CHESAPEAKE ENERGY 2017 Q4 EARNINGS February 22, 2018 - PowerPoint PPT Presentation

CHESAPEAKE ENERGY 2017 Q4 EARNINGS February 22, 2018

FORWARD-LOOKING STATEMENTS This presentation 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. Forward-looking statements are statements other than statements of historical fact. They include statements that give our current expectations, management's outlook guidance or forecasts of future events, production and well connection forecasts, estimates of operating costs, anticipated capital and operational efficiencies, planned development drilling and expected drilling cost reductions, anticipated timing of wells to be placed into production, general and administrative expenses, capital expenditures, the timing of anticipated asset sales and proceeds to be received therefrom, the expected use of proceeds of anticipated asset sales, projected cash flow and liquidity, our ability to enhance our cash flow and financial flexibility, plans and objectives for future operations, the ability of our employees, portfolio strength and operational leadership to create long-term value, and the assumptions on which such statements are based. Although we believe the expectations and forecasts reflected in the forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate or changed assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results include those described under “Risk Factors” in Item 1A of our annual report on Form 10 -K and any updates to those factors set forth in Chesapeake's subsequent quarterly reports on Form 10-Q or current reports on Form 8-K (available at http://www.chk.com/investors/sec- filings). These risk factors include the volatility of oil, natural gas and NGL prices; the limitations our level of indebtedness may have on our financial flexibility; our inability to access the capital markets on favorable terms; the availability of cash flows from operations and other funds to finance reserve replacement costs or satisfy our debt obligations; downgrade in our credit rating requiring us to post more collateral under certain commercial arrangements; write-downs of our oil and natural gas asset carrying values due to low commodity prices; our ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; our ability to generate profits or achieve targeted results in drilling and well operations; leasehold terms expiring before production can be established; commodity derivative activities resulting in lower prices realized on oil, natural gas and NGL sales; the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; charges incurred in response to market conditions and in connection with our ongoing actions to reduce financial leverage and complexity; drilling and operating risks and resulting liabilities; effects of environmental protection laws and regulation on our business; legislative and regulatory initiatives further regulating hydraulic fracturing; our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used; impacts of potential legislative and regulatory actions addressing climate change; federal and state tax proposals affecting our industry; potential OTC derivatives regulation limiting our ability to hedge against commodity price fluctuations; competition in the oil and gas exploration and production industry; a deterioration in general economic, business or industry conditions; negative public perceptions of our industry; limited control over properties we do not operate; pipeline and gathering system capacity constraints and transportation interruptions; terrorist activities and cyber-attacks adversely impacting our operations; an interruption in operations at our headquarters due to a catastrophic event; certain anti-takeover provisions that affect shareholder rights; and our inability to increase or maintain our liquidity through debt repurchases, capital exchanges, asset sales, joint ventures, farmouts or other means. In addition, disclosures concerning the estimated contribution of derivative contracts to our future results of operations are based upon market information as of a specific date. These market prices are subject to significant volatility. Our production forecasts are also dependent upon many assumptions, including estimates of production decline rates from existing wells and the outcome of future drilling activity. Expected asset sales may not be completed in the time frame anticipated or at all. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this presentation, and we undertake no obligation to update any of the information provided in this presentation, except as required by applicable law. In addition, this presentation contains time-sensitive information that reflects management's best judgment only as of the date of this presentation. We use certain terms in this presentation such as “Resource Potential,” “Net Reserves” and similar terms that the SEC’s guide lines strictly prohibit us from including in filings with the SEC. These terms include reserves with substantially less certainty, and no discount or other adjustment is included in the presentation of such reserve numbers. U.S. investors are urged to consider closely the disclosure in our Form 10-K for the year ended December 31, 2017, File No. 1-13726 and in our other filings with the SEC, available from us at 6100 North Western Avenue, Oklahoma City, Oklahoma 73118. These forms can also be obtained from the SEC by calling 1-800-SEC-0330. Q4 2017 EARNINGS 2

4 Q’17 FINANCIAL AND OPERATIONAL RESULTS (1) (1) Inclusive of capitalized interest Over 4X higher than 4Q 2016 83% increase over 4Q 2016 Down 24% from 3Q 2017 (2) 9% increase over 3Q 2017 16% increase over 3Q 2017 6% decrease over 3Q 2017 (1) See non-GAAP reconciliation on pages 11 and 12 (2) Cash costs defined as lease operating expenses combined with general and administrative expenses (excluding stock-based compensation) Q4 2017 EARNINGS 3

UPDATE ON RECENT PROGRESS Cash proceeds from divestitures ˃ ~$500 million in asset sales signed in late 2017 and 2018; expected to close in 1H 2018 • Represents an EBITDA multiple of 7.1x ˃ ~$74 million in net proceeds from sale of FTSI shares ˃ Pursuing multiple large transactions Current liquidity is strong ~$3.1 billion ~$450 million Revolver availability In pending receipts (2) (1) as of January 31, 2018 (1) Approximately $533 million borrowed on revolving credit facility and includes approximately ~$137 million of letters of credit (2) At January 31, 2018 and includes proceeds from planned asset sales, FTSI sale of ~4.3 million shares and a positive legal settlement. Q4 2017 EARNINGS 4

WHAT’S THE IMPACT? Sold ~23,000 boe/d (25% oil), yet 2018 adjusted production still projected to grow ~3% reduced by ~$0.14/boe Cost structure (1) Interest expense may be reduced by up to ~$50 million annually Overhead reduction of ~$70 million through efficiencies and synergies Remaining FTSI ownership of ~22 million shares + We expect to be cash flow positive with signed/closed A&D activity at current strip prices in 2018 (1) Includes production expenses and gathering, processing and transportation expenses. Q4 2017 EARNINGS 5

PREMIER, DIVERSIFIED ASSET BASE (1) MARCELLUS ~4.7 million 1 rig POWDER RIVER BASIN ~$1.60 – 2.20/mcf Breakeven ~4 rigs Acreage ~577,000 (86% Held) Net acres ~$25 – 35/bbl Breakeven Acreage ~275,000 (72% Held) UTICA 2 rigs ~13,300 ~$1.35 – 1.80/mcf Breakeven Acreage ~938,000 (87% Held) Undrilled locations MID-CONTINENT 150 ~1 rig ~$30 – 40/bbl Breakeven TIL Count 125 Acreage ~806,000 (97% Held) 100 75 50 HAYNESVILLE 25 3 rigs ~$2.00 – 2.50/mcf Breakeven 0 Acreage ~358,000 (90% Held) Q1 2018 Q2 2018 Q3 2018 Q4 2018 EAGLE FORD Gulf Coast Rockies ~4 rigs Appalachia North Appalachia South ~$30 – 40/bbl Breakeven Mid-Continent South Texas Acreage ~245,000 (97% Held) (1) Net acreage at December 31, 2017 is proforma for announced Mid- Continent asset divestitures and excludes approximately 1.5 million of “Other” net acreage; 2018 estimated average rig count; PV10 breakeven with oil held flat at $55/bbl and gas held flat at $3/mcf Q4 2017 EARNINGS 6

Appendix Q4 2017 EARNINGS 7

HEDGING POSITION AS OF 2/19/2018 (1) Oil NGL Natural Gas 2018 2018 2018 5% 5% Collars Collars $39.15/$47/$55/bbl 4% NGL $3.00/$3.25/mcf WTI Swaps HH 63% 74% (2) $52.87/bbl Swaps Swaps $3.11/mcf WTI HH 5% Propane Swaps $0.73/gal 5% Ethane Swaps $0.28/gal 10% Butane Swaps $0.88/gal • ~10.7 mmbbls of 2018 LLS-WTI oil basis hedges @ +$3.32 • ~57.7 bcf of January – October 2018 TGP Zone 4 gas basis hedges @ -$0.77 • ~5.7 bcf of January – February 2018 Tetco M3 gas basis hedges @ +$2.12 • ~3.3 mmbbls of 2019 oil hedged with swaps at an average price of $56.04 (1) Does not reflect January 2018 and February 2018 gas settlements (2) Oil swaps include 5% 2H18 calls (extendable calls) expected to be exercised at $52.87 per bbl Q4 2017 EARNINGS 8