10-Q/APeriod: Q1 FY2010

EXPAND ENERGY Corp Quarterly Report (Amendment) for Q1 Ended Mar 31, 2010

Filed July 30, 2010For Securities:EXEEXEELEXEEWEXEEZ

Summary

EXPAND ENERGY Corp (EXE) filed an amended quarterly report (10-Q/A) for the period ending March 31, 2010, showing a significant turnaround from the previous year. The company reported net income attributable to Chesapeake of $738 million for the first quarter of 2010, a substantial improvement from a net loss of $5,740 million in the same period of 2009. This dramatic shift was largely due to a significant non-cash impairment charge of approximately $6.0 billion recorded in the prior year's first quarter, which did not recur in 2010. Revenues also saw a strong increase, reaching $2.798 billion in Q1 2010, up from $1.995 billion in Q1 2009. This growth was driven by higher natural gas and oil sales, coupled with increased marketing, gathering, and compression services. The company's production volumes also increased year-over-year. While operating costs rose, the substantial improvement in revenue and the absence of large impairment charges led to significant profitability in the current quarter.

Financial Highlights

46 data points
Beta

Revenue

$2.80B

43.3% Gross Margin

Net Income

$738.00M

26.4% Net Margin

EPS (Diluted)

$1.14

Total Assets

$30.29B

Cash & Equivalents

$516.00M

Free Cash Flow

$1.18B

Financial Statements
Beta
Revenue$2.80B
Gross Profit$1.21B
Operating Expenses$1.59B
Operating Income$1.21B
Interest Expense$192.00M
Net Income$738.00M
EPS (Basic)$1.16
EPS (Diluted)$1.14
Shares Outstanding (Basic)630.00M
Shares Outstanding (Diluted)647.00M

Key Highlights

  • 1Net income attributable to Chesapeake rebounded to $738 million in Q1 2010 from a net loss of $5.74 billion in Q1 2009, primarily due to the absence of a large impairment charge that impacted the prior year.
  • 2Total revenues increased by approximately 40% to $2.798 billion in Q1 2010, compared to $1.995 billion in Q1 2009.
  • 3Production volumes saw an increase, with natural gas production at 209.6 bcf and oil at 3.9 mmbbls in Q1 2010, up from 195.7 bcf and 2.9 mmbbls respectively in Q1 2009.
  • 4The company's average realized price for natural gas (excluding derivatives) increased to $4.50/mcf and for oil to $62.59/bbl in Q1 2010, compared to $3.44/mcf and $35.99/bbl in Q1 2009.
  • 5Cash provided by operating activities was strong at $1.183 billion in Q1 2010, slightly down from $1.261 billion in Q1 2009, indicating healthy operational cash generation.
  • 6The company announced a strategic and financial plan on May 10, 2010, aimed at increasing shareholder value, reducing debt, and achieving an investment grade rating, including potential sales of equity interests in subsidiaries and monetizations of midstream assets.
  • 7The company reported significant joint venture activity, including a $2.25 billion Barnett Shale joint venture with Total E&P USA, Inc. and a Marcellus Shale transaction with Statoil.

Frequently Asked Questions

The primary reason for the substantial improvement in net income from a loss of $5.74 billion in Q1 2009 to a profit of $738 million in Q1 2010 is the absence of a large non-cash impairment charge. In the first quarter of 2009, the company recorded an impairment of natural gas and oil properties of approximately $6.0 billion (net of tax) due to declining commodity prices, which significantly impacted the prior year's results.

Revenues have significantly improved. Total revenues increased by approximately 40% to $2.798 billion in the first quarter of 2010, compared to $1.995 billion in the same period of 2009. This increase was driven by higher natural gas and oil sales, as well as increased revenue from marketing, gathering, and compression services.

The company is focused on strategic initiatives to enhance shareholder value, reduce debt, and improve its credit rating. This includes plans for asset monetizations, potential joint ventures in liquids-rich plays and midstream assets, and a target of repaying up to $3.5 billion in senior indebtedness. They are also adjusting their drilling strategy to focus more on liquids-rich plays due to lower natural gas prices.

As of March 31, 2010, the company had total debt of approximately $29.914 billion. They maintain significant liquidity through cash and cash equivalents ($516 million) and available borrowing capacity under their corporate ($1.689 billion) and midstream ($213 million) credit facilities. The company's strategic plan includes significant debt reduction targets.