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Chesapeake Energy Corporation Reports Financial And Operational Results For The 2012 Second Quarter

Chesapeake Energy Corporation (NYSE:CHK) today announced financial and operational results for the 2012 second quarter. For the 2012 second quarter, Chesapeake reported net income to common stockholders of $929 million ($1.29 per fully diluted common share), ebitda of $2.385 billion (defined as net income before income taxes, interest expense, and depreciation, depletion and amortization) and operating cash flow of $895 million (defined as cash flow from operating activities before changes in assets and liabilities) on revenue of $3.389 billion and production of 347 billion cubic feet of natural gas equivalent (bcfe).

The company’s 2012 second quarter results include various items that are typically not included in published estimates of the company’s financial results by certain securities analysts. Excluding such items for the 2012 second quarter, Chesapeake reported adjusted net income to common stockholders of $3 million ($0.06 per fully diluted common share) and adjusted ebitda of $803 million. The primary excluded items from the 2012 second quarter reported results are a net after-tax gain on investments of $584 million, primarily related to the sale of all of the company’s interests in Access Midstream Partners, L.P. (NYSE:ACMP; formerly named Chesapeake Midstream Partners, L.P.), unrealized noncash after-tax mark-to-market gains of $490 million resulting from the company’s oil, natural gas liquids (NGL) and natural gas and interest rate hedging programs and a noncash after-tax charge of $148 million related to the impairment of certain of the company’s property and equipment. A reconciliation of operating cash flow, ebitda, adjusted ebitda and adjusted net income to comparable financial measures calculated in accordance with generally accepted accounting principles is presented on pages 20 – 24 of this release.

Key Operational and Financial Statistics Summarized

The table below summarizes Chesapeake’s key results during the 2012 second quarter and compares them to results during the 2012 first quarter and the 2011 second quarter.
  Three Months Ended
6/30/12   3/31/12   6/30/11
Average daily production (in mmcfe) (a) 3,808 3,658 3,049
Natural gas equivalent production (in bcfe) 347 333 277
Natural gas equivalent realized price ($/mcfe) (b) 3.77 4.02 6.07
Oil production (in mbbls) 7,325 6,008 3,894
Average realized oil price ($/bbl) (b) 91.58 92.63 87.99
Oil as % of total production 13 11 9
NGL production (in mbbls) 4,525 4,326 3,298
Average realized NGL price ($/bbl) (b) 25.94 33.60 38.37
NGL as % of total production 8 8 7
Liquids as % of realized revenue (c) 60 52 28
Liquids as % of unhedged revenue (c) 70 61 40
Natural gas production (in bcf) 275 271 234
Average realized natural gas price ($/mcf) (b) 1.88 2.35 5.19
Natural gas as % of total production 79 81 84
Natural gas as % of realized revenue 40 48 72
Natural gas as % of unhedged revenue 30 39 60
Marketing, gathering and compression net margin ($/mcfe) (d) 0.05 0.06 0.14
Oilfield services net margin ($/mcfe) (d) 0.14 0.12 0.11
Production expenses ($/mcfe) (e) (0.97 ) (1.05 ) (0.94 )
Production taxes ($/mcfe) (0.12 ) (0.14 ) (0.17 )
General and administrative costs ($/mcfe) (f) (0.39 ) (0.35 ) (0.38 )
Stock-based compensation ($/mcfe) (0.06 ) (0.06 ) (0.08 )
DD&A of natural gas and liquids properties ($/mcfe) (1.70 ) (1.52 ) (1.32 )
D&A of other assets ($/mcfe) (0.24 ) (0.25 ) (0.23 )
Interest expense ($/mcfe) (b) (0.06 ) (0.02 ) (0.07 )
Operating cash flow ($ in millions) (g) 895 910 1,207
Operating cash flow ($/mcfe) 2.58 2.73 4.35
Adjusted ebitda ($ in millions) (h) 803 838 1,365
Adjusted ebitda ($/mcfe) 2.32 2.52 4.92
Net income (loss) to common stockholders ($ in millions) 929 (71 ) 467
Earnings (loss) per share – diluted ($) 1.29 (0.11 ) 0.68
Adjusted net income to common stockholders ($ in millions) (i) 3 94 528
Adjusted earnings per share – diluted ($) 0.06 0.18 0.76

(a)
  Includes effect of VPP #9 sale in May 2011 (which had an average production loss impact of approximately 70 mmcfe per day in the 2012 second and first quarters and 40 mmcfe per day in the 2011 second quarter) and VPP #10 sale in March 2012 (which had an average production loss impact of approximately 115 mmcfe and 30 mmcfe per day in the 2012 second and first quarters, respectively). Also includes the effect of net natural gas production curtailments of approximately 30 bcf in each of the 2012 second and first quarters, or an average of approximately 330 mmcf per day in each quarter.
(b) Includes the effects of realized gains (losses) from hedging, but excludes the effects of unrealized gains (losses) from hedging.
(c) “Liquids” includes both oil and natural gas liquids.
(d) Includes revenue and operating costs and excludes depreciation and amortization of other assets.
(e) Includes one-time retroactive Pennsylvania natural gas impact fee in the 2012 first quarter of $0.04 per mcfe.

(f)
Excludes expenses associated with noncash stock-based compensation.
(g) Defined as cash flow provided by operating activities before changes in assets and liabilities.
(h) Defined as net income (loss) before income taxes, interest expense, and depreciation, depletion and amortization expense, as adjusted to remove the effects of certain items detailed on page 22.
(i) Defined as net income (loss) available to common stockholders, as adjusted to remove the effects of certain items detailed on page 23.
 
 

2012 Second Quarter Average Daily Total Production of 3.808 Bcfe per Day Increases 25% Year over Year and 4% Sequentially; 2012 Second Quarter Daily Liquids Production Increases 65% Year over Year and 15% Sequentially to 130,200 Bbls per Day

Chesapeake’s daily production for the 2012 second quarter averaged 3.808 bcfe, an increase of 25% from the average 3.049 bcfe produced per day in the 2011 second quarter and an increase of 4% from the average 3.658 bcfe produced per day in the 2012 first quarter. Chesapeake’s average daily production of 3.808 bcfe for the 2012 second quarter consisted of approximately 3.027 billion cubic feet (bcf) of natural gas (79% on a natural gas equivalent basis) and approximately 130,200 barrels (bbls) of liquids, consisting of approximately 80,500 bbls of oil (13% on a natural gas equivalent basis) and approximately 49,700 bbls of NGL (8% on a natural gas equivalent basis) (oil and NGL collectively referred to as “liquids”).

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