Item 1. Condensed Consolidated Financial Statements

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, except per share data)						March 31, 2024						December 31, 2023
Assets
Current assets:
Cash and cash equivalents						$	1,179					$	1,079
Restricted cash						75						74
Accounts receivable, net						314						593
Short-term derivative assets						592						637
Other current assets						218						226
Total current assets						2,378						2,609
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties						11,827						11,468
Unproved properties						1,799						1,806
Other property and equipment						499						497
Total property and equipment						14,125						13,771
Less: accumulated depreciation, depletion and amortization						(4,068)						(3,674)
Total property and equipment, net						10,057						10,097
Long-term derivative assets						46						74
Deferred income tax assets						926						933
Other long-term assets						611						663
Total assets						$	14,018					$	14,376
Liabilities and stockholders' equity
Current liabilities:
Accounts payable						$	317					$	425
Accrued interest						41						39
Short-term derivative liabilities						5						3
Other current liabilities						657						847
Total current liabilities						1,020						1,314
Long-term debt, net						2,025						2,028
Long-term derivative liabilities						1						9
Asset retirement obligations, net of current portion						269						265
Other long-term liabilities						21						31
Total liabilities						3,336						3,647
Contingencies and commitments (Note 5)
Stockholders' equity:
Common stock, $0.01 par value, 450,000,000 shares authorized: 130,958,675 and 130,789,936 shares issued						1						1
Additional paid-in capital						5,758						5,754
Retained earnings						4,923						4,974
Total stockholders' equity						10,682						10,729
Total liabilities and stockholders' equity						$	14,018					$	14,376

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

						Three Months Ended March 31,
($ in millions, except per share data)						2024						2023
Revenues and other:
Natural gas, oil and NGL						$	589					$	1,453
Marketing						312						652
Natural gas and oil derivatives						172						930
Gains on sales of assets						8						335
Total revenues and other						1,081						3,370
Operating expenses:
Production						59						131
Gathering, processing and transportation						173						264
Severance and ad valorem taxes						29						69
Exploration						2						7
Marketing						323						651
General and administrative						47						35
Depreciation, depletion and amortization						399						390
Other operating expense, net						17						3
Total operating expenses						1,049						1,550
Income from operations						32						1,820
Other income (expense):
Interest expense						(19)						(37)
Other income						20						10
Total other income (expense)						1						(27)
Income before income taxes						33						1,793
Income tax expense						7						404
Net income						$	26					$	1,389
Earnings per common share:
Basic						$	0.20					$	10.31
Diluted						$	0.18					$	9.60
Weighted average common shares outstanding (in thousands):
Basic						130,893						134,742
Diluted						141,752						144,731

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

						Three Months Ended March 31,
($ in millions)						2024						2023
Cash flows from operating activities:
Net income						$	26					$	1,389
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization						399						390
Deferred income tax expense						7						378
Derivative gains, net						(172)						(930)
Cash receipts (payments) on derivative settlements, net						228						(285)
Share-based compensation						9						7
Gains on sales of assets						(8)						(335)
Other						(13)						12
Changes in assets and liabilities						76						263
Net cash provided by operating activities						552						889
Cash flows from investing activities:
Capital expenditures						(421)						(497)
Receipts of deferred consideration						60						—
Contributions to investments						(19)						(39)
Proceeds from divestitures of property and equipment						6						931
Net cash provided by (used in) investing activities						(374)						395
Cash flows from financing activities:
Proceeds from Credit Facility						—						1,000
Payments on Credit Facility						—						(2,050)
Cash paid to repurchase and retire common stock						—						(54)
Cash paid for common stock dividends						(77)						(175)
Net cash used in financing activities						(77)						(1,279)
Net increase in cash, cash equivalents and restricted cash						101						5
Cash, cash equivalents and restricted cash, beginning of period						1,153						192
Cash, cash equivalents and restricted cash, end of period						$	1,254					$	197
Cash and cash equivalents						$	1,179					$	130
Restricted cash						75						67
Total cash, cash equivalents and restricted cash						$	1,254					$	197

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:

						Three Months Ended March 31,
($ in millions)						2024						2023
Supplemental cash flow information:
Interest paid, net of capitalized interest						$	20					$	41
Income taxes paid (refunds received), net						$	—					$	—
Supplemental disclosure of significant non-cash investing and financing activities:
Change in accrued drilling and completion costs						$	(59)					$	56
Operating lease obligations recognized						$	—					$	48

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

			Common Stock
($ in millions)			Shares						Amount						Additional Paid-in Capital						Retained Earnings						Total Stockholders' Equity
Balance as of December 31, 2022			134,715,094						$	1					$	5,724					$	3,399					$	9,124
Share-based compensation			92,048						—						5						—						5
Issuance of common stock for warrant exercise			4,654						—						—						—						—
Repurchase and retirement of common stock			(792,543)						—						—						(60)						(60)
Net income			—						—						—						1,389						1,389
Dividends on common stock			—						—						—						(175)						(175)
Balance as of March 31, 2023			134,019,253						$	1					$	5,729					$	4,553					$	10,283
Balance as of December 31, 2023			130,789,936						$	1					$	5,754					$	4,974					$	10,729
Share-based compensation			168,538						—						4						—						4
Issuance of common stock for warrant exercise			201						—						—						—						—
Net income			—						—						—						26						26
Dividends on common stock			—						—						—						(77)						(77)
Balance as of March 31, 2024			130,958,675						$	1					$	5,758					$	4,923					$	10,682

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.			Basis of Presentation and Summary of Significant Accounting Policies

Description of Company

Chesapeake Energy Corporation (“Chesapeake,” “we,” “our,” “us” or the “Company”) is a natural gas and oil exploration and production company engaged in the acquisition, exploration and development of properties for the production of natural gas, oil and NGL from underground reservoirs. Our operations are located onshore in the United States.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Chesapeake were prepared in accordance with GAAP and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted.

This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to our financial position as of March 31, 2024 and December 31, 2023, and our results of operations for the three months ended March 31, 2024 (“Current Quarter”) and the three months ended March 31, 2023 (“Prior Quarter”). Our annual report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. For the time periods covered by this Form 10-Q, we did not have any changes or items impacting other comprehensive income.

Segments

Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for which separate operational financial information is available and is regularly evaluated by the chief operating decision maker (“CODM”), who is our Chief Executive Officer, for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only one reportable operating segment due to the similar nature of the exploration and production business across Chesapeake and its consolidated subsidiaries and the fact that our marketing activities are ancillary to our operations.

Restricted Cash

As of March 31, 2024, we had restricted cash of $75 million. Our restricted cash represents funds legally restricted for payment of certain convenience class unsecured claims following our emergence from bankruptcy, as well as for future payment of certain royalties.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 intends to provide investors with additional information about an entity’s income taxes by requiring disclosure of items such as disaggregation of the effective tax rate reconciliation as well as information regarding income taxes paid. This ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. We are evaluating the impact this ASU will have on our disclosures and do not expect it to have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures. Under ASU 2023-07, the scope and frequency of segment disclosures is increased to provide investors with additional detail about information utilized by an entity’s CODM, including information about significant segment expenses. This ASU is effective beginning with our 2024 annual reporting and interim periods beginning in 2025, with early adoption permitted. We are evaluating the impact this ASU will have on our disclosures and do not expect it to have a material impact on our consolidated financial statements.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2.			Natural Gas and Oil Property Transactions

Southwestern Merger Agreement

On January 10, 2024, Chesapeake and Southwestern entered into an all-stock merger agreement. Southwestern is an independent energy company engaged in development, exploration and production activities, including related marketing activities, within its operating areas in the Appalachia and Haynesville shale plays. Pursuant to the terms of the merger agreement, at the effective time of the Southwestern Merger, each eligible share of Southwestern common stock issued and outstanding immediately prior to the effective time will be automatically converted into the right to receive 0.0867 of a share of Chesapeake’s common stock. Our Board of Directors and the Board of Directors of Southwestern both approved the merger agreement. Subject to the approval of our shareholders and Southwestern shareholders, regulatory approvals and the satisfaction or waiver of other customary closing conditions, the Southwestern Merger is targeted to close in the second half of 2024.

Eagle Ford Divestitures

In January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for approximately $1.425 billion, subject to customary post-closing adjustments. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of $60 million per year for the first three years following the transaction close date and $45 million to be paid in the fourth year following the transaction close date. During the Current Quarter, we received the first installment payment related to this transaction. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $56 million of the deferred consideration is reflected within other current assets and approximately $82 million is reflected within other long-term assets on the condensed consolidated balance sheets as of March 31, 2024. The divestiture, which closed on March 20, 2023 (with an effective date of October 1, 2022), resulted in a gain of approximately $337 million, inclusive of post-closing adjustments, based on the difference between the carrying value of the assets and consideration received.

In February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Upstream Holdings Limited (“INEOS Energy”) for approximately $1.4 billion, subject to customary post-closing adjustments. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of approximately $56 million per year for four years following the transaction close date. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $56 million of the deferred consideration is reflected within other current assets and approximately $146 million is reflected within other long-term assets on the condensed consolidated balance sheets as of March 31, 2024. The divestiture, which closed on April 28, 2023 (with an effective date of October 1, 2022), resulted in a gain of approximately $470 million, based on the difference between the carrying value of the assets and consideration received.

In August 2023, we entered into an agreement to sell the final portion of our Eagle Ford assets to SilverBow Resources, Inc. (“SilverBow”) for approximately $700 million, subject to customary post-closing adjustments. Approximately $50 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid one year from the closing date. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $47 million of the deferred consideration is reflected within other current assets on the condensed consolidated balance sheets as of March 31, 2024. Additionally, SilverBow agreed to pay Chesapeake an additional contingent payment of $25 million should WTI NYMEX prices average between $75 and $80 per barrel or $50 million should WTI NYMEX prices average above $80 per barrel during the year following the close of the transaction. The fair value of the contingent consideration as of March 31, 2024 of $33 million is reflected within short-term derivative assets within our condensed consolidated balance sheets. See Note 11 for additional information. The divestiture, which closed on November 30, 2023 (with an effective date of February 1, 2023), resulted in a gain of approximately $140 million, based on the difference between the carrying value of the assets and consideration received.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

3.			Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated in the same manner but includes the impact of potentially dilutive securities utilizing the treasury stock method. Potentially dilutive securities consists of issuable shares related to warrants, unvested restricted stock units (“RSUs”), and unvested performance share units (“PSUs”).

The reconciliations between basic and diluted earnings per share are as follows:

						Three Months Ended March 31,
						2024						2023
Numerator
Net income, basic and diluted						$	26					$	1,389
Denominator (in thousands)
Weighted average common shares outstanding, basic						130,893						134,742
Effect of potentially dilutive securities
Warrants						10,302						9,560
Restricted stock units						379						380
Performance share units						178						49
Weighted average common shares outstanding, diluted						141,752						144,731
Earnings per common share:
Basic						$	0.20					$	10.31
Diluted						$	0.18					$	9.60

During the Current Quarter and Prior Quarter, the diluted earnings per share calculation excludes the effect of 777,369 and 789,458 reserved shares of common stock and 1,466,502 and 1,489,337 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met for such shares to be considered dilutive shares during the Current Quarter and Prior Quarter, respectively.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

4.			Debt

Our long-term debt consisted of the following as of March 31, 2024 and December 31, 2023:

			March 31, 2024												December 31, 2023
			Carrying Amount						Fair Value**(a)**						Carrying Amount						Fair Value**(a)**
Credit Facility			$	—					$	—					$	—					$	—
5.50% senior notes due 2026			500						496						500						496
5.875% senior notes due 2029			500						496						500						489
6.75% senior notes due 2029			950						958						950						958
Premiums on senior notes			80						—						83						—
Debt issuance costs			(5)						—						(5)						—
Total long-term debt, net			$	2,025					$	1,950					$	2,028					$	1,943

---

(a)The carrying value of borrowings under our Credit Facility approximates fair value as the interest rates are based on prevailing market rates; therefore, they are a Level 1 fair value measurement. For all other debt, a market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value.

Credit Facility. In December 2022, we entered into a senior secured reserve-based credit agreement (the “Credit Agreement”) with the lenders and issuing banks party thereto (the “Lenders”), and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacity, the “Administrative Agent”), providing for a reserve-based credit facility (the “Credit Facility”) with an initial borrowing base of $3.5 billion and aggregate commitments of $2.0 billion. The Credit Facility matures in December 2027. The Credit Facility provides for a $200 million sublimit available for the issuance of letters of credit and a $50 million sublimit available for swingline loans. As of March 31, 2024, we have approximately $2.0 billion available for borrowings under the Credit Facility.

Initially, the obligations under the Credit Facility are guaranteed by certain of Chesapeake’s subsidiaries (the “Guarantors”), and the Credit Facility is secured by substantially all of the assets owned by the Company and the Guarantors (subject to customary exceptions), including mortgages on not less than 85% of the total PV-9 of the borrowing base properties evaluated in the most recent reserve report (where PV-9 is the net present value, discounted at 9% per annum, of the estimated future net revenues). The borrowing base will be redetermined semi-annually in or around April and October of each year, with one interim “wildcard” redetermination available to each of the Company and the Administrative Agent, the latter at the direction of the Required Lenders (as defined in the Credit Agreement), between scheduled redeterminations. In April 2024, our borrowing base was reaffirmed, and the aggregate commitments related to our Credit Facility were increased by $500 million to $2.5 billion. Additionally, the sublimit available for the issuance of letters of credit was increased by $300 million to $500 million. The next scheduled redetermination will be in or around October 2024. The Credit Agreement contains restrictive covenants that limit Chesapeake and its subsidiaries’ ability to, among other things but subject to exceptions customary to reserve-based credit facilities: (i) incur additional indebtedness, (ii) make investments, (iii) enter into mergers; (iv) make or declare dividends; (v) repurchase or redeem certain indebtedness; (vi) enter into certain hedges; (vii) incur liens; (viii) sell assets; and (ix) engage in certain transactions with affiliates. The Credit Agreement requires Chesapeake to maintain compliance with the following financial ratios: (A) a current ratio, which is the ratio of Chesapeake’s and its restricted subsidiaries’ consolidated current assets (including unused commitments under the Credit Facility but excluding certain non-cash assets) to their consolidated current liabilities (excluding the current portion of long-term debt and certain non-cash liabilities), of not less than 1.00 to 1.00; (B) a net leverage ratio, which is the ratio of total indebtedness (less unrestricted cash up to a specified threshold) to Consolidated EBITDAX (as defined in the Credit Agreement) for the prior four fiscal quarters, of not greater than 3.50 to 1.00 and (C) a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the proved reserves to Chesapeake’s and its restricted subsidiaries’ total indebtedness of not less than 1.50 to 1.00.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Borrowings under the Credit Agreement may be alternate base rate loans or term SOFR loans, at our election. Interest is payable quarterly for alternate base rate loans and at the end of the applicable interest period for term SOFR loans. Term SOFR loans bear interest at term SOFR plus an applicable rate ranging from 175 to 275 basis points per annum, depending on the percentage of the commitments utilized, plus an additional 10 basis points per annum credit spread adjustment. Alternate base rate loans bear interest at a rate per annum equal to the greatest of: (i) the prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted term SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 75 to 175 basis points per annum, depending on the percentage of the commitments utilized. Chesapeake also pays a commitment fee on unused commitment amounts under the Credit Facility ranging from 37.5 to 50 basis points per annum, depending on the percentage of the commitments utilized.

The Credit Facility is subject to customary events of default, remedies, and cure rights for credit facilities of this nature. The Company has no additional secured debt as of March 31, 2024.

5.			Contingencies and Commitments

Contingencies

Business Operations and Litigation and Regulatory Proceedings

We are involved in, and expect to continue to be 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.

Our total accrued liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates, and our final liabilities may ultimately be materially different.

The majority of the Company’s pre-petition legal proceedings were settled during the Chapter 11 Cases or will be resolved in connection with the claims reconciliation process before the Bankruptcy Court, together with actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. Any allowed claim related to such litigation will be treated in accordance with the Plan. 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. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is indeterminate.

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

In connection with the Southwestern Merger, one lawsuit has been filed by a purported stockholder of the Company relating to the Southwestern Merger: Gerald Joseph Lovoi v. Chesapeake Energy Corp., et al., No. 1:24-cv-01896 (S.D.N.Y Mar. 13, 2024). The complaint alleges, among other things, that the Company’s Board of Directors caused to be filed a materially misleading and incomplete registration statement on February 29, 2024, in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9, promulgated thereunder, and seeks to

enjoin the Southwestern Merger and obtain other relief. The Company believes that the claims in the complaint are without merit and intends to vigorously defend against them.

Based on management’s current assessment, other than as described above, 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.

Commitments

Gathering, Processing and Transportation Agreements

We have contractual commitments with midstream service companies and pipeline carriers for future gathering, processing and transportation of natural gas, oil and NGL to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to gathering, processing and transportation agreements are not recorded as obligations in the accompanying condensed consolidated balance sheets.

The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:

						March 31, 2024
Remainder of 2024						$	217
2025						264
2026						240
2027						213
2028						198
2029-2036						946
Total						$	2,078

In addition, we have long-term agreements for certain natural gas gathering and related services within specified acreage dedication areas in exchange for cost-of-service based fees redetermined annually, or tiered fees based on volumes delivered relative to scheduled volumes. Future gathering fees may vary with the applicable agreement.

Other Commitments

As part of our normal course of business, we enter into various agreements providing, or otherwise arranging for, financial or performance assurances to third parties on behalf of our wholly owned guarantor subsidiaries. These agreements may include future payment obligations or commitments regarding operational performance that effectively guarantee our subsidiaries’ future performance.

In connection with acquisitions and divestitures, our purchase and sale agreements generally provide indemnification to the counterparty for liabilities incurred as a result of a breach of a representation or warranty by the indemnifying party and/or other specified matters. These indemnifications generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or cannot be quantified at the time of entering into or consummating a particular transaction. For divestitures of natural gas and oil properties, our purchase and sale agreements may require the return of a portion of the proceeds we receive as a result of uncured title or environmental defects.

While executing our strategic priorities, we have incurred certain cash charges, including contract termination charges, financing extinguishment costs and charges for unused natural gas transportation and gathering capacity.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

6.			Other Current Liabilities

Other current liabilities as of March 31, 2024 and December 31, 2023 are detailed below:

						March 31, 2024						December 31, 2023
Revenues and royalties due to others						$	287					$	360
Accrued drilling and production costs						153						211
Accrued hedging costs						—						2
Accrued compensation and benefits						28						64
Taxes payable						90						84
Operating leases						61						84
Joint interest prepayments received						5						8
Other						33						34
Total other current liabilities						$	657					$	847

7.			Revenue

The following table shows revenue disaggregated by operating area and product type:

						Three Months Ended March 31, 2024
						Natural Gas						Oil						NGL						Total
Marcellus						$	317					$	—					$	—					$	317
Haynesville						272						—						—						272
Natural gas, oil and NGL revenue						$	589					$	—					$	—					$	589
Marketing revenue						$	197					$	82					$	33					$	312

						Three Months Ended March 31, 2023
						Natural Gas						Oil						NGL						Total
Marcellus						$	617					$	—					$	—					$	617
Haynesville						402						—						—						402
Eagle Ford						23						373						38						434
Natural gas, oil and NGL revenue						$	1,042					$	373					$	38					$	1,453
Marketing revenue						$	328					$	287					$	37					$	652

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Accounts Receivable

Our accounts receivable are primarily from purchasers of natural gas, oil and NGL and from exploration and production companies that own interests in properties we operate. This industry concentration could affect our overall exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our counterparties, and we generally require letters of credit or parent guarantees for receivables from parties deemed to have sub-standard credit, unless the credit risk can otherwise be mitigated. We utilize an allowance method in accounting for bad debt based on historical trends in addition to specifically identifying receivables that we believe may be uncollectible.

Accounts receivable as of March 31, 2024 and December 31, 2023 are detailed below:

						March 31, 2024						December 31, 2023
Natural gas, oil and NGL sales						$	165					$	406
Joint interest						135						180
Other						15						8
Allowance for doubtful accounts						(1)						(1)
Total accounts receivable, net						$	314					$	593

8.			Income Taxes

The table below presents a comparison of the Current Quarter and Prior Quarter’s income tax expense and actual quarterly effective tax rates.

						Three Months Ended March 31,
						2024												2023
Income before income taxes						$	33											$	1,793
Current tax expense						—						—		%				26						1.5		%
Deferred tax expense						7						21.2		%				378						21.0		%
Income tax expense						$	7					21.2		%				$	404					22.5		%

An estimated annual effective tax rate (“EAETR”) is used in recording our interim quarterly income tax provision. The EAETR is determined based on analysis of year-to-date and projected financial results of our operations. Our EAETR during the Current Quarter was 21.9%, compared to 22.5% in the Prior Quarter. The actual quarterly effective tax rate and EAETR can differ as a result of certain discrete items, which are recorded in the quarter. Such items include, but are not limited to, certain equity-based compensation, true-ups resulting from differences between tax returns filed and estimated accruals, and tax effects of enacted laws.

The Current Quarter income tax expense is entirely deferred as a result of projecting a loss this year for tax purposes. The Prior Quarter recorded $26 million of current tax expense, primarily as a result of projecting a tax gain on the Eagle Ford divestiture which closed in the Prior Quarter.

There were no material income tax payments made or refunds received in the Current Quarter.

As of December 31, 2023, we were in a net deferred tax asset position and anticipate being in a net deferred tax asset position as of December 31, 2024. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that some of our deferred tax assets will not be realized. As such, a partial valuation allowance was recorded against our net deferred tax asset position for federal and state purposes as of March 31, 2024 and December 31, 2023.

On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022, which includes provisions for a 15% corporate alternative minimum tax (“CAMT”) on book income for companies whose average book income exceeds $1 billion for any three consecutive years preceding the tax year. Based upon

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

our book income in the past three years, we believe we are subject to the CAMT beginning in the current year. The CAMT will result in incremental taxes to the extent that 15% of our adjusted book earnings exceeds our regular federal tax liability. We do not currently project any material impact due to the CAMT in 2024.

9.			Equity

Dividends

During the Current Quarter and Prior Quarter, we made dividend payments of $77 million ($0.575 per share) and $175 million ($1.29 per share), respectively.

On April 30, 2024, we declared a quarterly dividend payable of $0.715 per share, which will be paid on June 5, 2024 to stockholders of record at the close of business on May 16, 2024. The dividend consists of a base quarterly dividend in the amount of $0.575 per share and a variable dividend in the amount of $0.14 per share.

Share Repurchases

We did not repurchase any shares during the Current Quarter, and during the Prior Quarter, we repurchased 0.8 million shares of common stock for an aggregate price of $60 million, inclusive of shares for which cash settlement occurred in early April 2023. The repurchased shares of common stock were retired and recorded as a reduction to common stock and retained earnings and were made pursuant to the share repurchase program that expired on December 31, 2023. All share repurchases made after January 1, 2023 are subject to a 1% excise tax on share repurchases, as enacted under the Inflation Reduction Act of 2022. We are able to net this 1% excise tax on share repurchases against the issuance of shares of our common stock. The impact of this 1% excise tax was immaterial during the Prior Quarter.

Warrants

			Class A Warrants						Class B Warrants						Class C Warrants**(a)**
Outstanding as of December 31, 2023			4,247,615						4,403,064						4,023,483
Converted into common stock(b)			—						—						(168)
Outstanding as of March 31, 2024			4,247,615						4,403,064						4,023,315

---

(a)As of March 31, 2024, we had 1,466,502 of reserved Class C Warrants.

(b)During the Current Quarter, we issued 201 shares of common stock as a result of Warrant exercises.

10.			Share-Based Compensation

As of the Effective Date, the Board of Directors adopted the LTIP with a share reserve equal to 6,800,000 shares of common stock. The LTIP provides for the grant of RSUs, restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors.

Restricted Stock Units. During the Current Quarter, we granted RSUs to employees and non-employee directors under the LTIP, which will vest over a three-year period and one-year period, respectively. The fair value of RSUs is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in unvested RSUs is presented below:

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

						Unvested Restricted Stock Units						Weighted Average Grant Date Fair Value Per Share
						(in thousands)
Unvested as of December 31, 2023						940						$	73.08
Granted						413						$	83.47
Vested						(242)						$	72.84
Forfeited						(6)						$	67.61
Unvested as of March 31, 2024						1,105						$	77.05

The aggregate intrinsic value of RSUs that vested during the Current Quarter was approximately $20 million based on the stock price at the time of vesting.

As of March 31, 2024, there was approximately $71 million of total unrecognized compensation expense related to unvested RSUs. The expense is expected to be recognized over a weighted average period of approximately 2.51 years.

Performance Share Units. During the Current Quarter, we granted PSUs to senior management under the LTIP, which will generally vest over a three-year period and will be settled in shares. The performance criteria include total shareholder return (“TSR”) and relative TSR (“rTSR”) and could result in a total payout between 0% - 200% of the target units. The fair value of the PSUs was measured on the grant date using a Monte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria.

The following table presents the assumptions used in the valuation of the PSUs granted in 2024.

Assumption						TSR, rTSR
Risk-free interest rate						4.55		%
Volatility						39.36		%

A summary of the changes in unvested PSUs is presented below:

						Unvested Performance Share Units						Weighted Average Grant Date Fair Value Per Share
						(in thousands)
Unvested as of December 31, 2023						394						$	85.78
Granted						134						$	95.33
Vested						—						$	—
Forfeited						—						$	—
Unvested as of March 31, 2024						528						$	88.20

As of March 31, 2024, there was approximately $24 million of total unrecognized compensation expense related to unvested PSUs. The expense is expected to be recognized over a weighted average period of approximately 2.29 years.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

RSU and PSU Compensation.

We recognized the following compensation costs, net of actual forfeitures, related to RSUs and PSUs for the periods presented:

						Three Months Ended March 31,
						2024						2023
General and administrative expenses						$	8					$	6
Natural gas and oil properties						2						1
Production expense						1						1
Total RSU and PSU compensation						$	11					$	8
Related income tax benefit						$	2					$	1

11.			Derivative and Hedging Activities

We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. These commodity contract derivative financial instruments include financial price swaps, collars and basis protection swaps. All of our commodity contract derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty. We do not intend to hold or issue derivative financial instruments for speculative trading purposes and have elected not to designate any of our derivative instruments for hedge accounting treatment.

Contingent Consideration Arrangement

In November 2023, we sold the final portion of our Eagle Ford assets to SilverBow. As part of the divestiture agreement, SilverBow agreed to pay Chesapeake an additional contingent payment of $25 million should WTI NYMEX prices average between $75 and $80 per barrel or $50 million should WTI NYMEX prices average above $80 per barrel during the year following the close of the transaction. All changes in fair value are recognized as a gain or loss in earnings in the period they occur within natural gas and oil derivatives in our condensed consolidated statements of operations. During the Current Quarter, we recorded $21 million of unrealized gains related to the contingent consideration arrangement.

The estimated fair values of our natural gas and oil derivative instrument assets (liabilities) as of March 31, 2024 and December 31, 2023 are provided below:

						March 31, 2024												December 31, 2023
						Notional Volume						Fair Value						Notional Volume						Fair Value
Natural gas (Bcf):
Fixed-price swaps						314						$	199					343						$	188
Collars						511						451						558						497
Basis protection swaps						489						(51)						578						2
Total natural gas						1,314						599						1,479						687
Contingent Consideration:
Eagle Ford divestiture												33												12
Total estimated fair value												$	632											$	699

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 on a gross basis and after same-counterparty netting:

						Gross Fair Value**(a)**						Amounts Netted in the Condensed Consolidated Balance Sheets						Net Fair Value Presented in the Condensed Consolidated Balance Sheets
As of March 31, 2024
Commodity Contracts:
Short-term derivative asset						$	630					$	(71)					$	559
Long-term derivative asset						62						(16)						46
Short-term derivative liability						(76)						71						(5)
Long-term derivative liability						(17)						16						(1)
Contingent Consideration:
Short-term derivative asset						33						—						33
Total derivatives						$	632					$	—					$	632
As of December 31, 2023
Commodity Contracts:
Short-term derivative asset						$	661					$	(36)					$	625
Long-term derivative asset						101						(27)						74
Short-term derivative liability						(39)						36						(3)
Long-term derivative liability						(36)						27						(9)
Contingent Consideration:
Short-term derivative asset						12						—						12
Total derivatives						$	699					$	—					$	699

---

(a)These financial assets (liabilities) are measured at fair value on a recurring basis utilizing significant other observable inputs; see further discussion on fair value measurements below.

Fair Value

The fair value of our commodity derivatives is based on third-party pricing models, which utilize inputs that are either readily available in the public market, such as natural gas, oil and NGL forward curves and discount rates, or can be corroborated from active markets or broker quotes, and, as such, are classified as Level 2. These values are compared to the values given by our counterparties for reasonableness. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives. The valuation of the contingent consideration is based on an option pricing model using significant Level 2 inputs that include quoted future commodity prices based on active markets.

Credit Risk Considerations

Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we only enter into commodity contracts derivatives with counterparties that are highly rated or deemed by us to have acceptable credit strength and deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of March 31, 2024, our commodity contract derivative instruments were spread among 17 counterparties.

Table of Contents

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Hedging Arrangements

Certain of our hedging arrangements are with counterparties that were also lenders (or affiliates of lenders) under our Credit Facility. The contracts entered into with these counterparties are secured by the same collateral that secures the revolving credit facility. The counterparties’ obligations must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us exceed defined thresholds. As of March 31, 2024, we did not have any cash or letters of credit posted as collateral for our commodity derivatives.

12.			Investments

Momentum Sustainable Ventures LLC. During the fourth quarter of 2022, Chesapeake entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project (“CCUS”), 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 capture portion of the project anticipates capturing and permanently sequestering up to 2.0 million tons per annum of CO2. The natural gas gathering pipeline is projected for a potential in-service date in 2025, and the carbon sequestration portion of the project is subject to regulatory approvals. We have a 35% interest in the project and estimate approximately $100 million remaining in our commitment to the project. We have accounted for this investment as an equity method investment, and its carrying value, which is reflected within other long-term assets on the condensed consolidated balance sheets, was $257 million and $238 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the carrying value of our investment in Momentum Sustainable Ventures LLC included approximately $3 million of capitalized interest related to the project.

Table of Contents