EXPAND ENERGY Corp Quarterly Report for Q2 Ended Jun 30, 2008

Summary

Chesapeake Energy Corporation (now EXPAND ENERGY Corp) reported a significant net loss of $1.597 billion for the quarter ended June 30, 2008, primarily driven by a $2.094 billion unrealized non-cash after-tax mark-to-market loss on natural gas and oil hedges due to increased commodity prices. Despite the reported loss, the company's operational performance showed growth, with a 25% increase in natural gas and oil equivalent production compared to the previous quarter, marking the 28th consecutive quarter of production growth. The company also reported substantial investment in exploration and development activities, alongside significant capital raising efforts through stock and debt offerings and asset sales. While the company experienced a substantial increase in total assets to $38.023 billion from $30.734 billion at the end of 2007, it also saw a rise in total liabilities to $27.747 billion from $18.504 billion. This growth in liabilities, particularly current liabilities, contributed to a working capital deficit. Management's focus remains on continued production growth, strategic asset monetization, and managing its significant hedging portfolio, with a stated belief that the company's financial position and liquidity remain adequate despite the quarterly loss.

Key Highlights

• 1Significant Net Loss: Reported a net loss of $1.597 billion for the quarter, largely due to a $2.094 billion unrealized loss on derivative instruments.
• 2Production Growth Continues: Achieved a 25% increase in production (211.9 bcfe) compared to the prior quarter, extending a streak of 28 consecutive quarters of production growth.
• 3Substantial Capital Expenditures: Invested heavily in exploration and development, with capital expenditures totaling $2.857 billion for drilling and related activities in the six-month period.
• 4Increased Indebtedness: Total debt increased, with long-term debt and senior notes totaling $13.014 billion at June 30, 2008, up from $10.950 billion at December 31, 2007.
• 5Large Derivative Liability: Held a substantial net derivative liability of $6.551 billion related to natural gas and oil hedging activities at quarter-end.
• 6Strategic Asset Monetization: Engaged in asset sales and joint ventures to raise capital and fund growth, including a $1.65 billion joint venture for Haynesville Shale acreage and a $1.75 billion sale of Arkoma Basin assets.
• 7Working Capital Deficit: Reported a working capital deficit of $4.1 billion as of June 30, 2008, primarily due to the large derivative liability.

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