Chesapeake Energy's highly anticipated post-bankruptcy plan partially revealed in SEC filing
by Jack Money Published: Fri, October 9, 2020 3:58 PM Updated: Fri, October 9, 2020 3:59 PM
The bankruptcy process for Chesapeake Energy is far from over.
But the company made a filing with the U.S. Securities and Exchange Commission Friday that provides new information about its projected future operations, expenses, earnings and debt from 2021 through 2025.
About its future operations
Data on each of Chesapeake’s operating areas was pulled from its website, state records and SEC filings.
About its expenses
The company projects out its general and administrative and operating expenses over a five-year period that covers 2021 through 2025.
Its plan is to hold the general and administrative expenses at $187 million annually.
As for operating expenses, which consist of lease operating expenses, gathering, transportation and marketing costs and production taxes, it projects those will decline over time from about $1.3 billion in 2021 to just more than a billion dollars in 2025.
Part of those calculations involve projected realized pricing the company expects to receive for West Texas Intermediate oil and Henry Hub natural gas it produces.
The company expects it will get between $40 and $45 a barrel for oil over the five years and at least $2.25 per million British thermal units of natural gas.
The company plans to drop hedging strategies for both in 2023.
About its debt
The company owed creditors $8.9 billion when it entered into bankruptcy. Chesapeake is seeking approval from the court to exit its bankruptcy owing $750 million on a term loan and a billion dollars on a reserve-based lending facility of $1.75 billion. It projects it will retire the reserve-based lending facility debt by the end of 2022. It projects its total debt by the end of 2025 will be $713 million.
About its income
Chesapeake projects it will earn total revenues of about $3 billion in 2021, about $2.5 billion in 2022, about $2.3 billion in 2023 and about $2.25 billion in 2024 and in 2025.
The company projects it will generate free cash flows of $725 million in 2021, $364 million in 2022, $274 million in 2023, $251 million in 2024 and $260 million in 2025.
The company stated it has identified $2.5 billion in potential savings opportunities over the next decade, and noted that $1.75 billion of that is locked in to its post-bankruptcy plans. The remainder of those savings involve plans that are still being negotiated and may not be achieved, the filing stated.
The filing was required by an agreement it signed with certain holders of its funded debt, it stated.
in the list of expenses, I didn’t see any mention of “drilling costs.” Are those included in one of the items listed?
Doesn't look like it.