EXPAND ENERGY Corp Quarterly Report for Q1 Ended Mar 31, 2011

Summary

Chesapeake Energy Corporation (EXE) reported a net loss of $162 million for the first quarter of 2011, a significant swing from a net income of $738 million in the same period of the prior year. This loss was largely driven by a $725 million after-tax mark-to-market loss on derivative instruments, primarily related to natural gas and oil price hedging. Despite the quarterly loss, the company's operational performance showed growth. Net production increased by 20% year-over-year, driven by the "drillbit" strategy and expansion into liquids-rich plays. A major event during the quarter was the sale of its Fayetteville Shale assets for $4.65 billion, a key step in its "25/25 Plan" to reduce debt while growing production. The company also actively managed its debt, repurchasing $1.3 billion in senior and contingent convertible notes. Liquidity remains strong, supported by its corporate and midstream credit facilities and significant cash generated from asset sales.

Key Highlights

• 1Net loss of $162 million ($0.32 per diluted share) for Q1 2011, compared to a net income of $738 million ($1.14 per diluted share) in Q1 2010.
• 2Revenues decreased to $1.612 billion from $2.798 billion year-over-year, primarily due to a large unrealized after-tax mark-to-market loss on derivatives.
• 3Completed the sale of Fayetteville Shale assets for $4.65 billion, a significant monetization that will help reduce debt.
• 4Net production increased by 20% year-over-year to 279.6 bcfe, with liquids production showing particularly strong growth.
• 5Cash provided by operating activities was $741 million, down from $1.183 billion in the prior year quarter.
• 6Successfully repurchased approximately $1.3 billion in senior and contingent convertible notes as part of the "25/25 Plan" to reduce debt.
• 7Cash and cash equivalents increased to $849 million from $102 million at the end of the previous year.

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