Chesapeake Energy(CHK) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights This section provides an overview of Expand Energy's key financial and operational achievements for Q1 2025, along with strategic milestones and CEO commentary First Quarter 2025 Highlights Expand Energy reported key financial and operational achievements for Q1 2025, including significant net cash from operations, adjusted net income, and production, alongside strategic milestones like S&P 500 inclusion and an investment-grade credit rating Q1 2025 Key Financial & Operational Highlights | Metric | Value | | :----------------------------------- | :-------------------- | | Net cash provided by operating activities | $1,096 million | | Net loss | $249 million | | Net loss per fully diluted share | $1.06 | | Adjusted net income | $487 million | | Adjusted net income per share | $2.02 | | Adjusted EBITDAX | $1,395 million | | Net production | Approximately 6.79 Bcfe/d (92% natural gas) | | Quarterly base dividend | $0.575 per common share (to be paid in June 2025) | | 2025 Synergy Target | Approximately $400 million | | Total Synergy Target (by year-end 2026) | $500 million | - Added to the S&P 500, effective March 24, 2025[5] - Upgraded to Investment Grade credit rating by Moody's (Baa3); achieved uniform Investment Grade rating from all rating agencies[5] CEO Commentary CEO Nick Dell'Osso emphasized Expand Energy's resilient financial foundation, market-connected portfolio, and efficient operations as key to navigating market volatility and preparing for future market changes - Strategy focuses on a resilient financial foundation, a deep market-connected portfolio, and low-cost, efficient operations to overcome market volatility[4] - Company continues to execute its business, utilizing productive capacity to navigate the dynamic macro environment and efficiently respond as market conditions change[4] Business Overview This section provides an overview of Expand Energy's corporate profile, highlighting its position as the largest natural gas producer in the United States and its strategic focus Company Profile Expand Energy Corporation is the largest natural gas producer in the United States, committed to a returns-driven strategy that leverages its scale, financial strength, and operational execution to create sustainable value and expand America's energy reach for a more affordable, reliable, lower-carbon future - Expand Energy Corporation (NASDAQ: EXE) is the largest natural gas producer in the United States[12] - Strategy is returns-driven, focused on disrupting the industry's traditional cost and market delivery model to responsibly develop assets in the nation's most prolific natural gas basins[12] - Committed to expanding America's energy reach to fuel a more affordable, reliable, lower carbon future[13] Operational Performance & Outlook This section details Expand Energy's Q1 2025 operational results and outlines its annual synergy, capital, and operating projections for 2025 and beyond First Quarter 2025 Operations Update In Q1 2025, Expand Energy operated an average of 11 rigs, drilled 46 wells, and turned 89 wells in line, achieving a net production of approximately 6.79 Bcfe per day, predominantly natural gas - Operated an average of 11 rigs during the first quarter[6] - Drilled 46 wells and turned 89 wells in line[6] - Resulted in net production of approximately 6.79 Bcfe per day (92% natural gas)[6] 2025 Annual Synergy, Capital and Operating Outlook Expand Energy projects running approximately 12 rigs and investing $2.7 billion in 2025, targeting an estimated daily production of 7.1 Bcfe/d. The company also plans an additional $300 million investment to exit 2025 with 15 rigs, positioning for potential production growth to 7.5 Bcfe/d in 2026. The company remains on track to achieve $400 million in 2025 synergies, with a full target of $500 million by year-end 2026 2025 Annual Outlook | Metric | Value | | :-------------------------------- | :-------------------- | | Rigs Expected to Run | Approximately 12 | | Capital Investment | Approximately $2.7 billion | | Estimated Daily Production | Approximately 7.1 Bcfe/d | - Intends to build incremental productive capacity for an additional $300 million by exiting 2025 with approximately 15 rigs[7] - This incremental capital investment positions the Company to efficiently grow production from a year-end 2025 exit rate of approximately 7.2 Bcfe/d to average approximately 7.5 Bcfe/d in 2026 should market conditions warrant[7] - On track to capture its 2025 expected annual synergy target of approximately $400 million, with the full $500 million in annual synergies expected to be achieved by year end 2026[8] Shareholder Returns & Financial Strategy This section outlines Expand Energy's updated capital return framework, including its base dividend plan and strategy for net debt reduction and free cash flow allocation Shareholder Returns Update Expand Energy enhanced its capital return framework in 2024, planning a quarterly base dividend of $0.575 per share for June 2025. The company expects to allocate $500 million to Net Debt reduction in 2025 and anticipates additional free cash flow for variable dividends, share repurchases, and balance sheet management - Enhanced its capital return framework in 2024 to more efficiently return cash to shareholders and reduce Net Debt[9] - Plans to pay its quarterly base dividend of $0.575 per share on June 4, 2025[9] - Expects to allocate $500 million to Net Debt reduction in 2025, and at current market conditions, to have additional free cash flow available to allocate to the combination of variable dividends, share repurchases, and the balance sheet[9] Financial Results This section presents Expand Energy's condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows for Q1 2025 compared to prior periods Condensed Consolidated Balance Sheets As of March 31, 2025, Expand Energy reported total assets of $27,934 million, a slight increase from December 31, 2024. Key changes include an increase in cash and cash equivalents, accounts receivable, and proved natural gas and oil properties, while current maturities of long-term debt decreased significantly. Total liabilities also increased, primarily due to derivative liabilities and other current liabilities Condensed Consolidated Balance Sheets (March 31, 2025 vs. Dec 31, 2024) | Metric | March 31, 2025 ($ millions) | December 31, 2024 ($ millions) | Change ($ millions) | | :----------------------------------- | :-------------------------- | :--------------------------- | :------------------ | | Total Assets | 27,934 | 27,894 | +40 | | Cash and cash equivalents | 349 | 317 | +32 | | Accounts receivable, net | 1,361 | 1,226 | +135 | | Proved natural gas and oil properties | 23,874 | 23,093 | +781 | | Total current liabilities | 3,589 | 3,123 | +466 | | Current maturities of long-term debt, net | — | 389 | -389 | | Derivative liabilities (current) | 896 | 71 | +825 | | Total liabilities | 10,743 | 10,329 | +414 | | Total stockholders' equity | 17,191 | 17,565 | -374 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, Expand Energy reported a net loss of $249 million, a significant decline from a net income of $26 million in the prior year period. This was primarily driven by a substantial negative impact from natural gas, oil and NGL derivatives, despite a large increase in natural gas, oil and NGL revenues. Total revenues and other increased significantly, but operating expenses also rose sharply Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2025 vs. 2024) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Natural gas, oil and NGL revenues | 2,300 | 589 | +1,711 | +290.5% | | Natural gas, oil and NGL derivatives | (1,014) | 172 | -1,186 | -689.5% | | Total revenues and other | 2,196 | 1,081 | +1,115 | +103.1% | | Total operating expenses | 2,464 | 1,049 | +1,415 | +134.9% | | Income (loss) from operations | (268) | 32 | -300 | -937.5% | | Net income (loss) | (249) | 26 | -275 | -1057.7% | | Basic EPS | (1.06) | 0.20 | -1.26 | -630.0% | | Diluted EPS | (1.06) | 0.18 | -1.24 | -688.9% | Condensed Consolidated Statements of Cash Flows Expand Energy's net cash provided by operating activities significantly increased to $1,096 million in Q1 2025 from $552 million in Q1 2024, primarily due to derivative losses and changes in assets and liabilities. Cash used in investing activities also increased, while cash used in financing activities saw a substantial rise due to debt purchases and higher dividend payments Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2025 vs. 2024) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net cash provided by operating activities | 1,096 | 552 | +544 | +98.6% | | Net cash used in investing activities | (507) | (374) | -133 | +35.6% | | Net cash used in financing activities | (557) | (77) | -480 | +623.4% | | Net increase in cash, cash equivalents and restricted cash | 32 | 101 | -69 | -68.3% | | Cash, cash equivalents and restricted cash, end of period | 427 | 1,254 | -827 | -65.9% | - Key drivers for operating cash flow include derivative (gains) losses, net of $1,014 million in 2025 (vs. $(172) million in 2024) and changes in assets and liabilities of $(251) million in 2025 (vs. $76 million in 2024)[20] - Key drivers for financing cash flow include cash paid to purchase debt of $(436) million in 2025 and cash paid for common stock dividends of $(142) million in 2025 (vs. $(77) million in 2024)[20] Production and Capital Expenditures This section details Expand Energy's natural gas, oil, and NGL production volumes, average sales prices, and capital expenditures for Q1 2025, with comparisons to the prior year Natural Gas, Oil and NGL Production and Average Sales Prices In Q1 2025, Expand Energy significantly increased total production to 6,788 MMcfe per day, up from 3,198 MMcfe per day in Q1 2024, primarily driven by growth in Haynesville and Northeast Appalachia, and new production from Southwest Appalachia. The average realized price (including derivatives) also increased to $3.69 per Mcfe from $2.85 per Mcfe year-over-year Production and Average Sales Prices (Three Months Ended March 31, 2025 vs. 2024) | Metric | 2025 | 2024 | Change | Change (%) | | :----------------------------------- | :---------------- | :---------------- | :---------------- | :--------- | | Total Production (MMcfe per day) | 6,788 | 3,198 | +3,590 | +112.2% | | Average Realized Price (including realized derivatives) ($/Mcfe) | 3.69 | 2.85 | +0.84 | +29.5% | Production Breakdown (MMcfe per day, Q1 2025) | Region | MMcfe per day | | :-------------------- | :-------------- | | Haynesville | 2,617 | | Northeast Appalachia | 2,668 | | Southwest Appalachia | 1,503 | Average NYMEX Price (Q1 2025 vs. Q1 2024) | Commodity | 2025 | 2024 | | :---------- | :--- | :--- | | Natural Gas ($/Mcf) | 3.65 | 2.24 | | Oil ($/Bbl) | 71.42 | — | Capital Expenditures Accrued Total capital expenditures accrued for Q1 2025 significantly increased to $662 million, up from $354 million in Q1 2024. This rise was primarily driven by increased drilling and completion capital in Haynesville and the introduction of significant capital in Southwest Appalachia Capital Expenditures Accrued (Three Months Ended March 31, 2025 vs. 2024) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Total drilling and completion capital expenditures | 554 | 300 | +254 | +84.7% | | Total capital expenditures | 662 | 354 | +308 | +87.0% | Drilling and Completion Capital by Region (Q1 2025 vs. Q1 2024) | Region | 2025 ($ millions) | 2024 ($ millions) | | :-------------------- | :---------------- | :---------------- | | Haynesville | 286 | 195 | | Northeast Appalachia | 103 | 105 | | Southwest Appalachia | 165 | — | Non-GAAP Financial Measures This section defines and reconciles Expand Energy's non-GAAP financial measures, providing clarity on how management evaluates performance and presents financial results Non-GAAP Definitions This section provides definitions for several non-GAAP financial measures used by Expand Energy, including Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, Adjusted EBITDAX, Free Cash Flow, Adjusted Free Cash Flow, and Net Debt. These measures are used by management to evaluate performance and are considered comparable to analyst estimates, excluding one-time or hard-to-estimate items - Adjusted Net Income: Net income (loss) adjusted to exclude unrealized (gains) losses on natural gas and oil derivatives, (gains) losses on sales of assets, and certain items management believes affect the comparability of operating results, less a tax effect[25] - Adjusted Diluted Earnings Per Common Share: Diluted earnings (loss) per common share adjusted to exclude the per diluted share amounts attributed to unrealized (gains) losses on natural gas and oil derivatives, (gains) losses on sales of assets, and certain items, less a tax effect[26] - Adjusted EBITDAX: Net income (loss) before interest expense, income tax expense (benefit), depreciation, depletion and amortization expense, exploration expense, unrealized (gains) losses on natural gas and oil derivatives, separation and other termination costs, (gains) losses on sales of assets, and certain items management believes affect the comparability of operating results[27] - Free Cash Flow: Net cash provided by operating activities less cash capital expenditures[28] - Adjusted Free Cash Flow: Net cash provided by operating activities less cash capital expenditures and cash contributions to investments, adjusted to exclude certain items management believes affect the comparability of operating results[29] - Net Debt: GAAP total debt excluding premiums, discounts, and deferred issuance costs less cash and cash equivalents[30] Non-GAAP Reconciliations This section provides detailed reconciliations of various non-GAAP financial measures to their most directly comparable GAAP financial measures for the three months ended March 31, 2025, and 2024 Adjusted Net Income Reconciliation Adjusted Net Income for Q1 2025 was $487 million, a significant increase from $80 million in Q1 2024, primarily due to the exclusion of $969 million in unrealized losses on natural gas and oil derivatives in 2025 Reconciliation of Net Income (Loss) to Adjusted Net Income (Three Months Ended March 31) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net income (loss) (GAAP) | (249) | 26 | -275 | -1057.7% | | Unrealized losses on natural gas and oil derivatives | 969 | 67 | +902 | +1346.3% | | Adjusted net income (Non-GAAP) | 487 | 80 | +407 | +508.8% | Adjusted Diluted Earnings Per Common Share Reconciliation Adjusted Diluted Earnings Per Common Share for Q1 2025 was $2.02, a substantial increase from $0.56 in Q1 2024, mainly driven by the adjustment for unrealized losses on natural gas and oil derivatives Reconciliation of Earnings (Loss) Per Common Share to Adjusted Diluted EPS (Three Months Ended March 31) | Metric | 2025 ($/share) | 2024 ($/share) | Change ($/share) | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------------- | :--------- | | Diluted earnings (loss) per common share (GAAP) | (1.06) | 0.18 | -1.24 | -688.9% | | Unrealized losses on natural gas and oil derivatives | 4.14 | 0.47 | +3.67 | +780.9% | | Adjusted diluted earnings per common share (Non-GAAP) | 2.02 | 0.56 | +1.46 | +260.7% | Adjusted EBITDAX Reconciliation Adjusted EBITDAX for Q1 2025 was $1,395 million, a significant increase from $508 million in Q1 2024, primarily due to higher depreciation, depletion and amortization, and the exclusion of unrealized losses on natural gas and oil derivatives Reconciliation of Net Income (Loss) to Adjusted EBITDAX (Three Months Ended March 31) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net income (loss) (GAAP) | (249) | 26 | -275 | -1057.7% | | Depreciation, depletion and amortization | 711 | 399 | +312 | +78.2% | | Unrealized losses on natural gas and oil derivatives | 969 | 67 | +902 | +1346.3% | | Adjusted EBITDAX (Non-GAAP) | 1,395 | 508 | +887 | +174.6% | Adjusted Free Cash Flow Reconciliation Adjusted Free Cash Flow for Q1 2025 was $577 million, a substantial increase from $112 million in Q1 2024, driven by higher net cash provided by operating activities despite increased cash capital expenditures Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Three Months Ended March 31) | Metric | 2025 ($ millions) | 2024 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net cash provided by operating activities (GAAP) | 1,096 | 552 | +544 | +98.6% | | Cash capital expenditures | (563) | (421) | -142 | +33.7% | | Free cash flow (Non-GAAP) | 533 | 131 | +402 | +306.9% | | Adjusted free cash flow (Non-GAAP) | 577 | 112 | +465 | +415.2% | Net Debt Reconciliation As of March 31, 2025, Expand Energy reported Net Debt of $4,901 million, calculated by adjusting total GAAP debt for premiums, discounts, and issuance costs, and subtracting cash and cash equivalents Reconciliation of Total Debt to Net Debt (March 31, 2025) | Metric | Amount ($ millions) | | :-------------------------------- | :------------------ | | Total debt (GAAP) | 5,243 | | Premiums, discounts and issuance costs on debt | 7 | | Principal amount of debt | 5,250 | | Cash and cash equivalents | (349) | | Net debt (Non-GAAP) | 4,901 | Legal & Disclosures This section addresses important legal considerations and disclosures, particularly regarding forward-looking statements and the inherent risks and uncertainties associated with them Forward-Looking Statements This section contains standard forward-looking statements regarding future events, financial performance, market factors, and ESG initiatives, emphasizing that these are subject to numerous risks and uncertainties, including demand fluctuations, commodity price volatility, regulatory changes, and economic conditions. Investors are cautioned not to place undue reliance on these statements - Includes current expectations or forecasts of future events, business, financial performance, and financial condition[13] - Inherently subject to numerous risks and uncertainties, including reduced demand for natural gas, oil, and NGLs; negative public perceptions; commodity price volatility; significant capital expenditures; ability to replace reserves; drilling and operating risks; pipeline capacity constraints; terrorist activities and/or cyber-attacks; and legislative, regulatory, and ESG initiatives[14] - Caution against undue reliance on forward-looking statements, which speak only as of the filing date, with no obligation to update except as required by law[15]