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Chesapeake Energy Corporation Reports 2015 Third Quarter FINANCIAL AND OPERATIONAL RESULTS

The following excerpt is from the company's SEC filing.

OKLAHOMA CITY, November 4, 2015 – Chesapeake Energy Corporation (NYSE:CHK) today reported financial and operational results for the 2015 third quarter. Highlights include:

Production averaged approximately

667,000

boe per day, an increase of 3%

year over year, adjusted for asset sales

Adjusted net loss of

per fully diluted share and adjusted ebitda of

$560 million

2015 total production guidance increased to 670 – 680 mboe per day

2015 production expense and general and administrative expense guidance lowered significantly

2015 capital guida nce reduced to $3.4 – $3.9 billion

Doug Lawler

Chesapeake’s Chief Executive Officer

commented, “The many actions that we have taken this quarter, including executing new gas gathering agreements

amending our revolving credit facility, reducing complexity and commitments and lowering our business costs, have significantly increased Chesapeake’s ability to create additional value

Our focus on optimizing base production and continuing to generate efficiencies in the field drove a 3% increase in production compared to last year, adjusted for asset sales. In addition, the elimination of $200 million of annualized, controllable production and general and administrative expenses represents another step in our commitment to financial discipline.”

Lawler continued, “We lowered our 2015 capital guidance to $3.4 to $3.9 billion and are prepared to execute on a significantly lower capital program in 2016. While the current price environment presents many challenges for our industry

we will continue focusing on our capital and operating cost efficiency, enhancing our cash flow and financial flexibility and optimizing our base production. The power of our people, the strength of our portfolio and our operational leadership will continue to create value for Chesapeake for the long term.”

2015 Third Quarter Financial Results

For the 2015 third quarter, Chesapeake reported a net loss available to common stockholders of

$4.695 billion

per fully diluted share, which compares to net income available to common stockholders of $169 million, or $0.26 per fully diluted share, in the 2014 third quarter. Items typically excluded by securities analysts in their earnings estimates reduced 2015 third quarter net income by approximately $4.612 billion on an after-tax basis and are presented on Page [12] of this release. The primary source of this reduction was a noncash impairment of the carrying value of Chesapeake's oil and natural gas properties largely resulting from significant decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of September 30, 2015, compared to June 30, 2015. Adjusting for this and other items, the 2015 third quarter net loss available to common stockholders was

$83 million

per fully diluted share, which compares to adjusted net income available to common stockholders of

$251 million

Adjusted ebitda was

in the 2015 third quarter, compared to

$1.236 billion

in the 2014 third quarter. Operating cash flow was

$476 million

$1.293 billion

INVESTOR CONTACT:

MEDIA CONTACT:

CHESAPEAKE ENERGY CORPORATION

Brad Sylvester, CFA

(405) 935-8870

ir@chk.com

Gordon Pennoyer

(405) 935-8878

media@chk.com

6100 North Western Avenue

P.O. Box 18496

Oklahoma City, OK 73154

2014 third quarter. The year-over-year decreases in adjusted ebitda and operating cash flow were primarily the result of lower realized oil, natural gas and natural gas liquid (NGL) prices, partially offset by higher realized hedging gains and lower production expenses, general and administrative (G&A) expenses and production taxes.

Adjusted net income available to common stockholders, operating cash flow, ebitda and adjusted ebitda are non-GAAP financial measures. Reconciliations of these measures to comparable financial measures calculated in accordance with generally accepted accounting principles are provided on pages 12

16 of this release.

2015 Third Quarter Average Daily Production of

Boe Increased 3% Year Over Year, Adjusted for Asset Sales

Chesapeake’s daily production for the 2015 third quarter averaged approximately

barrels of oil equivalent (boe), a year-over-year increase of 3% adjusted for asset sales. Average daily production in the 2015 third quarter consisted of approximately

114,100

barrels (bbls) of oil,

billion cubic feet (bcf) of natural gas and

76,200

bbls of NGL, which represent year-over-year increases of 4%, 2% and 7%, respectively, adjusted for asset sales. During the 2015 third quarter, the company had average curtailed production of approximately 51,000 boe per day. The company has increased its total 2015 production guidance to 670,000 – 680,000 boe per day, representing a 6% – 8% increase over 2014 results, adjusted for asset sales.

Capital Spending and Cost Overview

Chesapeake’s 2015 third quarter drilling and completion capital expenditures decreased 41% sequentially to approximately $467 million, and capital expenditures for leasehold, geological and geophysical costs and other property, plant and equipment remained flat at approximately $57 million, for a total of approximately $524 million. Total 2015 third quarter capital expenditures of $623 million, including capitalized interest of $99 million, decreased 35% and 59% compared to 2015 second quarter and 2014 third quarter results, respectively, and are detailed in the table below. For 2015, the company has reduced its estimated total capital expenditures to $3.4 – $3.9 billion, compared to $3.5 – $4.0 billion as previously provided.

Activity Comparison

Average operated rig count

Gross wells completed

Gross wells spud

Gross wells connected

Type of Cost ($ in millions)

Drilling and completion costs

$1,241

Leasehold, G&G and other PP&E

Subtotal capital spending

$1,351

Capitalized interest

Total capital spending

$1,521

Chesapeake's focus on cost discipline continued to generate reductions in production and G&A expenses. Production expenses during the 2015 third quarter were

per boe, while G&A expenses (including stock-based compensation) during the 2015 third quarter were $0.79 per boe. Combined production expenses and G&A expenses (including stock-based compensation) during the 2015 third quarter decreased 10% sequentially and 9% year over year.

A summary of the company’s guidance for 2015 is provided in the Outlook dated November 4, 2015, beginning on Page 17.

Operational Results

Southern Division

Eagle Ford Shale (South Texas):

Eagle Ford net production averaged approximately 108 thousand barrels of oil equivalent (mboe) per day (234 gross operated mboe per day) during the 2015 third quarter, an increase of 3% sequentially

Average completed well costs to date in 2015 are $5.3 million with an average completed lateral length of 6,000 feet and 21 frac stages, compared to the full-year 2014 average completed well cost of $5.9 million with an average completed lateral length of 5,850 feet and 18 frac stages. Chesapeake continues to realize significant efficiencies with longer laterals and larger completions in the area. Recent third quarter well results include the Rogers E-1H and Faith San Pedro F-4H wells, which had completed lateral lengths of 12,488 and 13,151 feet, respectively, and reached peak 24-hour production rates of 1,479 and 1,067 bbls of oil per day, respectively. These two long-lateral wells have an average field estimated completed well cost of $7.8 million each. The JEA Unit XIV LAS S 4H East Four Corners well was also completed in the third quarter using an enhanced design on a 4,611-foot completed lateral and reached a peak 24-hour rate of 1,311 bbls of oil per day. The field estimated completed well cost of this well is $4.8 million. The company placed 30 wells on production during the 2015 third quarter, compared to 89 wells in the 2014 third quarter. Chesapeake's operated rig count in the Eagle Ford averaged three rigs in the 2015 third quarter, and the company anticipates maintaining three operated rigs through the end of the year

Haynesville Shale and Bossier Shales (Northwest Louisiana):

Haynesville net production averaged approximately 636 million cubic feet of natural gas (mmcf) per day (1.03 gross operated bcf per day) during the 2015 third quarter

a decrease of 5% sequentially

Average completed well costs to date in 2015 are $7.7 million with an average completed lateral length of 5,000 feet and 14 frac stages, compared to the full-year 2014 average completed well cost of $8.4 million with an average completed lateral length of 4,900 feet and 14 frac stages. The company placed seven wells on production during the 2015 third quarter, compared to 14 wells in the 2014 third quarter. Operated rig count in the Haynesville averaged six rigs in the 2015 third quarter, and the company anticipates maintaining six operated rigs through the end of the year

Mid-Continent:

Mississippian Lime (Northern Oklahoma)

: Mississippian Lime net production averaged approximately 31 mboe per day (74 gross operated mboe per day) during the 2015 third quarter

a decrease of 1% sequentially. Average completed well costs to date in 2015 are $2.8 million with an average completed lateral length of 4,500 feet and nine frac stages, compared to the full-year 2014 average completed well cost of $3.0 million with an average completed lateral length of 4,450 feet and nine frac stages. During the 2015 third quarter, the company drilled a record lateral length of 9,395 feet in the JJJ 23-25-11 1H well, which is currently being completed. Chesapeake also drilled its first multi-lateral well in the Mississippian Lime. The Wilber 26-27-11 1H, which had dual laterals of 4,653 feet and 4,556 feet, is currently being completed. The company placed 13 wells on production during the 2015 third quarter, compared to 44 wells in the 2014 third quarter. Operated rig count in the Mississippian Lime averaged three rigs during the 2015 third quarter, and the company has released all operated rigs in the area through the end of the year

Oklahoma STACK (Northwest and Central Oklahoma)

: The company has identified multiple stacked liquids-rich opportunities on its extensive Oklahoma STACK leasehold position, substantially all of which is held by production. During the 2015 third quarter, the company drilled its first two wells targeting the Meramec formation, and is currently drilling a third well, with encouraging results. The Rouce 4-17-10 1H, which has a completed lateral of 9,350 feet, was recently placed on production and has reached over 870 bbls of oil per day after three days. The Wittrock 16-16-9 1H has been drilled with a lateral length of 9,220 feet and is currently being completed. The Stangl 36-16-9 1H is currently drilling with a planned lateral length of 9,426 feet. The company intends to keep one operated rig in the STACK area through the end of the year

Northern Division

Utica Shale (Eastern Ohio):

Utica net production averaged approximately 106 mboe per day (183 gross operated mboe per day) during the 2015 third quarter

a decrease of 15% sequentially, as the company

voluntarily curtailed approximately 20 net mboe per day during the quarter as a result of weak product pricing. During the 2015 fourth quarter, a new regional pipeline is expected to be placed in-service, allowing the company to move an additional 350 mmcf per day out of the basin and greater access to Gulf Coast pricing. Average completed well costs to date in 2015 are $7.7 million with an average completed lateral length of 7,900 feet and 40 frac stages, compared to the full-year 2014 average completed well cost of $7.2 million with an average completed lateral length of 6,200 feet and 29 frac stages. During the 2015 third quarter, the...


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