10-QPeriod: Q2 FY2018

EXPAND ENERGY Corp Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 1, 2018For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (CHK) reported a net loss of $17 million for the six months ended June 30, 2018, a significant decrease from the net income of $634 million in the prior year period. This decline is primarily driven by lower revenues and increased expenses. Total revenues decreased to $4.744 billion from $5.034 billion year-over-year. While oil and natural gas sales saw an increase in revenue due to higher prices, this was offset by a decrease in marketing revenues. The company has undertaken significant strategic initiatives, including a workforce reduction of approximately 13% to reduce costs and streamline operations, resulting in an expected annual cash cost saving of $70 million. A major subsequent event is the agreement to sell its Ohio Utica Shale assets for approximately $2.0 billion, which is expected to significantly progress its debt reduction goals.

Financial Highlights

45 data points
Beta

Revenue

$2.29B

Net Income

-$249.00M

-10.9% Net Margin

EPS (Diluted)

$-0.30

Total Assets

$12.34B

Cash & Equivalents

$3.00M

Free Cash Flow

$363.00M

Financial Statements
Beta
Revenue$2.29B
Operating Expenses$2.45B
Operating Income-$160.00M
Interest Expense$155.00M
Net Income-$249.00M
EPS (Basic)$-0.30
EPS (Diluted)$-0.30
Shares Outstanding (Basic)909.00M
Shares Outstanding (Diluted)909.00M

Key Highlights

  • 1Net loss for the six months ended June 30, 2018, was $17 million, compared to a net income of $634 million in the same period of 2017.
  • 2Total revenues decreased by 5.7% to $4.744 billion for the six months ended June 30, 2018, compared to $5.034 billion for the prior year period.
  • 3The company completed a 13% workforce reduction in January 2018, expecting to save approximately $70 million annually in cash costs.
  • 4A significant event post-quarter end is the agreement to sell its Ohio Utica Shale assets for approximately $2.0 billion, aimed at debt reduction.
  • 5Total debt decreased by 2.7% to $9.706 billion as of June 30, 2018, from $9.981 billion as of December 31, 2017.
  • 6Cash flow from operating activities significantly improved, showing $1.091 billion for the six months ended June 30, 2018, compared to a use of $58 million in the prior year period.
  • 7The company recorded an impairment loss of $42 million on other fixed assets in the current quarter.

Frequently Asked Questions

The decline in net income was primarily due to lower total revenues and increased operating expenses. Specifically, while oil and natural gas revenues increased due to higher prices, marketing revenues decreased, and there were increases in certain operating expenses such as depreciation, depletion, and amortization, and general and administrative expenses.

Chesapeake Energy has a strategic priority to reduce total debt by $2 to $3 billion in 2018. This is being achieved through various means, including the planned sale of its Ohio Utica Shale assets for approximately $2.0 billion, property divestitures in the Mid-Continent, and a focus on generating operating cash flow to fund capital expenditures and debt reduction.

In January 2018, Chesapeake Energy reduced its workforce by approximately 13%. This initiative is part of a broader plan to reduce costs and improve operational efficiency, with an expected annual cash cost saving of approximately $70 million.

The company's liquidity is dependent on commodity prices. As of June 30, 2018, Chesapeake had $3 million in cash. It has $3.096 billion of borrowing capacity available under its senior secured revolving credit facility, with $506 million in outstanding borrowings. Management expects to be able to fund its obligations for the next 12 months based on its cash balance, forecasted operating cash flows, available credit facility, and proceeds from the pending sale of its Utica interests.