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Chesapeake Energy Q4, Full Year 2022 Results; IDs $1.8B 2023 Capex

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   |    Tuesday,February 21,2023

Chesapeake Energy Corp. reported fourth quarter and full-year 2022 results and issued 2023 guidance.

Fourth Quarter 2022 Highlights:

  • Net cash provided by operating activities of $1,050 million
  • Net income totaled $3,513 million, or $24.00 per fully diluted share; adjusted net income(1) totaled $618 million, or $4.22 per share
  • Adjusted EBITDAX(1) of $1,032 million; free cash flow(1) of $526 million; adjusted free cash flow(1) of $273 million, inclusive of the effect of asset sales
  • Quarterly dividend of $1.29 per common share to be paid in March 2023; repurchased approximately 4.1 million shares for approximately $406 million
  • Produced approximately 4.05 bcfe/d net (90% natural gas)

Full-Year 2022 Highlights:

  • Net cash provided by operating activities of $4,125 million
  • Generated company-record $2.1 billion of adjusted free cash flow(1) and returned $2.3 billion to shareholders in dividends and share repurchases
  • Simplified capital structure with exchange of approximately two-thirds of outstanding warrants and completed approximately $1.1 billion of authorized $2.0 billion share repurchase program
  • Proved reserves of approximately 13.0 tcfe at year end 2022; standardized measure of discounted future net cash flows of approximately $26.3 billion
  • Secured independent Responsibly Sourced Gas (RSG) certification for 100% of approximately 6 bcf per day of gross operated produced natural gas volumes

2023 Outlook Highlights:

  • Optimized capital allocation with reduced activity levels; production expected to modestly decline year-over-year; remain LNG ready
  • Total expected capital expenditures of $1.765 - $1.835 billion
  • Equity investment in Momentum Midstream $285 - $315 million for the year; project remains on budget and schedule
  • Lowered interim targets to less than 3.0 mt CO2e/boe GHG intensity and 0.02% methane intensity by 2025

Nick Dell'Osso, Chesapeake's President and Chief Executive Officer, said, "The premium rock, returns, and runway of our outstanding assets delivered strong results in 2022, allowing us to return an industry-leading $2.3 billion to shareholders through dividends and buybacks. While we continue to see strong long-term natural gas demand and rising LNG export capacity, our 2023 operating plan preserves margins, optimizes capital allocation and maintains our premier balance sheet as we navigate current market volatility. Behind our disciplined capital allocation, proactive hedging program, and strong balance sheet, we anticipate generating significant free cash flow from operations. When combined with proceeds from recent Eagle Ford divestitures, we expect that our plan will allow us to again deliver our leading shareholder return framework in the year ahead."

Shareholder Return Update

Chesapeake generated $1,050 million of operating cash flow during the fourth quarter. Chesapeake plans to pay its base and variable dividend on March 23, 2023 to shareholders of record at the close of business on March 7, 2023. The total common stock dividend, including the variable and base components, is calculated as follows:

($ and shares in millions, except per share amounts)


4Q 2022

Net cash provided by operating activities (GAAP)


$ 1,050

Less cash capital expenditures



Less cash contributions to investments



Less free cash flow associated with assets under contract



Adjusted free cash flow (Non-GAAP)



Less cash paid for common base dividends



50% of adjusted free cash flow available for common variable dividends


$ 100


Common shares outstanding at 2/21/23(1)



Variable dividend payable per common share in March 2023


$ 0.74

Base dividend payable per common share in March 2023


$ 0.55

Total dividend payable per common share in March 2023


$ 1.29



Basic common shares outstanding as of the declaration date of 2/21/2023. Assumes no exercise of warrants between
dividend declaration date and dividend record date.

Including fourth quarter base and variable dividends, Chesapeake returned $1.2 billion to shareholders in 2022. The Company enhanced its capital structure and returns framework in 2022 through the repurchase of approximately $1.1 billion of its common stock (under its $2.0 billion buyback authorization through December 2023) and the exchange of 18.4 million common shares for two-thirds of outstanding warrants.

Operations Update

Chesapeake's net production in the fourth quarter was approximately 4.05 bcfe per day (approximately 90% natural gas and 10% total liquids), utilizing an average of 14 rigs to drill 58 wells and place 66 wells on production. Fourth quarter sales were negatively impacted by minor production curtailments in November and weather conditions in late December.

For the full year 2022, the company produced approximately 4.0 bcfe per day (approximately 90% natural gas and 10% total liquids), utilizing an average of 14 rigs to drill 217 wells and place 215 wells on production.

Chesapeake is currently operating 14 rigs including five in the Marcellus, seven in the Haynesville, and two in the Eagle Ford. The company is currently operating five frac crews including one in the Marcellus, two in the Haynesville and two in the Eagle Ford. The company expects to drop two rigs in the Haynesville during 2023, one in the first quarter and another in the third quarter and a rig in the Marcellus in the third quarter while maintaining one to two frac crews in each asset throughout the year. The company expects to drill 50 - 60 wells and place 45 - 55 wells on production in the first quarter of 2023. The company's operating plan remains flexible and is prepared for further adjustments, higher or lower, should market conditions change materially.

ESG Update

In 2022, Chesapeake achieved independent responsibly sourced gas certification across all of its natural gas assets under a combination of the MiQ methane standard, the EO100™ Standard for Responsible Energy Development and Project Canary's TrustWell certification process. Chesapeake is the first producer to achieve certification for produced and marketed gas volumes across two industry leading gas plays, delivering approximately 6 bcf per day of the premium commodity.

Since 2021, Chesapeake has installed more than 2,000 continuous methane emission monitoring devices and retrofitted approximately 19,000 pneumatic devices. In 2022, the company began conducting aerial Gas Mapping LiDAR scans to detect emissions semiannually across the entirety of its assets, facilitating prompt remediation efforts, reducing emissions and increasing gas revenues.

The company expanded its 2035 net zero goal to include both Scope 1 and Scope 2 GHG emissions. It also lowered its previously attained interim 2025 GHG and methane intensity targets to 3.0 mt CO2e/boe and 0.02%, respectively.

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