10-QPeriod: Q3 FY2015

EXPAND ENERGY Corp Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 4, 2015For Securities:EXEEXEELEXEEWEXEEZ

Summary

Expand Energy Corp. (EXE) reported significant financial challenges in its Q3 2015 10-Q filing. The company experienced a substantial net loss of $4.65 billion for the three months ended September 30, 2015, a sharp decline from the net income of $662 million reported in the same period of the prior year. This loss was largely driven by a massive impairment charge of $5.416 billion related to oil and natural gas properties, reflecting the severe impact of falling commodity prices on the company's asset valuations. Total revenues also saw a significant drop, falling to $2.89 billion from $5.70 billion year-over-year, primarily due to lower oil and natural gas prices. Financially, the company's balance sheet reflects a deteriorating position, with total assets decreasing to $21.29 billion from $40.75 billion at the end of 2014, largely due to the asset impairments. Total liabilities also decreased to $15.74 billion from $24.06 billion, mainly driven by a reduction in deferred income tax liabilities and other long-term liabilities. However, shareholder equity has been severely impacted, falling to $4.55 billion from $18.21 billion, indicating a substantial erosion of value. The company's liquidity appears to be a key concern, with a working capital deficit and a significant reduction in cash and cash equivalents.

Financial Highlights

44 data points
Beta

Revenue

$3.38B

Net Income

-$4.65B

-137.8% Net Margin

EPS (Diluted)

$-7.08

Total Assets

$21.29B

Cash & Equivalents

$1.76B

Free Cash Flow

$318.00M

Financial Statements
Beta
Revenue$3.38B
Operating Expenses$8.83B
Operating Income-$5.45B
Interest Expense$88.00M
Net Income-$4.65B
EPS (Basic)$-7.08
EPS (Diluted)$-7.08
Shares Outstanding (Basic)663.00M
Shares Outstanding (Diluted)663.00M

Key Highlights

  • 1Significant Net Loss: The company reported a net loss of $4.639 billion for the three months ended September 30, 2015, a substantial deterioration from a net income of $692 million in the prior year period.
  • 2Massive Asset Impairment: A significant impairment of oil and natural gas properties totaling $5.416 billion was recorded, reflecting the sharp decline in commodity prices.
  • 3Declining Revenues: Total revenues for the quarter were $2.893 billion, down from $5.703 billion in the same period of the previous year, driven by lower commodity prices.
  • 4Eroding Shareholder Equity: Total Chesapeake stockholders' equity decreased significantly to $4.282 billion from $16.903 billion at the end of 2014.
  • 5Reduced Cash and Equivalents: Cash and cash equivalents decreased to $1.759 billion from $4.108 billion at the end of 2014.
  • 6Operational Scaleback: The company reduced its workforce by approximately 15% and operated significantly fewer rigs compared to the prior year.
  • 7Debt Management: The company amended its revolving credit facility to provide greater flexibility and access to liquidity.

Frequently Asked Questions

The primary reason for the substantial net loss of $4.639 billion in the third quarter of 2015 was a significant impairment charge of $5.416 billion related to the company's oil and natural gas properties. This impairment reflects the sharp decline in commodity prices and their impact on the valuation of the company's assets.

The decline in commodity prices has severely impacted the company's financial performance. Revenues have fallen significantly due to lower prices received for oil, natural gas, and NGL. This also led to a substantial impairment of the company's oil and natural gas properties and negatively affected the company's liquidity and overall financial position.

As of September 30, 2015, the company had approximately $5.748 billion in cash availability, defined as unrestricted cash on hand plus borrowing capacity under its revolving credit facility. However, the company also reported a working capital deficit of approximately $978 million, indicating short-term liquidity concerns, which was partly due to the reclassification of a significant portion of its debt to current liabilities.

The company is taking several steps, including reducing its workforce by 15%, scaling back drilling operations significantly, evaluating additional asset sales and joint ventures to increase liquidity, restructuring certain gathering agreements, and amending its revolving credit facility to enhance financial flexibility. The elimination of common stock dividends also aims to preserve cash.