filings.toolsExpand Energy 10-K 2022-12-31
Filed 2023-02-22. 23 sections, 600K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-13726
CHESAPEAKE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
| Oklahoma | 73-1395733 | |||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| 6100 North Western Avenue, | Oklahoma City, | Oklahoma | 73118 | |||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
| (405) | 848-8000 | |||||||||||||
| (Registrant’s telephone number, including area code) |
| Securities Registered Pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
| Common Stock, $0.01 par value per share | CHK | The Nasdaq Stock Market LLC | ||||||||||||
| Class A Warrants to purchase Common Stock | CHKEW | The Nasdaq Stock Market LLC | ||||||||||||
| Class B Warrants to purchase Common Stock | CHKEZ | The Nasdaq Stock Market LLC | ||||||||||||
| Class C Warrants to purchase Common Stock | CHKEL | The Nasdaq Stock Market LLC |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐
Smaller Reporting Company ☐ Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
The aggregate market value of our common stock held by non-affiliates on June 30, 2022, was approximately $3.6 billion. As of February 16, 2023, there were 134,719,821 shares of our $0.01 par value common stock outstanding.
__________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 2023 Annual Meeting of Stockholders are incorporated by reference in Part III.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
FORM 10-K
TABLE OF CONTENTS
| Definitions |
Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Chesapeake,” the “Company” and “Registrant” refer to Chesapeake Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. Certain reserves and production information was previously disclosed in a per barrel of oil equivalent, since the majority of our production profile consists of natural gas, we have converted this information, including prior periods, from a per barrel of oil equivalent, to a per one thousand cubic feet of natural gas equivalent, referred to, on such a converted basis, as per Mcfe. In addition, the following are other abbreviations and definitions of certain terms used within this Annual Report on Form 10-K (this “Form 10-K” or this “report”):
“Adjusted Free Cash Flow” (a non-GAAP measure) means net cash provided by operating activities (GAAP) less cash capital expenditures and contributions to investments, adjusted to exclude certain items management believes affect the comparability of operating results.
“ASC” means Accounting Standards Codification.
“Backstop Commitment Agreement” means that certain Backstop Commitment Agreement, dated as of June 28, 2020, by and between Chesapeake and the Backstop Parties, as may be further amended, modified, or supplemented from time to time, in accordance with its terms.
“Backstop Parties” means the members of the FLLO Ad Hoc Group that are signatories to the Backstop Commitment Agreement and Franklin Advisers, Inc., as investment manager on behalf of certain funds and accounts.
“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas.
“Bbl” or “Bbls” means barrel or barrels.
“Bcf” means billion cubic feet.
“Bcfe” means billion cubic feet of natural gas equivalent.
“BLM” means the Bureau of Land Management.
“Chapter 11 Cases” means, when used with reference to a particular Debtor, the case pending for that Debtor under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and when used with reference to all the Debtors, the procedurally consolidated Chapter 11 cases pending for the Debtors in the Bankruptcy Court.
“Chief” means Chief E&D Holdings, LP.
“Class A Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan, the Class B Warrants, and the Class C Warrants), at an initial exercise price per share of $27.63. The Class A Warrants are exercisable from the Effective Date until February 9, 2026.
“Class B Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan and the Class C Warrants), at an initial exercise price per share of $32.13. The Class B Warrants are exercisable from the Effective Date until February 9, 2026.
“Class C Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), at an initial exercise price per share of $36.18. The Class C Warrants are exercisable from the Effective Date until February 9, 2026.
“Completion” means the process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas, oil or natural gas liquids, or in the case of a dry well, the reporting to the appropriate authority that the well has been abandoned.
“Confirmation Order” means the order confirming the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, Docket No. 2915, entered by the Bankruptcy Court on January 16, 2021.
“DD&A” means depreciation, depletion and amortization.
“Debtors” means the Company, together with all of its direct and indirect subsidiaries that have filed the Chapter 11 Cases.
“DEI” means diversity, equity and inclusion.
“Developed Acreage” means acres which are allocated or assignable to producing wells or wells capable of production.
“DIP Facility” means that certain debtor-in-possession financing facility documented pursuant to the DIP Documents and DIP Order.
“Dry Well” means a well found to be incapable of producing either natural gas or oil in sufficient quantities to justify completion as a natural gas or oil well.
“Effective Date” means February 9, 2021.
“ESG” means environmental, social and governance.
“Exit Credit Facility” means the reserve-based credit facility available upon emergence from bankruptcy. In December 2022, we terminated the Exit Credit Facility.
“Exploratory Well” means a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of natural gas or oil in another reservoir.
“FLLO Term Loan Facility” means the facility outstanding under the FLLO Term Loan Facility Credit Agreement.
“FLLO Term Loan Facility Credit Agreement” means that certain Term Loan Agreement, dated as of December 19, 2019 ((i) as supplemented by that certain Class A Term Loan Supplement, dated as of December 19, 2019 (as amended, restated or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto, and (ii) as further amended, restated, or otherwise modified from time to time), by and among Chesapeake, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto.
“Formation” means a succession of sedimentary beds that were deposited under the same general geologic conditions.
“Free Cash Flow” (a non-GAAP measure) means net cash provided by operating activities (GAAP) less cash capital expenditures.
“G&A” means general and administrative expenses.
“GAAP” means U.S. generally accepted accounting principles.
“General Unsecured Claim” means any Claim against any Debtor that is not otherwise paid in full during the Chapter 11 Cases pursuant to an order of the Bankruptcy Court and is not an Administrative Claim, a Priority Tax Claim, an Other Priority Claim, an Other Secured Claim, a Revolving Credit Facility Claim, a FLLO Term Loan Facility Claim, a Second Lien Notes Claim, an Unsecured Notes Claim, an Intercompany Claim, or a Section 510(b) Claim.
“Gross Acres or Gross Wells” means the total acres or wells, as the case may be, in which a working interest is owned.
“LTIP” means the Chesapeake Energy Corporation 2021 Long Term Incentive Plan.
“LNG” means liquefied natural gas.
“Marcellus Acquisition” means Chesapeake’s acquisition of Chief and associated non-operated interests held by affiliates of Radler and Tug Hill, Inc., which closed on March 9, 2022, with an effective date of January 1, 2022.
“MBbls” means thousand barrels.
“MMBbls” means million barrels.
“Mcf” means thousand cubic feet.
“Mcfe” means one thousand cubic feet of natural gas equivalent, with one barrel of oil or NGL converted to an equivalent volume of natural gas using the ratio of one barrel of oil or NGL to six Mcf of natural gas.
“MMcf” means million cubic feet.
“MMcfe” means million cubic feet of natural gas equivalent.
“Net Acres or Net Wells” means the sum of the fractional working interests owned in gross acres or gross wells.
“New Common Stock” means the single class of common stock issued by Reorganized Chesapeake on the Effective Date.
“New Credit Facility” means the reserve-based credit facility entered into on December 9, 2022.
“NGL” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“OPEC+” means Organization of the Petroleum Exporting Countries Plus.
“Petition Date” means June 28, 2020, the date on which the Debtors commenced the Chapter 11 Cases.
“Plan” means the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, attached as Exhibit A to the Confirmation Order.
“Play” means a portion of the exploration and production cycle following the identification by geologists and geophysicists of areas with potential natural gas, oil and NGL reserves.
“Present Value of Estimated Future Net Revenues or PV-10 (non-GAAP)” means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices calculated as the average natural gas and oil price during the preceding 12-month period prior to the end of the current reporting period, (determined as the unweighted arithmetic average of prices on the first day of each month within the 12-month period) and costs in effect at the determination date (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.
“Price Differential” means the difference in the price of natural gas, oil or NGL received at the sales point and the NYMEX price.
“Productive Well” means a well that is not a dry well. Productive wells include producing wells and wells that are mechanically capable of production.
“Proved Developed Reserves” means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.
“Proved Properties” means properties with proved reserves.
“Proved Reserves” has the meaning given to such term in Rule 4-10(a)(22) of Regulation S-X, which states in part proved natural gas and oil reserves are those quantities of natural gas and oil, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
“Proved Undeveloped Reserves (PUDs)” means proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required. Reserves on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
“Put Option Premium” means a nonrefundable aggregate fee of $60 million, which represents 10 percent of the Rights Offering Amount, payable to the Backstop Parties in accordance with, and subject to the terms of the Backstop Commitment Agreement based on their respective backstop commitment percentages at the time such payment is made.
“Radler” means Radler 2000 Limited Partnership.
“Reservoir” means a porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
“Rights Offering” means the New Common Stock rights offering for the Rights Offering Amount consummated by the Debtors on the Effective Date.
“SEC” means United States Securities and Exchange Commission.
“Second Lien Notes” means the 11.50% senior notes due 2025 issued by Chesapeake pursuant to the Second Lien Notes Indenture.
“Second Lien Notes Claim” means any Claim on account of the Second Lien Notes.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator, the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“Standardized Measure” means the discounted future net cash flows relating to proved reserves based on the means of the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices calculated as the average natural gas and oil price during the preceding 12-month period prior to the end of the current reporting period (determined as the unweighted arithmetic average of prices on the first day of each month within the 12-month period). The standardized measure differs from the PV-10 measure only because the former includes the effects of estimated future income tax expenses.
“Tcf” means trillion cubic feet.
“Tcfe” means trillion cubic feet of natural gas equivalent.
“Tranche A Loans” means the fully revolving loans made under and on the terms set forth under the Exit Credit Facility which were partially funded on the Effective Date. The Tranche A Loans were repaid in full in connection with our entry into the New Credit Facility.
“Tranche B Loans” means term loans made under and on the terms set forth under the Exit Credit Facility which were fully funded on the Effective Date. The Tranche B Loans were repaid in full in connection with our entry into the New Credit Facility.
“Undeveloped Acreage” means acreage on which wells have not been drilled or completed to a point that would permit the production of economic quantities of natural gas and oil regardless of whether the acreage contains proved reserves.
“Unproved Properties” means properties with no proved reserves.
“Vine” means Vine Energy Inc.
“Vine Acquisition” means Chesapeake’s acquisition of Vine Energy Inc. which closed on November 1, 2021.
“Volumetric Production Payment (VPP)” means a limited-term overriding royalty interest in natural gas and oil reserves that: (i) entitles the purchaser to receive scheduled production volumes over a period of time from specific lease interests; (ii) is free and clear of all associated future production costs and capital expenditures; (iii) is nonrecourse to the seller (i.e., the purchaser's only recourse is to the reserves acquired); (iv) transfers title of the reserves to the purchaser; and (v) allows the seller to retain the remaining reserves, if any, after the scheduled production volumes have been delivered.
“Warrants” means, collectively, the Class A Warrants, Class B Warrants and Class C Warrants.
“Working Interest” means the operating interest which gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.
“WTI” means West Texas Intermediate.
“/Bbl” means per barrel.
“/Mcf” means per Mcf.
“/Mcfe” means per Mcfe.
“2020 Predecessor Period” means the year ended December 31, 2020.
“2021 Predecessor Period” means the period of January 1, 2021 through February 9, 2021.
“2021 Successor Period” means the period of February 10, 2021 through December 31, 2021.
“2022 Successor Period” means the year ended December 31, 2022.
| Forward-Looking Statements |
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include our current expectations or forecasts of future events, including matters relating to the continuing effects of the impact of inflation and commodity price volatility resulting from Russia’s invasion of Ukraine, COVID-19 and related supply chain constraints, and the impact of each on our business, financial condition, results of operations and cash flows, the potential effects of the Plan on our operations, management, and employees, actions by, or disputes among or between, members of OPEC+ and other foreign oil-exporting countries, market factors, market prices, our ability to meet debt service requirements, our ability to continue to pay cash dividends, the amount and timing of any cash dividends and our ESG initiatives. Forward-looking and other statements in this Form 10-K regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as "expect," “could,” “may,” "anticipate," "intend," "plan," “ability,” "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “guidance,” “outlook,” “opportunity” or “strategy.”
Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
-
the ability to execute on our business strategy following emergence from bankruptcy;
-
the impact of inflation and commodity price volatility resulting from Russia’s invasion of Ukraine, COVID-19 and related supply chain constraints along with the effect on our business, financial condition, employees, contractors, vendors and the global demand for natural gas and oil and U.S. and world financial markets;
-
our ability to comply with the covenants under the credit agreement for our New Credit Facility and other indebtedness;
-
risks related to potential acquisitions or dispositions;
-
our ability to realize anticipated cash cost reductions;
-
the volatility of natural gas, oil and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles;
-
a deterioration in general economic, business or industry conditions;
-
uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;
-
our ability to replace reserves and sustain production;
-
drilling and operating risks and resulting liabilities;
-
our ability to generate profits or achieve targeted results in drilling and well operations;
-
the limitations our level of indebtedness may have on our financial flexibility;
-
our ability to achieve and maintain ESG certifications, goals and commitments;
-
our inability to access the capital markets on favorable terms;
-
the availability of cash flows from operations and other funds to fund cash dividends and repurchases of equity securities, to finance reserve replacement costs and/or satisfy our debt obligations;
-
write-downs of our natural gas and oil asset carrying values due to low commodity prices;
-
charges incurred in response to market conditions;
-
limited control over properties we do not operate;
-
leasehold terms expiring before production can be established;
-
commodity derivative activities resulting in lower prices realized on natural gas, oil and NGL sales;
-
the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations;
-
potential OTC derivatives regulations limiting our ability to hedge against commodity price fluctuations;
-
adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims;
-
our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used;
-
pipeline and gathering system capacity constraints and transportation interruptions;
-
legislative, regulatory and ESG initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal;
-
terrorist activities and/or cyber-attacks adversely impacting our operations;
-
an interruption in operations at our headquarters due to a catastrophic event;
-
federal and state tax proposals affecting our industry;
-
competition in the natural gas and oil exploration and production industry;
-
negative public perceptions of our industry;
-
effects of purchase price adjustments and indemnity obligations; and
-
other factors that are described under Risk Factors in Item 1A of Part I of this Form 10-K.
We caution you not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the filing date, and we undertake no obligation to update this information. We urge you to carefully review and consider the disclosures in this report and our other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business.
PART I
Item 1. Business
Unless the context otherwise requires, references to “Chesapeake,” the “Company,” “us,” “we” and “our” in this report are to Chesapeake Energy Corporation together with its subsidiaries. Our principal executive offices are located at 6100 North Western Avenue, Oklahoma City, Oklahoma 73118, and our main telephone number at that location is (405) 848-8000.
| Our Business |
We are an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce natural gas, oil and NGL from underground reservoirs. We own a large portfolio of onshore U.S. unconventional natural gas and liquids assets, including interests in approximately 8,400 gross natural gas and oil wells.
On August 2, 2022, we announced that our Eagle Ford assets were non-core to our future capital allocation strategy. While continuing to focus our capital on the premium rock, returns and runway of our Marcellus and Haynesville positions, on January 17, 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion. On February 17, 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion.
On March 25, 2022, we sold our Powder River Basin assets in Wyoming to Continental Resources, Inc. for approximately $450 million.
On March 9, 2022, we completed our acquisition of Chief, Radler and associated non-operated interests held by affiliates of Tug Hill, Inc. (“Tug Hill”). Chief, Radler and Tug Hill held producing assets and an inventory of premium drilling locations in the Marcellus Shale in Northeast Pennsylvania.
On November 1, 2021, we completed our acquisition of Vine, an energy company focused on the development of natural gas properties in stacked Haynesville and Mid-Bossier shale plays in Northwest Louisiana.
On June 28, 2020, we and certain of our subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court confirmed the Plan in a bench ruling on January 13, 2021 and entered the Confirmation Order on January 16, 2021. The Debtors emerged from bankruptcy on February 9, 2021. Upon emergence, all existing equity was canceled and New Common Stock was issued to the previous holders of our FLLO Term Loan Facility, Second Lien Notes, senior unsecured notes and certain general unsecured creditors whose claims were impaired as a result of our bankruptcy, as well as to other parties as set forth in the Plan, including to other parties participating in a $600 million rights offering. Upon emergence from bankruptcy, we adopted fresh start accounting, which resulted in us becoming a new entity for financial reporting purposes. Accordingly, the consolidated financial statements on or after February 9, 2021 are not comparable to the consolidated financial statements prior to that date. To facilitate our discussion in this report, we refer to the post-emergence reorganized company as the “Successor” and the pre-emergence company as the “Predecessor.” See Note 2 and Note 3 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion of our bankruptcy, the resulting reorganization and fresh start accounting.
| Information About Us |
We make available, free of charge on our website at chk.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. From time to time, we also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. Documents and information on our website are not incorporated by reference herein.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including Chesapeake, that file electronically with the SEC.
| Business Strategy |
Our business strategy is to create shareholder value through the responsible development of our significant resource plays, while continuing to be a leading provider of affordable, reliable, low carbon energy to the United States.
Superior Capital Returns. We consistently focus on optimizing the development of our large resource base with a prioritization of generating high cash returns on capital invested. Our drive toward continuous improvement through engineering innovation and planning enhances margins for our shareholders.
Sustainability Leadership. We are committed to protecting our country’s natural resources and reducing our environmental footprint. We continue to foster a focus on environmental excellence through a culture of stewardship and sustainability among our employees and business partners. We recognize that ownership and accountability are key to helping ensure our work sites are safe and protective of the environment.
Premier Balance Sheet. We believe that maintaining low net leverage is integral to our business strategy and will allow us to maintain lower fixed costs, improve our margins and maintain the flexibility of our capital program. We further de-risk our margins and cash flows with prudent natural gas hedging that aims to reduce the impact of volatility.
| Operating Areas |
We focus our acquisition, exploration, development and production efforts in the geographic operating areas described below.
Marcellus - Northern Appalachian Basin in Pennsylvania.
Haynesville - Haynesville/Bossier Shales in Northwestern Louisiana.
Eagle Ford - Eagle Ford Shale in South Texas. In January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets. In February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets.
| Well Data |
As of December 31, 2022, we held an interest in approximately 8,400 gross productive wells, including 6,700 wells in which we held a working interest and 1,700 wells in which we held an overriding or royalty interest. Of the 6,700 (4,300 net) wells in which we held a working interest, 3,500 (2,100 net) wells were classified as productive natural gas wells and 3,200 (2,200 net) wells were classified as productive oil wells. During 2022, we operated 6,000 gross wells and held a non-operating working interest in 700 gross wells. We also completed 216 gross (151 net) wells as operator and participated in another 22 gross (1 net) wells completed by other operators. We operate approximately 99% of our current daily production volumes.
| Drilling Activity |
The following table sets forth the wells we completed or participated in during the periods indicated. In the table, "gross" refers to the total wells in which we had a working interest and "net" refers to gross wells multiplied by our working interest:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
Showing the first 8K of 67K characters. Open the full section
Item 1A. Risk Factors
There are numerous factors that affect our business and results of operations, many of which are beyond our control. The following is a description of factors that we consider to be material and that might cause our future results to differ materially from those currently expected. The risks described below are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. If any of these risks actually occur, our business, financial position, results of operations, cash flows, reserves and/or our ability to pay our debts and other liabilities could suffer, the trading price and liquidity of our securities could decline and you may lose all or part of your investment in our securities.
| Risks Related to Operating our Business |
Conservation measures and technological advances could reduce demand for natural gas and oil.
Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to natural gas and oil, technological advances in fuel economy and energy generation devices could reduce demand for natural gas and oil. The impact of the changing demand for natural gas and oil could adversely impact our earnings, cash flows and financial position.
Negative public perception regarding us or our industry could have an adverse effect on our operations.
Negative public perception regarding us or our industry resulting from, among other things, concerns raised by advocacy groups about hydraulic fracturing, waste disposal, oil spills, seismic activity, climate change, explosions of natural gas transmission lines and the development and operation of pipelines and other midstream facilities may lead to generally increased political pressure and regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations. Additionally, environmental groups, landowners, local groups and other advocates may oppose our operations through organized protests, attempts to block or sabotage our operations or those of our midstream transportation providers, encourage capital providers to divest of their interests in us or our industry, intervene in regulatory or administrative proceedings involving our assets or those of our midstream transportation providers, or file lawsuits or other actions designed to prevent, disrupt or delay the development or operation of our assets and business or those of our midstream transportation providers. These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens and increased risk of litigation, as well as potentially reducing our ability to execute routine or strategic business partnerships. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits we require to conduct our operations to be withheld, delayed or burdened by requirements that restrict our ability to profitably conduct our business. A change in control of national, state or local governments, including the U.S. presidential administration, Congress, state or local governments, and governments of other countries may also result in uncertainty regarding the degree to which there will be increased restrictions on natural gas and oil production activities, which could materially adversely affect our industry and our financial condition and results of operations.
Certain financial institutions, funds and other sources of capital have also elected to restrict or eliminate their investment in certain fossil fuel-related activities. For example, many large financial institutions have announced commitments to reduce the emissions associated with their financing activities, such as through the Glasgow Financial Alliance for Net Zero (“GFANZ”), whose members represent over $130 trillion in capital subject to a goal of net zero financed emissions by 2050. Ultimately, this could make it more difficult or costly for us to secure funding for exploration and production activities. Members of the investment community have also begun to screen companies such as ours for sustainability performance, including practices related to GHGs and climate change, before investing in our common stock or providing financing. Any efforts to improve our sustainability practices in response to these pressures may increase our costs, regardless of whether such efforts are successful, and we may be forced to implement technologies that are less economically efficient or are not economically viable in order to improve our sustainability performance and to meet the specific requirements to perform services for certain customers. For more information, see our risk factor “Increasing attention to ESG matters and our ability to achieve and maintain ESG certifications, goals and commitments may impact our business, financial results or stock price.”
Risks related to potential acquisitions or dispositions may adversely affect our business.
From time to time, we evaluate acquisitions and dispositions of assets, businesses and other investments. These transactions may not result in the anticipated benefits or efficiencies. In addition, acquisitions may be financed by borrowings, requiring us to incur more debt, or by the issuance of our common stock. Any such acquisition or disposition involves risks and we cannot assure you that:
-
any acquisition will be successfully integrated into our operations and internal controls;
-
the due diligence conducted prior to an acquisition will uncover situations that could result in financial or legal exposure, such as title defects and potential environmental and other liabilities;
-
post-closing purchase price adjustments will be realized in our favor;
-
our assumptions about, among other things, reserves, estimated production, revenues, capital expenditures, operating expenses and costs will be accurate;
-
there will not be delays in closing, lower than expected sales proceeds for the disposed assets or business, residual liabilities, or post-closing claims for indemnification;
-
any investment, acquisition, or disposition will not divert management resources from the operation of our business; and
-
any investment, acquisition, or disposition will not have a material adverse effect on our financial condition, results of operations, cash flows or reserves.
If any of these risks materialize, the benefits of such acquisition or disposition may not be fully realized, if at all, and our financial condition, results of operations, cash flows and reserves could be negatively impacted.
The gas and oil exploration and production industry is very competitive; some of our competitors have greater financial and other resources than we do, and there is competition to attract and retain talent and competition over access to certain industry equipment.
We face competition in every aspect of our business, including, but not limited to, buying and selling reserves and leases, obtaining goods and services needed to operate our business and marketing natural gas, oil or NGL. Competitors include multinational oil companies, independent production companies and individual producers and operators. Some of our competitors have greater financial and other resources than we do. As a result, these competitors may be able to address industry challenges more effectively or weather industry downturns more easily than we can. We also face indirect competition from alternative energy sources, including wind, solar and electric power.
Our performance depends largely on the tale
Showing the first 8K of 71K characters. Open the full section
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Information regarding our properties is included in Item 1. Business and in the Supplementary Information included in Item 8 of Part II of this report.
Item 3. Legal Proceedings
Chapter 11 Proceedings
Commencement of the Chapter 11 Cases automatically stayed the proceedings and actions against us that are referenced below, in addition to actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases. See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for additional information.
Litigation and Regulatory Proceedings
We were involved in a number of litigation and regulatory proceedings as of the Petition Date. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is currently indeterminate. See Note 7 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for information regarding our estimation and provision for potential losses related to litigation and regulatory proceedings.
Business Operations. We are involved in various lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. The majority of these prepetition legal proceedings were settled during the Chapter 11 Cases or will be resolved in connection with the claims reconciliation process before the Bankruptcy Court. Any allowed claim related to such prepetition litigation will be treated in accordance with the Plan.
Environmental Contingencies
The nature of the natural gas and oil business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property.
Other Matters
Based on management’s current assessment, we are of the opinion that no pending or threatened lawsuit or dispute relating to our business operations is likely to have a material adverse effect on our future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17CFR 229.104) is included in Exhibit 95.1 to this Form 10-K.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
| Common Stock |
Upon our emergence from Chapter 11 bankruptcy on February 9, 2021, our then-authorized common stock and preferred stock were canceled and released under the Plan without receiving any recovery on account thereof. In accordance with the Plan confirmed by the Bankruptcy Court on February 9, 2021, we issued 97,097,081 shares of New Common Stock of the Successor, which are listed on the Nasdaq Stock Market LLC under the symbol CHK. In addition, on February 9, 2021, we issued 11,111,111 Class A Warrants, 12,345,679 Class B Warrants and 9,768,527 Class C Warrants, each of which are exercisable for one share of common stock per warrant at the initial exercise prices of $27.63, $32.13 and $36.18 per share, respectively. The warrants are immediately exercisable and will expire on February 9, 2026. For more information regarding our emergence from Chapter 11 bankruptcy and our Plan of Reorganization, see Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report. Additionally, more information on our New Common Stock and Warrants can be found in Note 12 of the notes to our consolidated financial statements included in Item 8 of Part II of this report.
| Dividends |
We declared the first quarterly dividend on our New Common Stock in the second quarter of 2021, which consisted of a base dividend per share. In March 2022, we adopted a variable return program that resulted in the payment of an additional variable dividend equal to the sum of Adjusted Free Cash Flow from the prior quarter less the base quarterly dividend, multiplied by 50%. The declaration and payment of any future dividend is subject to the approval of our Board of Directors in its discretion. Since the initial base dividend declared during the second quarter of 2021, we have incrementally increased the base dividend per share. For additional information on our dividends, see Note 12 of the notes to our consolidated financial statements included in Item 8 of Part II of this report.
| Repurchases of Equity Securities; Unregistered Sales of Equity Securities and Use of Proceeds |
On December 2, 2021, we announced that our Board of Directors authorized the repurchase of up to $1.0 billion in aggregate value of our common stock and/or warrants from time to time. In June 2022, our Board of Directors authorized an increase in the size of the share repurchase program from $1.0 billion to $2.0 billion in aggregate value of our common stock and/or warrants. The repurchase authorization permits repurchases on a discretionary basis as determined by management, subject to market conditions, applicable legal requirements, available liquidity, compliance with the Company’s debt agreements and other appropriate factors. The share repurchase program expires on December 31, 2023. The following table provides information regarding purchases of our common stock made by us during the quarter ended December 31, 2022. In 2023, our share repurchase program will be subject to a 1% excise tax imposed under the Inflation Reduction Act of 2022.
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | ||||||||||||||||||||||
| October 1 - October 31 | 4,033,368 | $ | 98.90 | 4,033,368 | $ | 934 | ||||||||||||||||||||
| November 1 - November 30 | 72,083 | $ | 99.09 | 72,083 | $ | 927 | ||||||||||||||||||||
| December 1 - December 31 | — | $ | — | — | $ | 927 | ||||||||||||||||||||
| Total | 4,105,451 | $ | 98.90 | 4,105,451 |
| Stockholders |
As of February 16, 2023, there were approximately 154 holders of record of our common stock.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, liquidity, results of operations and certain other factors that may affect our future results. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future and should be read in conjunction with Item 8 of Part II of this report.
| Introduction |
We are an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce natural gas, oil and NGL from underground reservoirs. We own a large portfolio of onshore U.S. unconventional natural gas and liquids assets, including interests in approximately 8,400 natural gas and oil wells as of December 31, 2022. Our natural gas resource plays are the Marcellus Shale in the northern Appalachian Basin in Pennsylvania (“Marcellus”) and the Haynesville/Bossier Shales in northwestern Louisiana (“Haynesville”). Our liquids-rich resource play is in the Eagle Ford Shale in South Texas (“Eagle Ford”). In August 2022, we announced that we viewed the assets in Eagle Ford as non-core to our future capital allocation strategy, and in January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion. Additionally, in February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion.
Our strategy is to create shareholder value through the responsible development of our significant resource plays while continuing to be a leading provider of affordable, reliable, low carbon energy to the United States. We continue to focus on improving margins through operating efficiencies and financial discipline and improving our ESG performance. To accomplish these goals, we intend to allocate our human resources and capital expenditures to projects we believe offer the highest cash return on capital invested, to deploy leading drilling and completion technology throughout our portfolio, and to take advantage of acquisition and divestiture opportunities to strengthen our portfolio. We also intend to continue to dedicate capital to projects that reduce the environmental impact of our natural gas and oil producing activities. We continue to seek opportunities to reduce cash costs (production, gathering, processing and transportation and general and administrative), through operational efficiencies and improving our production volumes from existing wells.
Leading a responsible energy future is foundational to Chesapeake's success. Our core values and culture demand we continuously evaluate the environmental impact of our operations and work diligently to improve our ESG performance across all facets of our Company. Our path to answering the call for affordable, reliable, low carbon energy begins with our goal to achieve net zero greenhouse gas emissions (Scope 1 and 2) by 2035. To meet this challenge, we have set meaningful goals including:
-
Eliminate routine flaring from all new wells completed from 2021 forward, and enterprise-wide by 2025;
-
Reduce our methane intensity to 0.02% by 2025 (achieved approximately 0.05% in 2022); and
-
Reduce our GHG intensity to 3.0 metric tons CO2 equivalent per thousand barrel of oil equivalent by 2025 (achieved approximately 3.9 in 2022).
In July 2021, we announced our plan to receive independent certification of our natural gas production under the MiQ methane standard and EO100™ Standard for Responsible Energy Development. As of December 31, 2022, we have received certification for all our operated gas assets in Haynesville and Marcellus as responsibly sourced gas. The MiQ certification provides a verified approach to tracking our commitment to reduce our methane intensity, as well as support our overall objective of achieving net-zero Scope 1 and 2 greenhouse gas emissions by 2035.
Our results of operations as reported in our consolidated financial statements for the 2022 Successor Period, 2021 Successor Period, 2021 Predecessor Period and 2020 Predecessor Period are in accordance with GAAP. Although GAAP requires that we report on our results for the periods January 1, 2021 through February 9, 2021 and February 10, 2021 through December 31, 2021 separately, management views our operating results for the year ended December 31, 2021 by combining the results of the 2021 Predecessor Period and the 2021 Successor Period because management believes such presentation provides the most meaningful comparison of our results to prior periods. We are not able to compare the 40 days from January 1, 2021 through February 9, 2021 operating results to any of the previous periods reported in the consolidated financial statements and do not believe reviewing this period in isolation would be useful in identifying any trends in, or reaching any conclusions regarding, our overall operating performance. We believe the key performance indicators, such as operating revenues and expenses for the 2021 Successor Period combined with the 2021 Predecessor Period, provide more meaningful comparisons to other periods and are useful in understanding operational trends. Additionally, there were no changes in policies between the periods, and any material impacts as a result of fresh start accounting were included within the discussion of these changes. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison of our results to prior periods.
| Recent Developments |
Acquisitions
On March 9, 2022, we completed our Marcellus Acquisition pursuant to definitive agreements with Chief, Radler and Tug Hill, Inc. dated January 24, 2022. On November 1, 2021, we completed our Vine Acquisition pursuant to a definitive agreement with Vine dated August 10, 2021. These transactions strengthen Chesapeake’s competitive position, meaningfully increasing our operating cash flows and adding high quality producing assets and a deep inventory of premium drilling locations, while preserving the strength of our balance sheet.
Divestitures
On March 25, 2022, we completed the sale of our Powder River Basin assets in Wyoming to Continental Resources, Inc. for $450 million in cash, subject to post-closing adjustments, which resulted in the recognition of a gain of approximately $293 million.
On January 17, 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion. This transaction, which is subject to certain customary closing conditions, including certain regulatory approvals, is expected to close in the first quarter of 2023. As of December 31, 2022, the assets and liabilities associated with this transaction were classified as held for sale.
On February 17, 2023 we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion. This transaction, which is subject to certain customary closing conditions, including certain regulatory approvals, is expected to close in the second quarter of 2023.
Investments - Momentum Sustainable Ventures LLC
During the fourth quarter of 2022, we entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project, which will gather natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon
Showing the first 8K of 85K characters. Open the full section
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our exposure to market risk. The term market risk relates to our risk of loss arising from adverse changes in natural gas, oil and NGL prices and interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.
Commodity Price Risk
Our results of operations and cash flows are impacted by changes in market prices for natural gas, oil and NGL, which have historically been volatile. To mitigate a portion of our exposure to adverse price changes, we enter into various derivative instruments. Our natural gas, oil and NGL derivative activities, when combined with our sales of natural gas, oil and NGL, allow us to predict with greater certainty the revenue we will receive. We believe our derivative instruments continue to be highly effective in achieving our risk management objectives.
We determine the fair value of our derivative instruments utilizing established index prices, volatility curves and discount factors. These estimates are compared to counterparty valuations for reasonableness. Derivative transactions are also subject to the risk that counterparties will be unable to meet their obligations. This non-performance risk is considered in the valuation of our derivative instruments, but to date has not had a material impact on the values of our derivatives. Future risk related to counterparties not being able to meet their obligations has been partially mitigated under our commodity hedging arrangements that require counterparties to post collateral if their obligations to us are in excess of defined thresholds. The values we report in our financial statements are as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. See Note 15 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion of the fair value measurements associated with our derivatives.
For the 2022 Successor Period, natural gas, oil and NGL revenues, excluding any effect of our derivative instruments, were $7.803 billion, $1.864 billion, and $225 million, respectively. Based on production, natural gas, oil and NGL revenue for the 2022 Successor Period would have increased or decreased by approximately $780 million, $186 million, and $23 million, respectively, for each 10% increase or decrease in prices. As of December 31, 2022, the fair values of our natural gas and oil derivatives were net liabilities of $501 million and $24 million, respectively. A 10% increase in forward natural gas prices would decrease the valuation of natural gas derivatives by approximately $324 million, while a 10% decrease would increase the valuation by $321 million. A 10% increase in forward oil prices would decrease the valuation of oil derivatives by $22 million, while a 10% decrease would increase the valuation by $22 million. This fair value change assumes volatility based on prevailing market parameters at December 31, 2022. See Note 15 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further information on our open derivative positions.
Interest Rate Risk
Our exposure to interest rate changes relates primarily to borrowings under our New Credit Facility and Exit Credit Facility for the 2022 Successor Period, the Exit Credit Facility for the 2021 Successor Period and the pre-petition revolving credit facility and DIP Facility for the 2021 and 2020 Predecessor Periods. Interest is payable on borrowings under these credit agreements based on a floating rate. See Note 6 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for additional information. As of December 31, 2022, we had $1.05 billion of outstanding borrowings under our New Credit Facility. A 1.0% increase in interest rates based on the variable borrowings as of December 31, 2022 would result in an increase in our interest expense of approximately $11 million per year.
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Chesapeake Energy Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Chesapeake Energy Corporation and its subsidiaries (Successor) (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for the year ended December 31, 2022 and for the period from February 10, 2021 through December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operation
Showing the first 8K of 289K characters. Open the full section
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2022 that our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
It is the responsibility of the management of Chesapeake Energy Corporation to establish and maintain adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management utilized the Committee of Sponsoring Organizations of the Treadway Commission's Internal Control-Integrated Framework (2013) in conducting the required assessment of effectiveness of the Company's internal control over financial reporting.
Management has performed an assessment of the effectiveness of the Company's internal control over financial reporting and has determined the Company’s internal control over financial reporting was effective as of December 31, 2022.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein.
| /s/ DOMENIC J. DELL'OSSO, JR. | ||||||||||||||
| Domenic J. Dell'Osso, Jr. | ||||||||||||||
| President and Chief Executive Officer | ||||||||||||||
| /s/ MOHIT SINGH | ||||||||||||||
| Mohit Singh | ||||||||||||||
| Executive Vice President and Chief Financial Officer | ||||||||||||||
| February 22, 2023 | ||||||||||||||
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The names of executive officers of the Company and their ages, titles and biographies as of the date hereof are incorporated by reference from Item 1 of Part I of this report. The other information called for by this Item 10 is incorporated herein by reference to the definitive proxy statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 no later than 120 days following the fiscal year ended December 31, 2022 (the “2023 Proxy Statement”).
Item 11. Executive Compensation
The information called for by this Item 11 is incorporated herein by reference to the 2023 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information called for by this Item 12 is incorporated herein by reference to the 2023 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information called for by this Item 13 is incorporated herein by reference to the 2023 Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information called for by this Item 14 is incorporated herein by reference to the 2023 Proxy Statement.
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) The following financial statements, financial statement schedules and exhibits are filed as a part of this report:
1.Financial Statements. Chesapeake's consolidated financial statements are included in Item 8 of Part II of this report. Reference is made to the accompanying Index to Financial Statements.
2.Financial Statement Schedules. No financial statement schedules are applicable or required.
3.Exhibits. The exhibits listed below in the Index of Exhibits are filed, furnished or incorporated by reference pursuant to the requirements of Item 601 of Regulation S-K.
INDEX OF EXHIBITS
| † | Management contract or compensatory plan or arrangement. | |||||||||||||||||||||||||||||||||||||
| PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Annual Report on Form 10-K. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about Chesapeake Energy Corporation or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in our public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about Chesapeake Energy Corporation or its business or operations on the date hereof. |
Item 16. Form 10-K Summary
Not applicable.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CHESAPEAKE ENERGY CORPORATION | |||||||||||
| Date: February 22, 2023 | By: | /s/ DOMENIC J. DELL’OSSO, JR. | |||||||||
| Domenic J. Dell’Osso, Jr. | |||||||||||
| President and Chief Executive Officer |
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Domenic J. Dell'Osso, Jr. his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K, and to file the same, with all, exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each, and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or the substitute or substitutes of any or all of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||||||||||||
| /s/ DOMENIC J. DELL’OSSO, JR. | President and Chief Executive Officer (Principal Executive Officer) | February 22, 2023 | ||||||||||||
| Domenic J. Dell’Osso, Jr. | ||||||||||||||
| /s/ MOHIT SINGH | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | February 22, 2023 | ||||||||||||
| Mohit Singh | ||||||||||||||
| /s/ GREGORY M. LARSON | Vice President - Accounting & Controller (Principal Accounting Officer) | February 22, 2023 | ||||||||||||
| Gregory M. Larson | ||||||||||||||
| /s/ MICHAEL WICHTERICH | Chairman of the Board | February 22, 2023 | ||||||||||||
| Michael Wichterich | ||||||||||||||
| /s/ TIMOTHY S. DUNCAN | Director | February 22, 2023 | ||||||||||||
| Timothy S. Duncan | ||||||||||||||
| /s/ BENJAMIN C. DUSTER, IV | Director | February 22, 2023 | ||||||||||||
| Benjamin C. Duster, IV | ||||||||||||||
| /s/ SARAH A. EMERSON | Director | February 22, 2023 | ||||||||||||
| Sarah A. Emerson | ||||||||||||||
| /s/ MATTHEW M. GALLAGHER | Director | February 22, 2023 | ||||||||||||
| Matthew M. Gallagher | ||||||||||||||
| /s/ BRIAN STECK | Director | February 22, 2023 | ||||||||||||
| Brian Steck |