CHK - Earnings call transcript Q1 2018 | Expand Energy Corporation

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Operator

Good day, and welcome to the Chesapeake Energy Corporation Q1 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brad Sylvester. Please go ahead, sir.

Brad Sylvester

Good morning, and thank you for joining our call today to discuss Chesapeake's financial and operational results for the 2018 first quarter. chance presentation our our that morning. a the release website had investor updated we you've to press review and this Hopefully, posted to

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

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

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

Robert Douglas Lawler

morning. and provide update first operational good today and on pleased We're Brad, our and financial to an quarter performance. our earnings you, release Thank

transforming in The the debt. our material performance before our systematic our in our coupled In priorities Chesapeake cash business. of evident since positive resulted quartile improvements underlying first top with flow remain in strategic the operations, and prices, E&P XXXX. progress recognized higher quarter, sequential our financial net in Our aspects our free company in achieving as margins, best into all enhancing progress foundational a unchanged realized strength downturn in reducing of our in we

consecutive the reported stronger that than million EBITDA after or of adjusting production sales. XX% grew results we asset expected on second for For adjusted oil barrel $XX.XX posted quarter, We $XXX equivalent. per

of Importantly, as boe from first greater quarter this very our this of a it per increasing XXXX, revenue, revenue increase I'm acceleration growth about boe. is of the gas despite not XX% than improvement a greater value demonstrates oil commodity in excited EBITDA EBITDA over XX% and trajectory just prices. only per of rate the and our

periods much underlying been quarter, not the of a to several to fundamentals holders able obligations improvement address our over business due equity the last of noted cash. last to obligations need Those of the dramatically has reduced. of variety in uses financial to other have accrue been As the and cash

cost continuing discipline. of higher As margins employees, high-quality cash our efficiency, capital the returns. we're assets, see talented on trend showing this developing a result, strength and We and

to up. three-well the still X,XXX wells the production, results. ranging are new about All of where where spacing Basin, areas. technical formation, days yield wells while we Turner to excited six flowback results operating from very the encouraging. X,XXX-foot pressures psi tubing on encouraged April, the Our we all momentum the After fourth We on X,XXX In from production, operating four we're conducting rig. first and results flowing Powder recently expertise Turner are and cleaning growing across Flowing our a continues were added positive tests River by concentrated spacing tests. remain rigs and in operating early are our XX pressure's we of placed currently initial psi

for and be will disciplined or the spacing production. peak sand stage through XX choke development more management. weeks of days at rates within well planning this fairly achieved sharing Turner initial in XX Fuel we coming will as information the be anticipate is We conservative

to ultimate you'll is approach greater we as profitability. compared other hear capital from drive unique and both to seek recovery which operators, what Our of efficiency, maximize

States and important days cumulative its cubic gross our United gas XXX,XXX As total averaging for X the the oil equivalent, of roughly because of of well well to-date compared year there coming the XXX in test, month a strong gas from feet results, Today, to is is of per this of completed This first more one April, barrels reminder, ago. wells we Sundquist approximately more at XXX% the XXX drilled barrels Sundquist barrels after continues X, Turner than deliver year one or few X.X oil after very production, oil feet million day of barrels of production oil XXX,XXX XXXX. to that produce XXX than almost of million XXX revenue of Current generating are cubic online. cost. approximately

yesterday. day cubic completed well results X our lateral and improving the placed first first lateral first In and well it XX,XXX-foot In an Marcellus feet at as making So that has more in in billion prudently feet Powder on In plan In this averaging play gas growth. days our XX plays, we we we successfully the new gas Basin continue approximately drilling and Shale, XXX feet completion sand. role horizons. Bossier Haynesville, XX,XXX-foot XX-day well of has drilled cubic foot per (X:XX) stratigraphic to marine will are best day. future production our and lateral XX River we a of production, its produced through The of test in develop Bossier of online continue the oil We technologies that placed existing of expect, to in average Upper designs. key you'd per to cubic also Utica, production and completion rate drill. outstanding new cumulative in well million improved Louisiana, an the per than million our January our

with We years. are efficiency recent improvements pleased achieved significant operational in the

demonstrated Our the relentless continues our of as a capital benefit a continued drive the to performance, will our the to XX indicative Eagle that margins. compared efficient operational production Ford transformation differential financial clear. on progress. sequential in X the needed is by we shareholders are call as the foundational our historically fact improvements deploy. to Nick, performance focus generate prior progress will rigs most handing from And program This today be flat to and maintain the operator four-rig discipline and and to increasing close, we profile in our our to To to

the To efficiently our business. reduce further to now Nick. further cash shareholders the debt. forward remains call aspects Our our margins; our I'll flow; grow demonstrating our expand across our of same: commitment to all to look and pass We progress

[0B432N-E Nick Dell'Osso]

Thank you, and Doug; morning, good everyone.

on quarter's after proceeds by end $XXX asset cash years, allowing This highest increased sales We including again, capital greater flow operations, approximately results debt return net principal improved from outstanding. margins, of the reduce million of quarter, for in our our are And us confidence is stronger in XXXX. from cash quarter. the with the and our spending each balance the $XXX getting from of million, to capital over three delivering flow free recorded

from after of to we and remainder XXXX our net free in capital sales. proceeds the flow spending asset the cash strip expect planned be at positive year, at prices Looking current

commodity and oil both driven Our and results better differentials were stronger primarily with production by higher gas. oil for prices

XX% Zone of the We in $X.XX month strong Eagle TGP to and sales today, per continue oil the run We've hedged up prices significant $XX in average at using locked of of both over oil In end the differentials projected approximately over total, for at our XX% for in-basin our remaining for approximately positive to exposure production with X of these remaining $X.XX, differentials a to barrel to have This we represents users. hedged production barrel of our per Ford projected recent summer advantage NYMEX midpoint XXXX XX per a currently production gas taken $X.XX year. at exposure barrels which this oil also to firm per location XX% also guidance. in improvement see a XXXX, differential mcf fall approximately at April. our and and financial, hedged our our Marcellus million at oil production includes a price hedges, for of LLS compared of gas and volumes We've of last contracts barrel. $XX.XX of

year. for project volumes We opportunities and have added we'll throughout and our oil XXXX, continue oil to for hedges the additional watch to gas to

our outlook, Our A Appendix morning, unchanged. remains provided to earnings release XXXX as this

this production point investors from driven the implies for oil production would year investment the the that in stabilization previous production and following discussions, modest Eagle end the year. the From in of we as forecast the volume we replaced approach with a forward, sales. in gas current are investments results process total in increased seeing decline deliver volumes, volumes XXXX during our our program QX our growth accelerating guidance environment. low reduction In commodity modest growth, point as Again, QX flush be allocation in I on Our turn-in-line margins in total our profile by Ford the a capital for our we asset returns. Mid-Continent the highlighted production This for focused before, adjusted properties. our noted intended year, highlights the significant we're oil and that of the the from price for

volume growth. by encouraged oil We are our current

in produced QX assets previously, day resulting XXXX, noted XX,XXX XX,XXX a As of per of barrels the including sold QX day in X,XXX of comparison production oil as at go-forward from per point. end we've the quarter, barrels barrels of

oil of of the quarter. X.X% close those Following second April per first or the sales, in we of of XX,XXX averaged the day barrels asset growth month in

quarter. XXX the less to be in than wells Ford. to expect We Half Eagle in will XX compared second of line in the those the in quarter first turn wells

Mid-Continent of to LOE year. for per we year. a end significantly improve time, of As are our the our our projecting the of per guidance for expect boe remainder fall remainder production this boe toward of the LOE of At sales, expense we result to lower expense range the the

and margin further through will evident. have improvements from cash create growth and The on production, to our as to capital our questions. upon The directed efficiency, and track greater been price stock will was be over the improved efforts continue, shareholders. now noted. toward close, established previously when excited proceeds growing in and comments. to We multiple this small structure, discussions the my our record and not we're these flow. believe recognized value call on to-date, for turn debt To concludes to for oil sales performance returns operator in transformation I remain Our have realized asset remain That generating A&D cost our transactions. we reduction committed we active we large build

Operator

first you. We'll our Dingmann with question SunTrust. take Neal Thank from

Neal D. Dingmann

my question a nice positive you've cash Doug, that Say, Good flow in paydown morning, quarter. is, obviously shown, guys. the free the Very as nice you've the corner with turned as well debt.

having to just level million. basis? the something able a is now at I you've guidance, You're flow your $XXX as far seen nearly this cash looking without is sort but XXXX this free of know confidence something broader do generation picture, go-forward as on

Robert Douglas Lawler

our Good here the just we guidance recently, in Neal. years, motivated And outer is our how for ditch, the to about we looking about, beyond. and for the to yes, we're accrue started and very we quarters we're position question. things shareholder put at the to financial recognized. a the this has and to that yet in to that Chesapeake of XXXX sequential you that not good improvements really we're that in this tried the the the in for Hey. what very common we what assets, is And, doing is have, us to that we're are drive And continue highlighted. not we while what that in excited highlight be coming operationally and we're at deliver deliver very Thank the the we've capture reduction have driving, excited employees provided obligations going able on we're right morning, at talented really have we've what to And been about quality will sequential encouraged that a shareholders. technologies while performance And you going continue expect different Chesapeake. to can those this the future out that company

the very can that that your continue is expect I and think in that good, to So, you trajectory future. question

Neal D. Dingmann

all And and The Powder to very of then, other are obviously expanding. you exciting continue River follow-up. just number last there that for one be a companies

a You but know all Turner mentioned potential. the stack possibility, I lot there's of

end look you I to going there the XX you're you So, I here I'm is, on other the early excited just to overall focus guess that broader I here the think I or maybe that wells. next year. on with wondering are PRB, where rigs, Is what mentioned four the sooner – year, question what to best you later? Ford by think when is you're XX is, about? the I equally areas mean, of Turner at Eagle slides And production rival mean, there can this from had rather than your prospectivity

Frank J. Patterson

is the Frank Thanks for Patterson. Yeah. this Neal, question.

Powder. we're think I excited pretty about

Just give We're think count where from XXs knocking to our I to we're out drilling rigs was much, kind fantastic. of as the towards it We're an four the release, we Turner. because thought you for Turner, rig go to leaning good rig wells in drilling here we're The initial and that's faster. of really low team's idea park. down these might spud the of rigs headed, a for five the much

Our completion with are cost-effective completion to come up continuing more and faster teams styles.

the think four still anticipating Turner. rigs So, thinking rig fifth year. a number we are We maybe the is for this later about right

been that Parkman adopted program. best some Parkman of some Parkman course. As looks basin. were we've really docks, the wells, Nio completion Nios on in working we with these are We've the a the through the drilling those us. new completed some Nios to The Parkman. been We're styles Turner up style the taken of of going attractive that last year we've

we is have the forward lot just a good, So, with and Sussex Sussex of we The we locations. don't will program. but think still be moving Parkman Nio

be is better that's our the bring economics tests what other spacing the it's much very in zones if a rig, because we substantially. on to completed, out rigs just Day were we on Ford we're and be Analyst once production of that the Four the that. going It have And where we outside in ahead going And get Turner. point, So, rivaling think a with we the we're that. last could focused And Actually, pretty your Eagle running we'll of in said basin. with we're I to the expand fifth on best Turner Turner. the we room tad quickly. could to happy at you focus told on the track be, relatively handle we a

Neal D. Dingmann

guys. job. much, Great details. Thanks Nice so

Frank J. Patterson

Neal. Thanks,

Operator

from with Charles Johnson And our we'll question take next Meade Rice.

Charles A. Meade

you there. to Doug, morning, team Good and your

Robert Douglas Lawler

Charles. Hi, morning. Good

Charles A. Meade

picking I point spacing think seeing. if Hey, I about the you're more could to started about you already detail little add up Neal's if could Frank, question, ask on what test, you speak Turner. a another about this but I wondered

additional like through look go should what we and be year wells you're looking for six You talked reporting, and that that Powder you Turner, wells of you've as be the would at success look other the across for middle XQ well the And the already you're bounded but completed. completing? what we in to five seeing what six about the six one those the going from that of in the

Frank J. Patterson

Yeah. you. thank Charles,

through philosophy the data looked the and We've just here. Turner the entire available at all of Turner let you within entered basin. me So, walk our kind

pass section. it per first Our should wells said, drilling two be

tying Of laterals, course, we're to was initial up two assessment. basically, with spacing but sections basically X,XXX our X,XXX-foot longer

We to watched industry four. have the down test

Our work. know tight, that is don't will four is three but data we set if analysis too probably of

X,XXX. south. back-to-back a The pad, north, three bounded drilled well test. on the the together which both to will of by basically to the we three north, spacing, are standard. wells It's center to spacing sides at So, south kind our The put the X,XXX-foot is to three wells this the wells wells be

get flow reservoir which and these not up casing, We our get analysis IPs. and want high apart high the can we here are the of have in that because destroy we the pressures and question. of basically fluids wells up from all don't to There's going the wells to the value tube rip to philosophy trying these adopted IP, by wells a also no

are we're got on pressures really X,XXX nice at chokes. choke. pressures on pounds. XX/XX flowing we're X,XXX case, The wells managing between small the of chokes, doing our And flowing wells, all we've being on In XX/XX So, to what this our and tubing six cautious now. wells flowing very is all are

downhole are look wells how wells We've the in other. have tracers to at We gauges. behaving each put the basically against

monitoring And this. are so, we

open wells we We will pressure these monitor slowly as and the go.

days production. is feet Going forward, XX increases be, Turner the I XXX When out that probably I XXX, get too X,XXX substantially. X,XXX, spacing, on in footprint think the behaving would our that tells go want the XXX way days question it get us don't to of if with to it now, is we or days that can excited we

We're So, we're the to be for prudent. just the life optimum reservoir for going going of economics field. to manage the this

Charles A. Meade

I in Frank, I that. that's detail. then, Doug, appreciate your all back helpful comments. go could really if And something operational to prepared

well. a about in that XXX kind Can and $XX footprint days where period. a results? is, bcf result X and you said or how for averaging Bossier that your compares in million talk time Haynesville/Bossier of your it talked day believe You your did best perhaps was of with I you that Haynesville Haynesville, typical kind about

Robert Douglas Lawler

operational opportunity. forward the other And as sure in and and we go You to the many that bet. material drilling we company of have completion highlight provide profitability improvements, development technologies in Yeah. highlight also intervals excited technologies to our as about in program. areas, we a stratigraphic We're what our want that lot resulted we make of upside

turn So, comment some Frank Jason specific that to on of there. and details the to to the I'll Bossier,

Jason M. Pigott

strong I up there, mean, as towards the This side the the we the in go Bossier go mean, Jason. there. south I we wells south to picks field the Haynesville from north is in of Yeah. Bossier the

it. to up a on just We're pumped that's We frac a trying that. unique very there. large test prove So,

I productivity Bossier get it of or we a maximum X,XXX the was frac, foot to big was out just pounds that think try It per something. the to can.

excited. the online we're So, well to We're first just about Haynesville that. We've to TD'd equally our put XX,XXX-foot and excited north. about

really become online the feet. So, technical for we've put to struggle and as to normal well. of our proud there accomplish or that's XX,XXX-foot that to some now operators us, tested, can something and That's we're capabilities XX,XXX about get of first they teams are our the what

in value the still day. our continue and lots on every and that asset of of going the to trying So, great Haynesville and to economics improve things optimize

Charles A. Meade

Thank Jason. you,

Operator

And we'll our question with next Perincheril take from Biju Susquehanna.

Biju Perincheril

Thanks my Good morning. Hi. question. for taking

the to all Turner for back same the landing in zone? Going multiple benches see Turner? you are spacing landed wells are in test, those potential And the do

Frank J. Patterson

Biju, Niobrara in Parkman, intervals. that will on. the the the Turner do XXX, acreage our our and discrete we we again. really Parkman for draining reservoir, of to benches some thick of we're have being Frank this concept and of is think five now, kind the is We later the concept maybe probably other test four The in XXX-foot productive. the that to like to in we landed benches area zones. potential move that footprint The in be look a effectively have where not north, us interval. productive industry center Patterson testing The of reservoir. and And two see discrete the does multiple Turner is about We is relative out intervals different

picture Powder footprint acreage. stacking see the for we in are blocked is – when our majority opportunity think on you the we our and acreage basically lot So, that a the and our of yeah, look I reservoir. at up the big within stacking resides where of But

of Mowry, top other. Parkman, Sussex, Niobrara, each We have stacked on Turner, all

phenomenal, of stacking and this have of we the So, ton it. a is potential basin

Biju Perincheril

what you're talked side, the additional some the is Is where then completion XX there helpful. think slide that like any in I'm you the that of seeing would the looks you the because you're presentation, on really And all side west you landing hope can consider far the Utica, wet in That's strong component are wondering some improvements oil if of it can design about for window. of And new some you western of give color? wells where you lateral? these on there's take window? or do the how gas some this to, the on

Frank J. Patterson

of completion. I'll the were the as we knowledge reinvented we've it, for Ford, Eagle learned Utica. question. as this Thanks the moving our into possibly other all Yeah. well fast basically the back I'll in and talk Jason start and and Haynesville, that Everything We've we let program. plays, then plays all I can. gone we're about mean, to

the and are we within Utica. We of have the some looking, landing changed

drilling the are We Utica. in laterals longer

in we're spacing. that tight upspaced have because the we the effectively stimulating don't Utica, rock and We believe more need

to towards is And and expands portion positive And to are acreage let yes, changing think styles. a think for it's historically. I'll uptick then, It's That And going well Jason of is moving talk the about available some the doing. And real of excited over about right, you're a it's above. the field, substantial completion future. of our really So, we we're it well it's position. what all the what oilier we've count. that. But bode for that our I the we seen

Jason M. Pigott

drilling redesign We're changing actually also effort and and had on we the Frank. increased successful we've fluids started sand like our the wells really the place the combination Haynesville. onwards. from of there. Thanks, completion it the But out between side pump, to And that completion to concentrations, We other in a casing completely it's teams. what we're was like able we've good string the accomplish Yeah. excited

well. So, XX% per sand is up

So, to adjustments that's board do some get the to able there, high going producing be these to but us wells. to us something took again make forward, that's operational easy across for

in future well. Utica the really as we're So, excited about

Frank J. Patterson

Biju, opportunity field the well a back refract as this re-stimulate. is looking we're maybe portions of and to go that things at, the older And of one into

expandable is with opportunity there technology. So,

Biju Perincheril

data to? on could had the Any I think some then you seeing, points that new that And last wet the locations Day, in the gas Okay. about or move about Analyst based so where thoughts you're at of talked window. XXX

Frank J. Patterson

dry should still are the of the process window and the re-evaluating wet in behave. how We

we've that upspacing driver. So, also working per it's little given any So, a as With wellbore, our said, we're comes because That's field. to I of EUR increased premature necessarily say, our upspaced. not locations an in not

in do the ground. how in the field well driver maximize every is Our of put value we every we

count could could to to go do down. our drilled in go on It that given the to well up a single what be. trying the spacing, every get it depending So, highest economics is but can field, well we we're at

Biju Perincheril

Makes sense.

Robert Douglas Lawler

just of in our on Biju, is And, top we mind today about that has in of all developed. Frank's still that comments keep Chesapeake that there, that essentially positions fields, competitive one the of XX% remain

answer So, asset. and of we're we've when improvements It opportunity gets the about better number locations asking bunch well We've every of recognizing. the locations a start significant this the and with bunch technical them. only a you company, of in got got specific in is improvements

Biju Perincheril

That's you. great. Thank

Operator

final Marshall from Advisors. with We'll Energy Heikkinen take Carver our question

Marshall Hampton Carver

you. Yes. Thank

QX. drop significant to Haynesville from have Do any on pretty You that? production you a had color QX in

Frank J. Patterson

done basically the we've What the all create. rigs of crews that is the completion to again. we can create to Frank is possibly with the efficient logistics lessons is, in learned the drilling most stream This trying align fields, one

as you're very to we're We've our those just two of completion a a basically transportation. rigs. aware, rigs. crew, has with dropped, our in the running of gas now tried also three because fields, right that's firm running most following gas where So, completion situation We're align price crews

lining so that And out. just we're

gas transportation And see about gas running that's can firm at asset system basically our drive where as the reacts, the that's rate. price We into needed. asset an more where we and if react will

Domenic J. Dell’Osso

is Nick. And, Marshall, this

as We the add in that. reduce those efforts costs only to to our efficient wells possible. be align revised in possible in Haynesville and and the four quarter as line operational Just turned as much as get logistics to on we as

environment as call high. allocation work commodity in today's for I optimal as be notes which we terribly the prepared as morning, allocation gas, not through driving price And efficient are noted my in our to we So, with this an are our we as capital capital to is for going possible. process,

of lumpiness bit the more in the a about where where allocating line efficiency, we and in capital to invest it again, the the frankly gas in But move we so, in turned the schedule. capital year. as throughout need be with across is don't wells as strip turn-in-line about There'll it's today. have it's gas a And Haynesville much portfolio, there

Marshall Hampton Carver

as you sense. Makes talked And all some $XXX And of with sales, Do of you the you million the split. follow too? that was It that, the asset it have up, think a Okay. gave MidCon. in associated gas about oil MidCon. almost being I

Domenic J. Dell’Osso

on there MidCon, on Yeah. It then first was $XX and another day was million sold April. of the effectively

right all oil end the of of it's all and So, during aggregated at barrels it quarter. It's the amount X,XXX equivalent the Mid-Continent, quarter.

XX,XXX barrels. So, that again, adjusting down be would our production for in the quarter first

We've of about alone. April in replaced with we're sold quarter turn-in-lines what in it's excited our our production forward. the So, was going most trajectory really just first why

Marshall Hampton Carver

up you. in color I there's one Thank we're quarter? more. I'll have the Could in nobody's turned Okay. early to CapEx some year? there in And step second since the think about left, in line know the fairly be a guess, hour going CapEx, Is ramp how I big wells cadence give quarter. and CapEx in we should in second you a through the or on

Frank J. Patterson

This is Frank.

maybe I a at looked different you've it way. in think

hour we're little congested. bit branch branch, we reason have that that's front-end running an speed We South was Texas very our loaded a capital. one and a limit. doing today. XX-mile have we about lot a The We've is in rigs first five very high. talked deep It's of The basically has quarter a it

like hour site. it's plus rig from to the an drive So, highway the

rig a all basically in we put out the to wells. So, there knock

contributing capital We're quarter. Texas. off running in tails front-end few of into So, drop South so right quite a going why now. to the that loaded second rigs We'll volume associated drop that see our a with branch the not a and move to rig is four that's on see we'll forward, going rig lot you're and of completions,

to up, down want going and we can dropping manage And on we're then what what see the the our always we we year, So, of is how ramp XXXX. you're start to the depending towards end commodity curve, ramp going capital slightly. to see

now, quarter the first the of is for don't as trajectory you I So, the think use hot. think I year. rest that

Robert Douglas Lawler

guidance the our left We range same intentionally. Yeah.

Marshall Hampton Carver

Okay. you. Thank

Operator

concludes Mr. additional the closing back Sylvester, today's at you conference I question-and-answer this turn session. to will remarks any that time, for And or

Brad Sylvester

ahead, Go Doug.

Robert Douglas Lawler

you. Thank Yeah.

further the So, in well to noted, And further of forward a as the very everyone's very but morning. to updating of share look appreciate And as Look with noted, this progress significant I Thank results forward quarters. other Turner, on you. to-date. by appreciate as progress, pleased we're we as areas we you we quarter. our significant do, interest company. we the the we encouraged business. in the coming particularly time we're have amount the to have And opportunity. work And And in

Operator

This call. you Thank your concludes for today's participation.

may You now disconnect.

Expand Energy (EXE) 2 May 182018 Q1 Earnings call transcript