10-QPeriod: Q3 FY2019

EXPAND ENERGY Corp Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 5, 2019For Securities:EXEEXEELEXEEWEXEEZ

Summary

EXPAND ENERGY Corp (EXE) reported its financial results for the period ending September 30, 2019. The company saw a decrease in total revenues for both the three and nine months ended periods compared to the prior year, primarily driven by lower oil, natural gas, and NGL sales volumes and prices. Despite revenue challenges, operational efficiencies and strategic acquisitions have been areas of focus. Despite a reported net loss attributable to Chesapeake for the three months ended September 30, 2019, the company has been actively managing its debt through various exchange transactions, aiming to reduce leverage and improve its financial flexibility. The acquisition of WildHorse Resource Development Corporation in February 2019 significantly expanded the company's oil production and is expected to yield substantial cost savings through operational synergies. Management is also focused on reducing capital expenditures for 2020 to target free cash flow and ensure compliance with debt covenants, though continued low commodity prices pose a significant risk to liquidity and going concern.

Financial Highlights

45 data points
Beta

Revenue

$2.09B

Net Income

-$61.00M

-2.9% Net Margin

EPS (Diluted)

$-11.89

Total Assets

$16.58B

Cash & Equivalents

$14.00M

Free Cash Flow

$329.00M

Financial Statements
Beta
Revenue$2.09B
Operating Expenses$2.04B
Operating Income$46.00M
Interest Expense$177.00M
Net Income-$61.00M
EPS (Basic)$-11.89
EPS (Diluted)$-11.89
Shares Outstanding (Basic)8.49M
Shares Outstanding (Diluted)8.49M

Key Highlights

  • 1Total Revenues decreased to $2.06 billion for the three months ended September 30, 2019, from $2.42 billion in the prior year period.
  • 2Net Income (Loss) Attributable to Chesapeake was $(61) million for the three months ended September 30, 2019, compared to $(146) million in the prior year period.
  • 3The company acquired WildHorse Resource Development Corporation on February 1, 2019, for approximately 717.4 million shares of common stock and $381 million in cash, plus assumption of debt.
  • 4Long-term debt, net, increased to $9.13 billion as of September 30, 2019, from $7.34 billion as of December 31, 2018, primarily due to the WildHorse acquisition.
  • 5Cash flows from operating activities decreased to $1.18 billion for the nine months ended September 30, 2019, from $1.39 billion in the prior year period.
  • 6The company is actively pursuing cost-cutting measures and strategic transactions to manage liquidity and comply with debt covenants, including a projected 30% reduction in capital expenditures for 2020.
  • 7A voluntary change in accounting principle from the full cost method to the successful efforts method for oil and natural gas exploration and development activities was made in Q1 2019, with prior periods recast.

Frequently Asked Questions

EXPAND ENERGY Corp (EXE) experienced a decline in total revenues for the third quarter of 2019, reporting $2.06 billion compared to $2.42 billion in the same period last year. This decrease was largely attributed to lower sales volumes and prices for oil, natural gas, and NGLs. The company reported a net loss attributable to Chesapeake of $61 million for the quarter, an improvement from the $146 million loss in the prior year quarter.

The most significant strategic initiative was the acquisition of WildHorse Resource Development Corporation in February 2019, which aimed to increase oil production and reduce costs through synergies. The company also engaged in debt restructuring through various note exchanges to reduce leverage and extend maturity profiles. Additionally, management is implementing cost-saving measures and plans to reduce capital expenditures by approximately 30% in 2020 to improve liquidity and free cash flow.

As of September 30, 2019, the company had $14 million in cash and cash equivalents and a net working capital deficit of $945 million. Key risks to liquidity include the volatility of oil and natural gas prices and the company's ability to comply with the leverage ratio covenant in its revolving credit facility. Failure to comply could lead to an event of default and potential acceleration of debt. Management is actively pursuing measures to mitigate these risks.

Yes, in the first quarter of 2019, EXPAND ENERGY Corp voluntarily changed its accounting method for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Prior period financial information has been restated to reflect this change, which is expected to improve comparability with industry peers and provide a more representative depiction of assets and operating results.