10-QPeriod: Q1 FY2019

EXPAND ENERGY Corp Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 9, 2019For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (EXE) reported a net loss of $21 million for the first quarter of 2019, a decline from a net income of $18 million in the prior year period. This was accompanied by a significant increase in total assets, largely due to the acquisition of WildHorse Resource Development Corporation (WildHorse) on February 1, 2019. The acquisition significantly expanded the company's oil production and asset base, particularly in the Eagle Ford Shale. Despite the net loss, the company saw a substantial increase in cash flow from operations, reaching $456 million, driven by disciplined capital allocation and operational efficiencies. Debt management remains a key focus, with efforts to extend maturity profiles and reduce leverage. The company also transitioned to the successful efforts method of accounting for oil and natural gas exploration and development activities, recasting prior periods for comparability. While revenues saw a decrease compared to the prior year, the strategic acquisition of WildHorse is expected to yield significant cost savings and enhance the company's oil production mix. Investors should monitor the integration of WildHorse and the company's ability to manage its debt obligations and leverage in the volatile commodity price environment.

Financial Highlights

46 data points
Beta

Revenue

$2.20B

Net Income

-$21.00M

-1.0% Net Margin

EPS (Diluted)

$-6.37

Total Assets

$16.64B

Cash & Equivalents

$8.00M

Free Cash Flow

$456.00M

Financial Statements
Beta
Revenue$2.20B
Operating Expenses$2.38B
Operating Income-$182.00M
Interest Expense$161.00M
Net Income-$21.00M
EPS (Basic)$-6.37
EPS (Diluted)$-6.37
Shares Outstanding (Basic)6.90M
Shares Outstanding (Diluted)6.90M

Key Highlights

  • 1Net loss of $21 million in Q1 2019, compared to a net income of $18 million in Q1 2018.
  • 2Acquired WildHorse Resource Development Corporation on February 1, 2019, for approximately $717.4 million in stock and $381 million in cash, significantly increasing oil production and asset base.
  • 3Cash flow from operating activities increased to $456 million in Q1 2019, up from $588 million in Q1 2018.
  • 4Total assets increased significantly to $16.6 billion as of March 31, 2019, from $12.7 billion as of December 31, 2018, largely due to the WildHorse acquisition.
  • 5Long-term debt increased substantially to $9.17 billion as of March 31, 2019, from $7.34 billion as of December 31, 2018, reflecting the assumption of WildHorse's debt.
  • 6Company transitioned to the successful efforts method of accounting for oil and natural gas exploration and development activities, recasting prior periods.
  • 7Strategic focus on reducing leverage, increasing cash flow from operations, and improving margins.

Frequently Asked Questions

The acquisition of WildHorse on February 1, 2019, significantly increased Chesapeake's total assets to $16.6 billion and its long-term debt to $9.17 billion. It also expanded the company's oil production and asset base. The acquisition is expected to generate substantial cost savings through operational synergies.

Chesapeake Energy reported a net loss of $21 million in the first quarter of 2019, compared to a net income of $18 million in the same period of the prior year. This was influenced by various factors, including a decrease in total revenues and the costs associated with the WildHorse acquisition and related integration.

Chesapeake Energy voluntarily changed its accounting method for oil and natural gas exploration and development from the full cost method to the successful efforts method. Prior period financial information has been recast to reflect this change, improving comparability with industry peers and providing a more representative depiction of assets and operating results.

As of March 31, 2019, Chesapeake had $8 million in cash and cash equivalents and $2.097 billion in available borrowing capacity under its revolving credit facility. The company expects to fund its planned capital expenditures and debt service requirements for the next 12 months, but acknowledges the ongoing volatility in commodity prices and the potential impact on future liquidity.