Chesapeake Energy
Chesapeake Energy (CHK) own interests in approximately 22,700 oil and natural gas wells and produced an average of approximately 575 mboe per day in the 2016 fourth quarter, net to its interest. Chesapeake Energy has a large and geographically diverse resource base of onshore U.S. unconventional natural gas and liquids assets. Chesapeake Energy has leading positions in the liquids-rich resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania. The company also own an oil and natural gas marketing business.1
The Company's estimated proved reserves as of December 31, 2016, were 1.708 bboe, an increase of 204 mmboe or 14%, from 1.504 bboe as of December 31, 2015. The increase in estimated proved reserves included 70 mmboe of downward revisions resulting primarily from lower average oil and natural gas prices offset by 580 mmboe of extensions and discoveries and 113 mmboe of upward revisions resulting from changes to previous estimates as further discussed below in Oil, Natural Gas and NGL Reserves and in Supplemental Disclosures About Oil, Natural Gas and NGL Producing Activities included in Item 8 of Part II of this report. In 2016, the company produced 233 mmboe, divested 241 mmboe and acquired 55 mmboe of estimated proved reserves. Before basis differential adjustments, oil and natural gas prices used in estimating proved reserves decreased as of December 31, 2016, compared to December 31, 2015, using the trailing 12-month average prices required by the Securities and Exchange Commission (SEC). Oil prices decreased by $7.53 per bbl or 15%, to $42.75 per bbl from $50.28 per bbl. Natural gas prices decreased $0.09 per mcf, or 3%, to $2.49 per mcf from $2.58 per mcf. Proved developed reserves represented 70% of its proved reserves as of December 31, 2016, compared to 84% as of December 31, 2015.
Its daily production for 2016 averaged 635 mboe, a decrease of 44 mboe, or 6%, from the 679 mboe of daily production for 2015, and consisted of approximately 90,800 bbls of oil (14% on an oil equivalent basis), approximately 2.9 bcf of natural gas (75% on an oil equivalent basis) and approximately 66,700 bbls of NGL (11% on an oil equivalent basis). Its average daily oil production decreased by 20% year over year primarily as a result of the sale of certain of its Mid-Continent assets in 2015 and 2016 as well as a significant reduction in drilling activity. Natural gas production decreased by 2% and NGL production decreased by 13%.
Company Information
The company make available, free of charge on its website at chk.com, its 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 the company electronically file such material with, or furnish it to, the SEC. From time to time, the company also post announcements, updates, events, investor information and presentations on its website in addition to copies of all recent news releases. Documents and information on its website are not incorporated by reference herein.
Business Strategy
Chesapeake’s strategy is to create shareholder value through the development of its significant positions in premier U.S. onshore resource plays. In addition, the company continue to focus its financial strategy on reducing debt and improving margins. The company apply financial discipline to all aspects of its business with goals of increasing financial and operational flexibility. Its capital program is focused on investments that can improve its cash flow generating ability regardless of the commodity price environment. The company plan to increase its capital expenditures in 2017 over 2016 levels to capture high rate of return opportunities in its oil and natural gas portfolio. These opportunities are a result of improved capital and operating efficiencies, including improved well performance, decreased drilling and completion costs per foot and decreased operating expenditures. The company expect its anticipated production increases in the 2017 second half and into 2018 will position it to balance capital expenditures and operating cash flow in 2018 and beyond.
In 2016, the company amended its senior secured revolving bank credit facility, issued a $1.5 billion secured term loan, issued $1.25 billion in 5.5% convertible senior notes due 2026, issued $1.0 billion in unsecured 8.00% senior notes due 2025 and sold approximately $1.4 billion of assets that did not fit its strategic priorities to increase liquidity and retire or refinance near-term maturities of debt. In addition, in 2016 and through February 24, 2017, the company strengthened its balance sheet and improved its liquidity position by refinancing, exchanging or repurchasing, where possible at a discount, $4.104 billion of its debt and $1.4 billion liquidation value of its preferred equity instruments.
Its substantial inventory of hydrocarbon resources, including its undeveloped acreage, provides a strong foundation to create future value. Its focus on efficiencies and operational improvements has led to increased well productivity from longer laterals, improved completion techniques and base production improvements. Building on its strong and diverse asset base through increasing production and cash flow and further delineating its emerging new development opportunities, the company believe that its dedication to financial discipline, the flexibility of its capital program, and its continued focus on safety and environmental stewardship will provide opportunities to create value for Chesapeake and its stakeholders in 2017 and beyond.
Operating Divisions
Chesapeake focuses its exploration, development, acquisition and production efforts in the two geographic operating divisions described below.
Southern Division. Includes the Eagle Ford Shale in South Texas, the Anadarko Basin in northwestern Oklahoma, the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and, prior to October 31, 2016, the Barnett Shale in the Fort Worth Basin in north central Texas.
Northern Division. Includes the Utica Shale in Ohio, the Marcellus Shale in the northern Appalachian Basin in Pennsylvania and the stacked pay in the Powder River Basin in Wyoming.
Well Data
As of December 31, 2016, the company held an interest in approximately 22,700 gross (8,800 net) productive wells, including 19,100 properties in which the company held a working interest and 3,600 properties in which the company held an overriding or royalty interest. Of the wells in which the company had a working interest, 14,500 gross (6,700 net) were classified as natural gas productive wells and 4,600 gross (2,100 net) were classified as oil productive wells. Chesapeake operated approximately 10,900 of its 19,100 productive wells in which the company had a working interest. During 2016, the company drilled or participated in 382 gross (235 net) wells as operator and participated in another 53 gross (4 net) wells completed by other operators. The company operate approximately 93% of its current daily production volumes.