10-QPeriod: Q3 FY2018

EXPAND ENERGY Corp Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (EXE) reported its third-quarter 2018 financial results, showing a significant improvement in net income available to common stockholders, rising to $60 million from a loss of $41 million in the same period last year. This was driven by higher revenues and increased production volumes, particularly from oil and NGLs, coupled with a general increase in commodity prices. The company continues to focus on debt reduction and portfolio optimization. During the quarter, EXE issued new senior notes to repay existing debt, extending its maturity profile. Furthermore, subsequent to the quarter, the company announced a major acquisition of WildHorse Resource Development Corporation, signaling a strategic shift towards growth. However, investors should remain aware of the ongoing volatility in commodity prices and the company's substantial debt obligations, despite efforts to manage them.

Financial Highlights

45 data points
Beta

Revenue

$2.42B

Net Income

-$146.00M

-6.0% Net Margin

EPS (Diluted)

$-0.19

Total Assets

$12.66B

Cash & Equivalents

$4.00M

Free Cash Flow

$444.00M

Financial Statements
Beta
Revenue$2.42B
Operating Expenses$2.34B
Operating Income$82.00M
Interest Expense$165.00M
Net Income-$146.00M
EPS (Basic)$-0.19
EPS (Diluted)$-0.19
Shares Outstanding (Basic)910.00M
Shares Outstanding (Diluted)910.00M

Key Highlights

  • 1Net income available to common stockholders improved significantly to $60 million in Q3 2018, compared to a net loss of $41 million in Q3 2017.
  • 2Total revenues increased to $2.418 billion in Q3 2018 from $1.943 billion in Q3 2017, driven by higher oil, natural gas, and NGL sales prices.
  • 3The company successfully issued $850 million in 7.00% Senior Notes due 2024 and $400 million in 7.50% Senior Notes due 2026, using proceeds to repay $1.233 billion of its secured term loan.
  • 4Subsequent to the quarter, EXE announced a definitive agreement to acquire WildHorse Resource Development Corporation for approximately $3.977 billion, indicating a move towards expansion.
  • 5The company's cash flow from operating activities saw a substantial increase, reaching $1.595 billion for the nine months ended September 30, 2018, compared to $273 million in the prior-year period.
  • 6EXE's total debt remained substantial, at $9.862 billion as of September 30, 2018, although the company is actively managing its debt maturity profile.
  • 7Significant divestitures, including the sale of Utica Shale assets for $1.868 billion, are part of the strategy to reduce debt and streamline operations.

Frequently Asked Questions

Chesapeake Energy Corporation reported a significant improvement in profitability. Net income available to common stockholders was $60 million for the three months ended September 30, 2018, a substantial increase from a net loss of $41 million for the same period in 2017. This turnaround was driven by higher revenues, primarily due to increased commodity prices and improved sales volumes.

The company has a substantial debt load, totaling $9.862 billion as of September 30, 2018. Chesapeake is actively working to manage this debt through various strategies, including asset divestitures and debt issuance. Notably, in the current quarter, they issued new senior notes to repay a secured term loan. Subsequent to the quarter, the company announced its intent to acquire WildHorse Resource Development Corporation for approximately $3.977 billion, signaling a strategic direction that may involve further debt financing or equity issuance to fund growth.

Total revenues increased to $2.418 billion in the third quarter of 2018, up from $1.943 billion in the same period of 2017. This growth was primarily driven by higher average sales prices for oil, natural gas, and natural gas liquids (NGLs). Higher production volumes, particularly from retained assets, also contributed to the revenue increase.

Chesapeake Energy utilizes derivative instruments, such as swaps and collars, to mitigate its exposure to volatile commodity prices. As of September 30, 2018, the company had open derivative instruments with a fair value liability of $338 million, primarily related to oil and natural gas. These activities are aimed at predicting revenue more accurately and protecting cash flow against downside price risk. While not designated for hedge accounting, these derivatives are a key part of their risk management strategy.