Chesapeake Energy recorded gains in 4Q but eases exploration in 2024

Chesapeake Energy saw a  gain in its fourth quarter net income which totaled $569 million or $4.02 a fully diluted share but announced it won’t be as aggressive in new well exploration in the coming months.

Its adjusted EBITDAX gained as well, moving from $580 million in the third quarter to $635 million and a free cash flow of $91 million in the fourth quarter. However, Chesapeake leadership decided to reduce some of its rig activity and drop a frac crew beginning in March, explaining that deferring new well production and completion activity “will build short-cycle, capital efficient productive capacity which can be activated when consumer demand requires it.”

Chesapeake pointed to “current market dynamics” as the reason for the reduction. At the same time in looking ahead for the remainder of 2024, the Oklahoma City-based company lowered its prior capital expenditure guidance nearly 20% to between $1.25 billion and $1.35 billion through rig count reductions and deferment of completions and turn-in-lines.

“Our 2024 operating plan is designed to prudently respond to today’s market, further demonstrating our continued focus on capital discipline, operational efficiency, and free cash flow generation to consistently deliver through all demand cycles,” explainedNick Dell’Osso, President and Chief Executive Officer.

Of course, the big move for Chesapeake was its January announcement of its merger with Southwestern Energy of Houston, a merger that won’t see closure until sometime in the second quarter of the year. Shareholders for both firms have yet to vote on the move that will see the newly-formed company remain headquartered in Oklahoma City.

“Our strategic combination with Southwestern will make our future outlook even stronger, extending America’s energy reach by positioning us to deliver more reliable, affordable, lower carbon energy to markets in need. We are forming the first U.S. independent that can truly compete on a global scale, redefining the natural gas producer to the benefit of our shareholders and energy consumers alike,” added Dell’Osso in releasing the financial report.

For the full-year 2023, Chesapeake’s net cash from operating activities totaled $2.4 billion and its net income was the same amount or $16.92 per share. Adjusted net income for the year was $702 million or $4.91 a share. It also managed to return nearly $840 million to shareholders.

For the year, Chesapeake reported $3.5 billion in proceeds in closing its Eagle Ford divestitures. It also reported fourth quarter net production of 3.43 bcfe a day using an average of nine rigs to drill 45 wells and putting 52 wells on production.

Production for the full year was 3.66b bcfe a day.

Also part of the fourth quarter activities was Chesapeake’s signing of its first LNG Sale and Purchase Agreements. As part of the deal, Chesapeake will purchase 0.5 million tones a year of LNG from Delfin LNG with a targeted contract start date in 2023, then deliver the LNG to Cyprus-based Gunvor with the sales price linked to the Japan Korea Market for a period of 20 years.

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