CHK - Earnings call transcript Q4 2017 | Chesapeake Energy Corporation

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Operator

Good day, everyone, and welcome to the Chesapeake Energy Corporation Q4 2017 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brad Sylvester. Please go ahead, sir.

Brad Sylvester

you and our XXXX operational and year. thank discuss today fourth and full financial Chesapeake's results morning for call joining to quarter Good for the and chance to posted website this our Hopefully, that our to had Investor Presentation a press you've release the morning. updated we review

future statements, forecasts, in regarding confirmed a and this to required including that, with help by update that performance our During such Please should forward-looking the across existing may place peers. call, projections factors applicable and our statements forward-looking such of information, by any in note which statements, you results not identified that no from will we comparisons reliance financial non-GAAP differ consist morning's statements to and SEC beliefs, number undue will reference except forward-looking expectations, goals, other that and recognize and discussed making including duty underlying materially Please as our assumptions periods be which cannot measures, factors facilitate we today law, the also some actual on of undertake filings. be cause and refer to statements. to are there We statements, release statements. earnings

over a the before of Pigott. results Jason for over measures our Lawler, and measure release. non-GAAP With Patterson, Doug begin teleconference on use, can any me website for call turn are then Frank we will review the in GAAP to Nick earnings the our Q&A. we call For Dell'Osso, the and call to Nick be Doug a our nearest corresponding reconciliation and found turn financial on the today

over I thank the turn to that, you, will now with So, Doug. and teleconference

Robert Douglas Lawler

value-generating all for competitive another of strong and Brad, XXXX our to morning. that transform to commodity and company. as Chesapeake you, offer will returns Thank volatility we price building resilient our We continued a to enterprise committed be foundational year remain aspects was for investors. good

have strategies Today, exploration; business X,XXX discipline; important made on enhancing margins our to XXXX. driven challenging free in employees priorities We cash this financial our debt priorities, demonstrated asset billion and proud Chesapeake growth; minimal our pricing during and not believe billion company. achieving toward sales balance $X eliminating changed. again of: profitable efficient once reaching flow. and of three, environment two, sheet, our billion other our net strongly development, from all our of approximately and progress are toward $X.X all cash improvements focused in top three flow. three the one, Our achieving business accomplishments four, positive and transformational to $X depth closing that by I'm had no We portfolio second of associated are

roughly debt our than term $X.XX or by X% oil also by annual cost We $X.X our our per on We structure overall while or production capital to reducing X% oil secured basis, structure XX%. $XXX approximately simplify equivalent. approximately reducing our sales, adjusting by importantly for enhanced approximately and barrel year-over-year million asset by growing by billion more an margins, continued production

through our operating industry-leading our lengths on improved with all record performance We gains across and XXXX. plays in legal completions. lateral reduce continued enhanced and employees performance We environmental, assets to safety record and our productivity significant complexity all health delivered in

positive cash strip positive to of a current Chesapeake few be And four six our in cash at prices assets divestitures As positioned result a of flow weeks is and flow announced with the XXXX. XXXX. major in ago, were these achievements,

adjusted compared grow XXXX, for year-over-year oil be will total While X% not levels. approximately and production, our we expect by I'm the made, sales, proud our are progress you of approximately assure asset we X% volumes In we to I to done. XXXX

in cash improvements projects. return further generation deliver prudent and return in greater efficiency, through our Our shareholder priorities highest investments capital will

continue will improve volumes. create despite value technologies utilize margins we a and and across absolute operations, capital to our our in increased program lower meaningfully advancing out costs will lower drive production We XXXX deliver of EBITDA to portfolio. Ultimately,

As stated balance the a earlier, our restoring sheet health remains of priority. top

reduction in are regarding are material approach, and large prudent multiple, divestiture maturity billion $X debt of We transactions progress in conversations to to schedule $X be in goal the opportunity our in making our while affords us billion towards active we our to debt XXXX. committed

transformed few years also have thought many company in ago. ways short this a not We possible

We have reduced our since XXXX. year-end leverage total XX% by over

and our since a nearly midstream achieved $X reduction have XXXX. billion commitments We transportation to

while our reduced the by over relatively production adjusted XX% have keeping CapEx flat. We years budget our last five

We employees have our costs a cost on more have in to transformation. in of environmental, we be by leader continue this established making and displayed cutting not improvement ourselves a and have commitment, this safety effort, key as during XX% across done health industry our and while half display all and all a today daily And I proud the value could metrics. of our dedication safety basis. the cash

ahead, we assets have and, importantly, the most the is the this bright, people to have our shareholders. know company and future and significant to strategy, important work of we value deliver While we upside I believe

record strategic at our In are anniversary Energy. We XXXX. well-positioned fifth in Chesapeake I'll deliver my priorities to June,

sequential this our of that price made of improvement and track last determination has company this I'm from One obstacles commodity deliver past we great depressed what the measurement We and has will environment. next grit the encouraged, during progress few not the of comment excited, would but business. in I record company Chesapeake be most five underestimate have great in the tackled the a me. years, many years. the continuous built

price over what The the in to deliver. substantial have We said commodity last legacy would due to common and improvements burdensome delivered I'll Nick. fundamental pass company accrued our as But have shareholder significantly legacy model. we years debt now five excellent obligations. call not been our largely have the business common to shareholder an is and we obligations from removed, commitments our in the position improved the

[0B432N-E Nick Dell'Osso]

Doug, everyone. good morning, Thanks, and

and our stated, in best in to improved this meaningful evident generated legacy amount XXXX transformative beyond. past Chesapeake in been from the have cost about billion year and setup history. simply Doug we our structure, us we liabilities our returns environmental complexities year a recorded secured the safety As made Despite and profile, again has shareholder company's have of view improving performance our sales, a significant. the eliminated positioned legal approximately asset debt, and was reducing XXXX we accomplishments, reduced was as years restoring production over XXXX as profitability. last create changes increased that at four $X.X And our

our has delivering us on value XXXX less this spending. seen outlook greater morning, in As

Our CapEx while will production our grow adjusted will costs and decline.

compared as XXXX. result, generate a we free will As operating cash in cash and more to XXXX

Lime the in our pleased continue sheet for barrel agreements projected are capital LOE through month. its Mid-Continent, including XXXX. a to and in improvements to highlight alone the improvements total with profitability. for announced Further, earlier We closed, from with our assets asset expenses in agreement remove transactions and signed efficiency outlook pleased sale we these and implied are Mississippi properties sales Once we balance this recently operating approximately are GP&T our this $X.XX per

this million investment sold recently $XX approximately from month. we its FTS legacy shares International, of our in net addition, X.X for proceeds offering completed initial In which million earlier public

traded million hold We XX expect in this million FTS and $XXX we signed sales together, approximately company. asset sale or publicly additional shares from already the of All approximately continue partial our to closed shares.

our expense. We reduce asset under annual producing up to interest to XXXX credit revolving interest our the divestitures investment transaction repurchasing our toward in for applied outstanding could million will expense our If and annually. borrowings $XX to expect proceeds go highest-cost high-coupon debt our from the signed XXXX that in our debt, FTSI and the facility late to-date reduce

stated, our costs. sales prices planned removing free in our being at to of work our positive financing Doug will transactions strip to our multiple in spending cash pursue $X billion As from Chesapeake flow larger debt billion and as balance and continue an sheet. of combination of additional after expected XXXX we goal capital cash result The toward we our $X asset flow today's

expected cash by largely flow XXXX. hedge our is position in Our protected strong

$X.XX XXXX of hedged hedged XX% barrel. of XX% We at approximately and have per mcf our crude $XX.XX at production approximately projected oil per our gas production

providing in our seen basis and crude pipeline our front, the as basis gas QX competitive are for realizations markets, realizations. on support commitments strong Additionally, to premium access through

$X.XX have of and half less to for prices at market to We WTI believe flow watch this we'll hedge We both XXXX. it gas protect hedging for our to at half opportunities a of contract NYMEX, XXXX the location. our in-basin exposure oil is continue hedged also approximately exposure and the cash for oil pricing our a through over prudent portion to to improvement $X.XX exposure of gas our barrel LLS and per

areas and we On do due January. weather several delays to our outages the cold operations operating across in front, some experienced of

on our Because rather highlight However, guidance despite flow this due flow we this the our cash prices, weather our higher we received premium on earnings all impact under to goals toward commodity further that early our primarily LLS XXXX the contracts. well oil focused with we growing and of our have volumes, benefited cold growing as are of remain morning. to greatly production, than as progress from pleased lower cash winter released sold the

strong adjusted is from to using growth at are our be sales, free prices The asset lower for increased believe while and as our investment This of expenditures done production a %to flow returns on capital of XXXX and cash structure, growth, is in are All our We items all cash X%, more projected improvement operating planned recipe XXXX. cost oil from all XX% efficiency, well assets. financial production are being as success. that lower margin capital current decreasing NYMEX generating increasing with in X midpoints. for flow, cost EBITDA

for years gone the commitments several noted, legacy improvements and the cash profitability flow Doug reducing last toward obligations. significant As and have

in and direct being is turn recognized sight delivering in on create That returns operator have the getting today these line this call improvements the concludes believe questions. shareholder we poised the while in over for will marketplace, of stronger, are years my real we to to periods. coming Chesapeake the shareholder not ahead. now meaningful I the comments. and value fully is We months

Operator

from question Your SunTrust. Dingmann come Neal with will first

Neal D. Dingmann

or potentially two, the leverage going year what Doug, morning, Good your in given you're here guys. flow? to could you in free have talk Hey, cash ideal next about situation

Robert Douglas Lawler

reduce is when Neal, you appropriate few company. that's targets we be believe Ideal further that need the of the obligations. We past progress to that been and the we've made, for highlighted have we years we there leverage, question the Well, to, that legacy yeah, deliver place years. we'd in and past the in made we've to cleaned that good like the those Xx Chesapeake the we've progress have a debt all as like at other out it question. thanks we put few we've not really look cash a to as proceeds be. And target able to generation up And

complexity debt and you continue refinance, we're not high-quality the can to ability debt we're managed Xx. have maturities, we'll And $X. And not we team, the place we going to straight do our ideal dilute can. to is the so, continue. We'll that that to work few value reducing Nick company that our have as all the if out, the on possibly not extend the financial and that assets the the group Well, of expect Key next while at quickly the some in our years. business, the we'd for you we're be selling over it And $X.XX retired, financial as across is at way and Xx. obligations, ask, direction that

it's conclude as of fast asset $X an target, we debt we say we can. We've $X will Xx. that got targeted have debt from to get sale to a possibly so – billion And reduction ideal to we'll billion major as

Neal D. Dingmann

Great still Powder break and you you Based be sort last do changing that anticipate then just have, the color slide And Eagle where you rig now staying areas. CapEx points, position on on out Ford stable, each Doug. year having of rigs? Doug. there the the the Any throughout the have the you the follow-up, the one X of Thanks, bulk of relatively or that appreciated. meaning would in

Frank J. Patterson

our is we manage this This And Patterson. before. let continually We've spend Jason about week. Neal. chip every in We I'll Yeah, Frank where talked here. capital also

five to the that us possibly Texas we corporation. as we to We'll all think be the We're we and as value the four running South get unfold. say go going big currently that assets. will see in allocation. a try area us the to to I rigs see best move four. rigs But evaluated where ranch We're any can. an with in adding for rig front drop would rigs move to actually in going fast to to year have is capital move rig. I that back of Powder, I relatively see five a probably the extra gas to don't you're as

will work you had could the take reallocate We if that in there? success doing be there. anything have could some to Jason, there, off, we we we If Mid-Con. appraisal do a rig were

Jason M. Pigott

Not much to add.

designs Just exciting on of doubled where technology we've we as seen wells. it's time new and for instances us and overnight an drilling, completion completions the the world we've test productivity

we how a at When but way can better well. a make we're that, some developing for a well, create can teams But are to as they wells it it's we as and really fields. things and do these way wells. their they it's very optimize fun so lose kind the a change So like and approaching competitive. competition a help how when find exciting we new time time Chesapeake of send really for rig, drill the us And look may rig, we complete exciting information we where as

Neal D. Dingmann

Great. much, guys. Thanks so

Operator

From JPMorgan, Jayaram. Arun

Arun Jayaram

just I morning, Good talk little Doug. you A&D wondered the could about bit if a market.

to $X million. like billion sales. It potential you've billion signed looks $XXX $X on highlighted You asset of

your So some sales. getting in just asset and around range confidence maybe in thoughts A&D to targeted

Robert Douglas Lawler

asset values minimal We sales heavily exactly there makes backwardated are My still future expect. fuller curves, low, thoughts extremely is small large in with probably pricing development price you'd that the for there, and associated are confidence It's Arun, that out see as dependent. the it very and challenging.

pursue. to we core look As further as up we will further tighten at smaller that portfolio, opportunities we sales look at areas, asset our incremental in be there and will

have We asset base. large a very

and – trying an of buyers we in we always options asset a long that may or for to where area to are period strategics that build always an those find that to can equity So look private smaller looking for are get not position area time.

accelerating So value sense. of a makes lot forward that

So you can expect that.

of efficiency have have base a larger been at improving but market divest, to the not technology, we comes record balance you value the do in accretive others. from price and we're our performance that the in still going interest see that is do our sight captured significant transactions prudent The assets a as to clear we of it do sheet comes are returns the and opportunity asset into that in our side, it large And this have those pace lot and that to to at On from that a interest it, we'll teams driven see of our and capital shareholders. to and that portfolio. line do

always what and So possible, returns shareholders generation. look and but the to our watching with continuing and being think is as to expect act be to on I accretive as cash you be we'll our we'll for can opportunities the eager and the quickly market focus

Arun Jayaram

a Basin. on Fair follow-up River maybe just enough. Powder the And

guys You press Turner well in pretty the strong release. highlighted a

in could Just future know plans? want Devon about Niobrara in I plans tests talked in talk to know about the the testing Powder. there? and Niobrara Turner you for Any the if opportunities any

Frank J. Patterson

Powder. the going Frank program What you're XXXX basically is Patterson is a This in Turner-focused Yeah. to see again. in

tweaking and the We getting costs are time out, we completion wells those Every down. go cheaper. down faster getting we're and

it's So more and competitive day. more becoming every

new on but basically and and the going When on on we'll time where What bring bring on the have Nio. will three now, wells to put direction rig we've so we in Turner Turner, make we from as in greatest as economic significant probably not competitive focus of and could the the of head. focus running done Nio focus couple Turner forward. on be the more number a ground value today the completion We'll we're the have We historically some the It That's play. those we rig is wells will the with years, fifth today. we we all in, we last Sussex in The rigs design lot the well. and that as wells. fourth going what focused can already is those longer know in Turner,

to in we Turner evolve becomes Mowry, that believe formations think I not future. time. I within that have distant very significant us the footprint valuable that number of and other over too will a Parkman

is greatest the in be We greatest value today, and Turner. that will value to though, asset focus on going the

Arun Jayaram

Frank. Thanks,

Operator

we'll Next from Goldman with hear Brian Singer Sachs.

Brian Singer

Good morning. you. Thank

Robert Douglas Lawler

Brian. Hey,

Brian Singer

probably wells you reducing and year, intensity more how you're, and the Can to the reasons, of I Ford wells. could a you wells disciplined bit Eagle It little but XXXX completed compare the the would like for Haynesville? talk the on this if the wondered looks talk XXXX productivity being of to number

Frank J. Patterson

we're actually Brian, one single we're activity of In wells this Frank to align again. knocking productive out rigs We're are. and is as how with every we number doing our South faster. of trying the Texas, assets, with almost

inventory. a So big we to completion you align we're crews. year, found last productivity completion those too rigs build of crews, with more of get front your rigs in DUC lot trying logistically, a What if getting out you

very If drop size, you inefficient. crew, have inventory might a to of you DUC or a inventory a standing and have sufficient don't working completion that's DUC very,

completion what So can rigs our assets we crew. possible all to trying as where we're efficient as the around of to do be align our is with

The going to consistent with to able South productive. are wells completion we three Texas drop may count. today We and try pretty run point. four two to crew be to the in probably at So rigs stay drop are five that to highly and

align facilities for common the with to build larger ability pace the activity to our facilities. We have that out

capacity. effective same full run the logistics see basically the efficient, up In in Gulf We crews the can one one two you crew keep that's In the all Coast, things on now, thing. and highly struggled last potentially basically we've of times, one So to three three with rigs we so busy. completions our rigs machine. running drill a wells, but the effective at Powder, can months being we're is keep can't crew, few

us I the going is to So four rigs going with to align completion well think crew. really

all the every value So this spend. of about is dollar maximizing we

Brian Singer

and focused coming noteworthy. Yeah. Okay. the each of it. the the well rig productivity is more certainly a just was productivity I probably down underlying little Got on bit well, but count

This talk just trajectory bit I the a can production? on my others, In terms mentioned the of we last quarter's you to sequential follow-up, as as your was should a of go more what quarter. bit a think year? have in we the strong kind basis. on you more production some just very, the weather through you about disruptions quarterly of for comments, in Can talk very first little see

Frank J. Patterson

out you, a the now lot came the a be have off now the behave. of on has Yeah, the behaving and of This experience in completion fourth well the mode completion going we We're really to oil wells That quarter don't quite stabilized side. They're of some with the honest gas Frank We ramp. again with have, big We mid-January. is into field are doing the Brian. out. actually we're well. completion both how that again. in To of going back designs

into production is see was this which we're anticipated. totally to coming lower quarter, little a bit So what first going

steady kind years We will to build through keep year. And to out. build a the that plan of and is that for build our just ramp going basically try off of

Robert Douglas Lawler

And XXXX on past back shared program pulled top on amplitude that maintained and throughout maintain we is team sales on asset spend we pace add that have technology roll work adjusted I'm capital and in of we that improve for the the Brian, to take way quarter the Frank goal just XXXX, flow some predictable the while we as of efficiency. trying some reduced throughout the our and technology on cash of do been made production our year-over-year, years possible a approach. efficiency few resulted a we adjusted the And that on and result possible. more, in and positive in a And have through – to we've you and of as have production program XXXX the capital is to recognized program Doug production. the and focused while lumpiness as out the with take to on throughout the balance years, profile that for our in up our across focus might that's being or have we're as we to quickly that relatively I comments portfolio. sheet, quarter-by-quarter more out most done with and our but And opportunity more capital volatility this flat continue in our efficient encouraged the also And steady eliminate profile in volatility of profile. investment first some based capital free dollars the by reach that, that that we – through improvements expended have capital based as capital to that, capital position

Brian Singer

Very Thank you much. Great. helpful. very

Operator

from more we come time for Panjwani Pickering, that will have question Sameer Holt. And Tudor, with and one

Sameer Panjwani

sales But prioritizing the added it the to the morning. see assets specific that guys Hey, on gas been getting I gas like guys. And years, the in past more activity ask details. to the session, for have to looks guys even very unlikely Good the without several asset earlier mentioned Q&A oil assets. into wanted than you you assets.

all of think the that to I'm sales options of kind wondering to liquids-rich now. or more different should over just time, so production a is shift looking about mix And it you're at right your of continue mix we kind asset potential

Domenic J. Dell’Osso

This that. take I'll Nick. Hey, Sameer. is

about sale our you is portfolio be value. asset going all redefinition, to continue our will, if approach, So to

forward, at look long in gas our create how value going are today. we As program we we

of some our gas on focused portfolio. have we the the So opportunities portion down of to sell

Eagle then in the just create over really going redefining see we to the return see Powder as We attractive River. we're And of Ford how couple also the a years, amount in there. value opportunities some opportunity tremendous areas next we're like really

strategic what So from us they opportunities opportunities have as said, to highest the of return-agnostic, recognition value-agnostic, we some sell our and being led of standpoint best think there is value, in there highest participants gas. participants supply/demand to And world returns. are to are, we real. drive long-term markets, in arise to circles. we and That those maybe and are or asset, an onshore that that to in But encouraging as view. things is that there in we real the oil out will for be from increasing market, financial gas of think some created extremely around those is some would contrarian A&D you down is extremely to return that assets of One nontraditional might are particularly asset is a in some know, I the continue these an you by what it's standard oil about the that want as be if dynamics favor I the fact connected that market, of U.S. consider. markets, a in for Gas out would many favor all interest portfolio thing note out and equity assets

that's look what we'll our how will discussions our be focused program materially that have increase to balance portfolio materially ongoing continue deliver And asset improving on. own. the sale to And And on us else across value. That's we sheet all balance of return will around will so to improve rate our of we our transactions allow everything sheet.

Sameer Panjwani

Thank you.

Robert Douglas Lawler

XXXX. everyone, We year. for closing, your in time. So, strong had you, an We've to look forward thank outstanding

Chesapeake value. company prices south. focused Our predictable have progress record is on and when to the we've been accrued and we'll We're the And returns always common upon focused not get directly shareholder. year, share improvements and didn't religion returns each incremental, improvement This has value. went that. on continue made the

for substantially take those Thank to our improved place as and you. now have legacy positioned upon are We business. been that eliminated from obligations

Operator

participation may Ladies today's disconnect. everyone now We your for does and do gentlemen, conclude presentation. you thank and that

Chesapeake Energy (CHK) 22 Feb 182017 Q4 Earnings call transcript