 Proceedings~~

Litigation and Regulatory Proceedings

We were involved in a number of litigation and regulatory proceedings as of the Petition Date. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is currently indeterminate. See ~~Note 7~~ of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for information regarding our estimation and provision for potential losses related to litigation and regulatory proceedings.

~~Business Operations.~~

We are involved in various pre-petition lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. The majority of these prepetition legal proceedings were settled during the Chapter 11 Cases or will be resolved in connection with the claims reconciliation process before the Bankruptcy ~~Court.~~Court, together with actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. Any allowed claim related to such ~~prepetition~~ litigation will be treated in accordance with the Plan. We were involved in a number of litigation and regulatory proceedings as of the Petition Date. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is currently indeterminate. See Note 5 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for information regarding our estimation and provision for potential losses related to litigation and regulatory proceedings. Commencement of the Chapter 11 Cases automatically stayed the proceedings and actions against us that are referred to above. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases.

Environmental Contingencies

The nature of the ~~oil~~natural gas and ~~gas~~oil business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property.

Other Matters

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ITEM 1A.			Risk Factors

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock are described under “Risk Factors” in Item 1A of our ~~2021 Form 10-K~~202 ~~and the additional risk factor provided below, which supplements the risk factors included in our~~ ~~2021~~2 Form 10-K. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.

~~The conflict in Ukraine and related price volatility and geopolitical instability could negatively impact our business~~.

In late February 2022, Russia launched significant military action against Ukraine. The conflict has caused, and could intensify, volatility in natural gas, oil and NGL prices, and the extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time. Any such volatility and disruptions may also magnify the impact of other risks described under “Risk Factors” in Item 1A of our ~~2021 Form 10-K~~.


ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Equity Securities

On December 2, 2021, we announced that our Board of Directors authorized the repurchase of up to $1.0 billion in aggregate value of our common stock and/or warrants from time to time. In June 2022, our Board of Directors authorized an increase in the size of the share repurchase program from $1.0 billion to $2.0 billion in aggregate value of our common stock and/or warrants. The repurchase authorization permits repurchases on a discretionary basis as determined by management, subject to market conditions, applicable legal requirements, available liquidity, compliance with the Company’s debt agreements and other appropriate factors. The share repurchase program expires on December 31, 2023. The following table provides information regarding purchases of our common stock made by us during the quarter ended ~~September 30, 2022.~~March 31, 2023.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1 - July 31 749,600 $ 92.14 749,600 $ 1,333
August 1 - August 31 — $ — — $ 1,333
September 1 - September 30 — $ — — $ 1,333
Total 749,600 $ 92.14 749,600


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
January 1 - January 31	—	$	—	—	$	927
February 1 - February 28	—	$	—	—	$	927
March 1 - March 31	792,543	$	74.95	792,543	$	867
Total	792,543	$	74.95	792,543


ITEM 3.			Defaults Upon Senior Securities

None.


ITEM 4.			Mine Safety Disclosures

The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Form 10-Q. On March 20, 2023, we divested our mining assets to WildFire Energy I LLC.


ITEM 5.			Other Information

Not applicable.

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ITEM 6.			Exhibits

The exhibits listed below in the Index of Exhibits are filed, furnished or incorporated by reference pursuant to the requirements of Item 601 of Regulation S-K.

INDEX OF EXHIBITS

Incorporated by Reference
Exhibit
Number
Exhibit Description Form
SEC File
Number
Exhibit Filing Date
Filed or
Furnished
Herewith
2.1
Fifth Amended Joint Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (Exhibit A of the Confirmation Order).
8-K 001-13726 2.1 1/19/2021
2.2
Agreement and Plan of Merger, dated as of August 10, 2021, by and among Chesapeake Energy Corporation, Hannibal Merger Sub, Inc., Hannibal Merger Sub, LLC, Vine Energy Inc. and Vine Energy Holdings LLC.
8-K 001-13726 2.1 8/11/2021
2.3
Partnership Interest Purchase Agreement by and among The Jan & Trevor Rees-Jones Revocable Trust, Rees-Jones Family Holdings, LP, Chief E&D Participants, LP, and Chief E&D (GP) LLC (collectively, as Sellers) and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.
10-K 001-13726 10.36 2/24/2022
2.4
Membership Interest Purchase Agreement by and among Radler 2000 Limited Partnership and Tug Hill, Inc., together as Sellers, and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.
10-K 001-13726 10.37 2/24/2022
2.5
Membership Interest Purchase Agreement by and among Radler 2000 Limited Partnership and Tug Hill, Inc., together as Sellers, and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.
10-K 001-13726 10.38 2/24/2022
3.1
Second Amended and Restated Certificate of Incorporation of Chesapeake Energy Corporation.
8-K 001-13726 3.1 2/9/2021
3.2
Second Amended and Restated Bylaws of Chesapeake Energy Corporation.
8-K 001-13726 3.2 2/9/2021
10.1
Form of Dealer Manager Agreement in connection with exchange offers for Warrant s.
S-4 333-266961 10.34 8/18/2022
10.2
Form of Tender and Support Agreement, dated September 12, 2022, in connection with exchange offers for Warran t.
S-4/A 333-266961 10.35 9/12/2022
31.1
Domenic J. Dell’Osso, Jr., President and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Domenic J. Dell’Osso Jr., President and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
95.1
Mine Safety Disclosur e.
X

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

SEC File

Number

Exhibit

Filing Date

Filed or

Furnished

Herewith

2.1

Fifth Amended Joint Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (Exhibit A of the Confirmation Order).

8-K

001-13726

2.1

1/19/2021

2.2

Agreement and Plan of Merger, dated as of August 10, 2021, by and among Chesapeake Energy Corporation, Hannibal Merger Sub, Inc., Hannibal Merger Sub, LLC, Vine Energy Inc. and Vine Energy Holdings LLC.

8-K

001-13726

2.1

8/11/2021

2.3

Partnership Interest Purchase Agreement by and among The Jan & Trevor Rees-Jones Revocable Trust, Rees-Jones Family Holdings, LP, Chief E&D Participants, LP, and Chief E&D (GP) LLC (collectively, as Sellers) and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.

10-K

001-13726

10.36

2/24/2022

2.4

Membership Interest Purchase Agreement by and among Radler 2000 Limited Partnership and Tug Hill, Inc., together as Sellers, and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.

10-K

001-13726

10.37

2/24/2022

2.5

10-K

001-13726

10.38

2/24/2022

3.1

Second Amended and Restated Certificate of Incorporation of Chesapeake Energy Corporation.

8-K

001-13726

3.1

2/9/2021

3.2

Second Amended and Restated Bylaws of Chesapeake Energy Corporation.

8-K

001-13726

3.2

2/9/2021

31.1

Domenic J. Dell’Osso, Jr., President and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Domenic J. Dell’Osso Jr., President and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95.1

Mine Safety Disclosure.

101 INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

SEC File

Number

Exhibit

Filing Date

Filed or

Furnished

Herewith

~~101 INS~~

~~Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

101 SCH

Inline XBRL Taxonomy Extension Schema Document.

101 CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101 DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101 LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101 PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CHESAPEAKE ENERGY CORPORATION

Date: ~~November 1, 2022~~May 2, 2023	By:	/s/ DOMENIC J. DELL’OSSO, JR.
		Domenic J. Dell’Osso, Jr. President and Chief Executive Officer

Date: ~~November 1, 2022~~May 2, 2023	By:	/s/ MOHIT SINGH
		Mohit Singh Executive Vice President and Chief Financial Officer

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	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income		Total Stockholders' Equity
Balance as of December 31, 2021 (Successor)	—	$	—	117,917,349	$	1	$	4,845	$	825	$	—	$	5,671
Issuance of common stock for Marcellus Acquisition	—	—		9,442,185	—		764		—		—		764
Share-based compensation	—	—		23,169	—		5		—		—		5
Issuance of common stock for warrant exercise	—	—		669,669	—		1		—		—		1
Repurchase and retirement of common stock	—	—		(1,000,000)	—		—		(83)		—		(83)
Net loss	—	—		—	—		—		(764)		—		(764)
Dividends on common stock	—	—		—	—		—		(211)		—		(211)
Balance as of March 31, 2022 (Successor)	—	$	—	127,052,372	$	1	$	5,615	$	(233)	$	—	$	5,383
Share-based compensation	—	—		146,054	—		3		—		—		3
Issuance of common stock for warrant exercise	—	—		166,606	—		1		—		—		1
Issuance of reserved common stock and warrants	—	—		36,951	—		—		—		—		—
Repurchase and retirement of common stock	—	—		(5,811,727)	—		—		(515)		—		(515)
Net income	—	—		—	—		—		1,237		—		1,237
Dividends on common stock	—	—		—	—		—		(301)		—		(301)
Balance as of June 30, 2022 (Successor)	—	$	—	121,590,256	$	1	$	5,619	$	188	$	—	$	5,808
Share-based compensation	—	—		991	—		7		—		—		7
Issuance of common stock for warrant exercise	—	—		493,016	—		1		—		—		1

Repurchase and retirement of common stock	—	—		(749,600)	—		—		(69)		—		(69)
Net income	—	—		—	—		—		883		—		883
Dividends on common stock	—	—		—	—		—		(283)		—		(283)
Balance as of September 30, 2022 (Successor)	—	$	—	121,334,663	$	1	$	5,627	$	719	$	—	$	6,347


	Predecessor		Reorganization Adjustments			Fresh Start Adjustments			Successor

Assets
Current assets:
Cash and cash equivalents	$	243	$	(203)	(a)	$	—		$	40
Restricted cash	—		86		(b)	—			86
Accounts receivable, net	861		(18)		(c)	—			843
Short-term derivative assets	—		—			—			—
Other current assets	66		(5)		(d)	—			61
Total current assets	1,170		(140)			—			1,030
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties	25,794		—			(21,108)		(o)	4,686
Unproved properties	1,546		—			(1,063)		(o)	483
Other property and equipment	1,755		—			(1,256)		(o)	499
Total property and equipment	29,095		—			(23,427)		(o)	5,668
Less: accumulated depreciation, depletion and amortization	(23,877)		—			23,877		(o)	—
Property and equipment held for sale, net	9		—			(7)		(o)	2
Total property and equipment, net	5,227		—			443		(o)	5,670
Other long-term assets	198		—			(84)		(p)	114
Total assets	$	6,595	$	(140)		$	359		$	6,814


Payment Date	Stockholders of Record Date	Dividend Payment		Rate Per Share
March 22, 2022	March 7, 2022	$	210	$	1.7675
June 2, 2022	May 19, 2022	$	298	$	2.34
September 1, 2022	August 17, 2022	$	280	$	2.32


	Unvested Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Unvested as of December 31, 2020	1	$	616.57
Granted	—	$	—
Vested	—	$	—
Forfeited/canceled	(1)	$	611.47
Unvested as of February 9, 2021	—	$	—


	Number of Shares Underlying Options	Weighted Average Exercise Price Per Share		Weighted Average Contract Life in Years	Aggregate Intrinsic Value(a)
	(in thousands)
Outstanding as of December 31, 2020	20	$	1,429.11	4.27	$	—
Granted	—	$	—
Exercised	—	$	—		$	—
Expired	(1)	$	741.86
Forfeited/canceled	(19)	$	1,452.40
Outstanding as of February 9, 2021	—	$	—	—	$	—
Exercisable as of February 9, 2021	—	$	—	—	$	—


	Predecessor
	Period from January 1, 2021 through February 9, 2021

	Before Tax		After Tax
Balance, beginning of period	$	(12)	$	45
Losses reclassified to income(a)	3		3
Fresh start adjustments	9		9
Elimination of tax effects	—		(57)
Balance, end of period	$	—	$	—


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	SEC File Number	Exhibit	Filing Date	Filed or Furnished Herewith
2.1	Fifth Amended Joint Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (Exhibit A of the Confirmation Order).	8-K	001-13726	2.1	1/19/2021

2.2	Agreement and Plan of Merger, dated as of August 10, 2021, by and among Chesapeake Energy Corporation, Hannibal Merger Sub, Inc., Hannibal Merger Sub, LLC, Vine Energy Inc. and Vine Energy Holdings LLC.	8-K	001-13726	2.1	8/11/2021

2.3	Partnership Interest Purchase Agreement by and among The Jan & Trevor Rees-Jones Revocable Trust, Rees-Jones Family Holdings, LP, Chief E&D Participants, LP, and Chief E&D (GP) LLC (collectively, as Sellers) and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.	10-K	001-13726	10.36	2/24/2022

2.4	Membership Interest Purchase Agreement by and among Radler 2000 Limited Partnership and Tug Hill, Inc., together as Sellers, and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.	10-K	001-13726	10.37	2/24/2022

2.5	Membership Interest Purchase Agreement by and among Radler 2000 Limited Partnership and Tug Hill, Inc., together as Sellers, and Chesapeake Energy Corporation and its affiliates, dated as of January 24, 2022.	10-K	001-13726	10.38	2/24/2022

3.1	Second Amended and Restated Certificate of Incorporation of Chesapeake Energy Corporation.	8-K	001-13726	3.1	2/9/2021

3.2	Second Amended and Restated Bylaws of Chesapeake Energy Corporation.	8-K	001-13726	3.2	2/9/2021

10.1	Form of Dealer Manager Agreement in connection with exchange offers for Warrant s.	S-4	333-266961	10.34	8/18/2022

10.2	Form of Tender and Support Agreement, dated September 12, 2022, in connection with exchange offers for Warran t.	S-4/A	333-266961	10.35	9/12/2022

31.1	Domenic J. Dell’Osso, Jr., President and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X

31.2	Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X

32.1	Domenic J. Dell’Osso Jr., President and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

32.2	Mohit Singh, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

95.1	Mine Safety Disclosur e.					X