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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2021
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File No. 1-13726
chk-20210930_g1.jpg
CHESAPEAKE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Oklahoma
73-1395733
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6100 North Western Avenue,
Oklahoma City,
Oklahoma
73118
(Address of principal executive offices)(Zip Code)
(405)
 848-8000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.01 par value per shareCHKThe Nasdaq Stock Market LLC
Class A Warrants to purchase Common StockCHKEWThe Nasdaq Stock Market LLC
Class B Warrants to purchase Common StockCHKEZThe Nasdaq Stock Market LLC
Class C Warrants to purchase Common StockCHKELThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer   Accelerated Filer   Non-accelerated Filer   
Smaller Reporting Company   Emerging Growth Company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court Yes   No
As of November 1, 2021, there were 117,105,845 shares of our $0.01 par value common stock outstanding.


CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
 



Definitions
Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Chesapeake,” the “Company” and “Registrant” refer to Chesapeake Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:
“ASC” means Accounting Standards Codification.
“Backstop Commitment Agreement” means that certain Backstop Commitment Agreement, dated as of June 28, 2020, by and between Chesapeake and the Backstop Parties, as may be further amended, modified, or supplemented from time to time, in accordance with its terms.
“Backstop Parties” means the members of the FLLO Ad Hoc Group that are signatories to the Backstop Commitment Agreement and Franklin Advisers, Inc., as investment manager on behalf of certain funds and accounts.
“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas.
“Bbl” or “Bbls” means barrel or barrels.
“Bcf” means billion cubic feet.
“Boe” means barrel of oil equivalent. Natural gas proved reserves and production are converted to Boe, at the pressure and temperature base standard of each respective state in which the natural gas is produced, at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of natural gas and oil. NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.
“Chapter 11 Cases” means, when used with reference to a particular Debtor, the case pending for that Debtor under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and when used with reference to all the Debtors, the procedurally consolidated Chapter 11 cases pending for the Debtors in the Bankruptcy Court.
“Class A Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan, the Class B Warrants, and the Class C Warrants), at an initial exercise price per share of $27.63. The Class A Warrants are exercisable from the Effective Date until February 9, 2026.
“Class B Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan and the Class C Warrants), at an initial exercise price per share of $32.13. The Class B Warrants are exercisable from the Effective Date until February 9, 2026.
“Class C Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), at an initial exercise price per share of $36.18. The Class C Warrants are exercisable from the Effective Date until February 9, 2026.
“Confirmation Order” means the order confirming the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, Docket No. 2915, entered by the Bankruptcy Court on January 16, 2021.
“Debtors” means the Company, together with all of its direct and indirect subsidiaries that have filed the Chapter 11 Cases.
“DIP Facility” means that certain debtor-in-possession financing facility documented pursuant to the DIP Documents and DIP Order.
“Effective Date” means February 9, 2021.



“Exit Credit Facility” means the reserve-based revolving credit facility available upon emergence from bankruptcy.
“FLLO Term Loan Facility” means the facility outstanding under the FLLO Term Loan Facility Credit Agreement.
“FLLO Term Loan Facility Credit Agreement” means that certain Term Loan Agreement, dated as of December 19, 2019 ((i) as supplemented by that certain Class A Term Loan Supplement, dated as of December 19, 2019 (as amended, restated or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto, and (ii) as further amended, restated, or otherwise modified from time to time), by and among Chesapeake, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto.
“GAAP” means U.S. generally accepted accounting principles.
“General Unsecured Claim” means any Claim against any Debtor that is not otherwise paid in full during the Chapter 11 Cases pursuant to an order of the Bankruptcy Court and is not an Administrative Claim, a Priority Tax Claim, an Other Priority Claim, an Other Secured Claim, a Revolving Credit Facility Claim, a FLLO Term Loan Facility Claim, a Second Lien Notes Claim, an Unsecured Notes Claim, an Intercompany Claim, or a Section 510(b) Claim.
“MBbls” means thousand barrels.
“MMBbls” means million barrels.
“MBoe” means thousand Boe.
“MMBoe” means million Boe.
“Mcf” means thousand cubic feet.
“MMcf” means million cubic feet.
“New Common Stock” means the single class of common stock issued by Reorganized Chesapeake on the Effective Date.
“NGL” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“OPEC” means Organization of the Petroleum Exporting Countries.
“Petition Date” means June 28, 2020, the date on which the Debtors commenced the Chapter 11 Cases.
“Plan” means the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, attached as Exhibit A to the Confirmation Order.
“Put Option Premium” means a nonrefundable aggregate fee of $60 million, which represents 10 percent of the Rights Offering Amount, payable to the Backstop Parties in accordance with, and subject to the terms of the Backstop Commitment Agreement based on their respective backstop commitment percentages at the time such payment is made.
“Rights Offering” means the New Common Stock rights offering for the Rights Offering Amount consummated by the Debtors on the Effective Date.
“SEC” means United States Securities and Exchange Commission.
“Second Lien Notes” means the 11.500% senior notes due 2025 issued by Chesapeake pursuant to the Second Lien Notes Indenture.
“Second Lien Notes Claim” means any Claim on account of the Second Lien Notes.
“Tranche A Loans” means the fully revolving loans made under and on the terms set forth under the Exit Credit Facility which will be partially funded on the Effective Date, will have a scheduled maturity of 3 years from the Effective Date, and shall at all times be repaid prior to the repayment of the Tranche B Loans.



“Tranche B Loans” means term loans made under and on the terms set forth under the Exit Credit Facility which will be fully funded on the Effective Date, will have a scheduled maturity of 4 years from the Effective Date, will be repaid or prepaid only after there are no Tranche A Loans outstanding, and once so prepaid or repaid, may not be reborrowed.
“Warrants” means collectively, the Class A Warrants, Class B Warrants and Class C Warrants.
“WTI” means West Texas Intermediate.
“/Bbl” means per barrel.
“/Boe” means per Boe.
“/Mcf” means per Mcf.


PART I. FINANCIAL INFORMATION

ITEM 1.
Condensed Consolidated Financial Statements

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
SuccessorPredecessor
September 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$849 $279 
Restricted cash9  
Accounts receivable, net815 746 
Short-term derivative assets 19 
Other current assets61 64 
Total current assets1,734 1,108 
Property and equipment:
Oil and natural gas properties, successful efforts method
Proved oil and natural gas properties 5,163 25,734 
Unproved properties421 1,550 
Other property and equipment 492 1,754 
Total property and equipment6,076 29,038 
Less: accumulated depreciation, depletion and amortization(571)(23,806)
Property and equipment held for sale, net3 10 
Total property and equipment, net5,508 5,242 
Other long-term assets
84 234 
Total assets$7,326 $6,584 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – (Continued)
(Unaudited)
SuccessorPredecessor
September 30,
2021
December 31,
2020
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
$257 $346 
Current maturities of long-term debt 1,929 
Accrued interest
10 3 
Short-term derivative liabilities
1,345 93 
Other current liabilities898 723 
Total current liabilities2,510 3,094 
Long-term debt, net
1,259  
Long-term derivative liabilities
265 44 
Asset retirement obligations, net of current portion
244 139 
Other long-term liabilities
10 5 
Liabilities subject to compromise
 8,643 
Total liabilities4,288 11,925 
Contingencies and commitments (Note 6)
Stockholders’ equity (deficit):
Predecessor preferred stock, $0.01 par value, 20,000,000 shares authorized: 0 and 5,563,458 shares outstanding
— 1,631 
Predecessor common stock, $0.01 par value, 22,500,000 shares authorized: 0 and 9,780,547 shares issued
—  
Predecessor additional paid-in capital— 16,937 
Predecessor accumulated other comprehensive income— 45 
Successor common stock, $0.01 par value, 450,000,000 shares authorized: 98,286,731 and 0 shares issued
1 — 
Successor additional paid-in capital3,594 — 
Accumulated deficit(557)(23,954)
Total stockholders’ equity (deficit)3,038 (5,341)
Total liabilities and stockholders’ equity (deficit)$7,326 $6,584 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
SuccessorPredecessor
 Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Revenues and other:
Oil, natural gas and NGL$1,170 $672 
Marketing627 448 
Oil and natural gas derivatives(910)(161)
Gains on sales of assets3 1 
Total revenues and other890 960 
Operating expenses:
Production80 82 
Gathering, processing and transportation219 258 
Severance and ad valorem taxes41 37 
Exploration2 5 
Marketing625 450 
General and administrative30 52 
Separation and other termination costs 16 
Depreciation, depletion and amortization228 170 
Other operating expense, net3 1 
Total operating expenses1,228 1,071 
Loss from operations(338)(111)
Other income (expense):
Interest expense(17)(25)
Other income 2 
Reorganization items, net (611)
Total other expense(17)(634)
Loss before income taxes(355)(745)
Income tax benefit
(10) 
Net loss(345)(745)
Net loss attributable to noncontrolling interests  
Net loss attributable to Chesapeake(345)(745)
Preferred stock dividends  
Net loss available to common stockholders$(345)$(745)
Loss per common share:
Basic
$(3.51)$(76.18)
Diluted
$(3.51)$(76.18)
Weighted average common shares outstanding (in thousands):
Basic
98,221 9,780 
Diluted
98,221 9,780 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(Unaudited)
SuccessorPredecessor
 Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Revenues and other:
Oil, natural gas and NGL$2,615 $398 $2,006 
Marketing1,443 239 1,412 
Oil and natural gas derivatives(1,604)(382)573 
Gains on sales of assets9 5 1 
Total revenues and other2,463 260 3,992 
Operating expenses:
Production194 32 295 
Gathering, processing and transportation541 102 813 
Severance and ad valorem taxes106 18 116 
Exploration4 2 417 
Marketing1,440 237 1,438 
General and administrative69 21 229 
Separation and other termination costs11 22 43 
Depreciation, depletion and amortization579 72 931 
Impairments1  8,522 
Other operating expense (income), net1 (12)67 
Total operating expenses2,946 494 12,871 
Loss from operations(483)(234)(8,879)
Other income (expense):
Interest expense(47)(11)(307)
Gains on purchases or exchanges of debt  65 
Other income (expense)31 2 (9)
Reorganization items, net 5,569 (217)
Total other income (expense)(16)5,560 (468)
Income (loss) before income taxes(499)5,326 (9,347)
Income tax benefit
(10)(57)(13)
Net income (loss)(489)5,383 (9,334)
Net loss attributable to noncontrolling interests  16 
Net income (loss) attributable to Chesapeake(489)5,383 (9,318)
Preferred stock dividends  (22)
Net income (loss) available to common stockholders$(489)$5,383 $(9,340)
Earnings (loss) per common share:
Basic
$(4.99)$550.35 $(955.99)
Diluted
$(4.99)$534.51 $(955.99)
Weighted average common shares outstanding (in thousands):
Basic
98,040 9,781 9,770 
Diluted
98,040 10,071 9,770 

The accompanying notes are an integral part of these condensed consolidated financial statements.
9

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

SuccessorPredecessor
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
 
Net loss$(345)$(745)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments 7 
Other comprehensive income 7 
Comprehensive loss(345)(738)
Comprehensive loss attributable to noncontrolling interests  
Comprehensive loss attributable to Chesapeake$(345)$(738)

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
 
Net income (loss)$(489)$5,383 $(9,334)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments 3 24 
Other comprehensive income 3 24 
Comprehensive income (loss)(489)5,386 (9,310)
Comprehensive loss attributable to noncontrolling interests  16 
Comprehensive income (loss) attributable to Chesapeake$(489)$5,386 $(9,294)
The accompanying notes are an integral part of these condensed consolidated financial statements.
10

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SuccessorPredecessor
 Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Cash flows from operating activities:
Net income (loss)$(489)$5,383 $(9,334)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization579 72 931 
Deferred income tax benefit (57)(10)
Derivative (gains) losses, net1,604 382 (573)
Cash receipts (payments) on derivative settlements, net(437)(17)890 
Share-based compensation5 3 16 
Gains on sales of assets(9)(5)(1)
Impairments1  8,522 
Non-cash reorganization items, net (6,680)(300)
Exploration1 2 409 
Gains on purchases or exchanges of debt  (65)
Other10 45 (23)
Changes in assets and liabilities(19)851 693 
Net cash provided by (used in) operating activities1,246 (21)1,155 
Cash flows from investing activities:
Capital expenditures(404)(66)(973)
Proceeds from divestitures of property and equipment9  15 
Net cash used in investing activities(395)(66)(958)
Cash flows from financing activities:
Proceeds from Exit Credit Facility - Tranche A Loans30   
Payments on Exit Credit Facility - Tranche A Loans(80)(479) 
Proceeds from pre-petition revolving credit facility borrowings  3,806 
Payments on pre-petition revolving credit facility borrowings  (3,467)
 Proceeds from DIP Facility borrowings  60 
Payments on DIP Facility borrowings (1,179)(60)
Proceeds from issuance of senior notes, net 1,000  
Proceeds from issuance of common stock 600  
Proceeds from warrant exercise2   
Debt issuance and other financing costs(3)(8)(109)
Cash paid to purchase debt   (95)
Cash paid for common stock dividends(67)  
Cash paid for preferred stock dividends  (22)
Other(1) (10)
Net cash provided by (used in) financing activities(119)(66)103 
Net increase (decrease) in cash, cash equivalents and restricted cash732 (153)300 
Cash, cash equivalents and restricted cash, beginning of period126 279 6 
Cash, cash equivalents and restricted cash, end of period$858 $126 $306 
Cash and cash equivalents$849 $40 $306 
Restricted cash9 86  
Total cash, cash equivalents and restricted cash$858 $126 $306 
The accompanying notes are an integral part of these condensed consolidated financial statements.
11


Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Supplemental cash flow information:
Cash paid for reorganization items, net$65 $66 $118 
Interest paid, net of capitalized interest$33 $13 $201 
Income taxes paid, net of refunds received$(3)$ $1 
Supplemental disclosure of significant non-cash investing and financing activities:
Change in accrued drilling and completion costs$25 $(5)$(206)
Put option premium on equity backstop agreement$ $60 $60 
Operating lease obligations recognized$ $ $32 

























The accompanying notes are an integral part of these condensed consolidated financial statements.
12

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of June 30, 2021 (Successor)$97,954,037 $1$3,590$(178)$$$$3,413
Share-based compensation76144
Issuance of common stock for warrant exercise6,218
Issuance of reserved common stock and warrants325,715
Net loss(345)(345)
Dividends on common stock(34)(34)
Balance as of September 30, 2021 (Successor)$98,286,731$1$3,594$(557)$$$$3,038
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Deficit
SharesAmountSharesAmount
Balance as of June 30, 2020 (Predecessor)5,563,458 $1,631 9,780,202 $ $16,924 $(22,793)$29 $ $21 $(4,188)
Share-based compensation— — 169 — 7 — — — — 7 
Net loss attributable to Chesapeake— — — — — (745)— — — (745)
Hedging activity— — — — — — 7 — — 7 
Balance as of September 30, 2020 (Predecessor)5,563,458 $1,631 9,780,371 $ $16,931 $(23,538)$36 $ $21 $(4,919)
The accompanying notes are an integral part of these condensed consolidated financial statements.
13

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 2020 (Predecessor)5,563,358 $1,631 9,780,547 $ $16,937 $(