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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, 2022
    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-20220930_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 October 28, 2022, there were 133,971,136 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, 2022
 



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.
“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.
“Chief” means Chief E&D Holdings, LP.
“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.
“DD&A” means depreciation, depletion and amortization.
“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.
“Free Cash Flow” (a non-GAAP measure) means net cash provided by operating activities (GAAP) less cash capital expenditures.
“G&A” means general and administrative expenses.
“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.
“Marcellus Acquisition” means Chesapeake’s acquisition of Chief and associated non-operated interests held by affiliates of Radler and Tug Hill, Inc., which closed on March 9, 2022 with an effective date of January 1, 2022.
“MBbls” means thousand barrels.
“MMBbls” means million barrels.
“Mcf” means thousand cubic feet.
“Mcfe” means one thousand cubic feet of natural gas equivalent, with one barrel of oil or NGL converted to an equivalent volume of natural gas using the ratio of one barrel of oil or NGL to six Mcf of natural gas.
“MMcf” means million cubic feet.
“MMcfe” means million cubic feet of natural gas equivalent.
“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 Plus.
“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.
“Present Value of Estimated Future Net Revenues or PV-10 (non-GAAP)” means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices calculated as the average natural gas and oil price during the preceding 12-month period prior to the end of the current reporting period, (determined as the unweighted arithmetic average of prices on the first day of each month within the 12-month period) and costs in effect at the determination date (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.
“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.
“Radler” means Radler 2000 Limited Partnership.
“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.
“Vine” means Vine Energy Inc.
“Vine Acquisition” means Chesapeake’s acquisition of Vine, which closed on November 1, 2021.
“Warrants” means collectively, the Class A Warrants, Class B Warrants and Class C Warrants.
“/Bbl” means per barrel.
“/Mcf” means per Mcf.
“/Mcfe” means per Mcfe.
“2021 Predecessor Period” means the period of January 1, 2021 through February 9, 2021.
“2021 Successor Period” means the period of February 10, 2021 through September 30, 2021.
“2021 Successor Quarter” means the three months ended September 30, 2021.
“2022 Successor Period” means the nine months ended September 30, 2022.
“2022 Successor Quarter” means the three months ended September 30, 2022.



PART I. FINANCIAL INFORMATION

ITEM 1.
Condensed Consolidated Financial Statements
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)


Successor
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$74 $905 
Restricted cash56 9 
Accounts receivable, net1,757 1,115 
Short-term derivative assets4 5 
Other current assets168 69 
Total current assets2,059 2,103 
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties11,437 7,682 
Unproved properties2,192 1,530 
Other property and equipment506 495 
Total property and equipment14,135 9,707 
Less: accumulated depreciation, depletion and amortization(2,182)(908)
Property and equipment held for sale, net1 3 
Total property and equipment, net11,954 8,802 
Other long-term assets76 104 
Total assets$14,089 $11,009 

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)


Successor
September 30, 2022December 31, 2021
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$539 $308 
Accrued interest40 38 
Short-term derivative liabilities1,875 899 
Other current liabilities1,784 1,202 
Total current liabilities4,238 2,447 
Long-term debt, net2,717 2,278 
Long-term derivative liabilities419 249 
Asset retirement obligations, net of current portion350 349 
Other long-term liabilities18 15 
Total liabilities7,742 5,338 
Contingencies and commitments (Note 7)
Stockholders' equity:
Successor common stock, $0.01 par value, 450,000,000 shares authorized: 121,334,663 and 117,917,349 shares issued
1 1 
Successor additional paid-in capital5,627 4,845 
Retained earnings719 825 
Total stockholders' equity6,347 5,671 
Total liabilities and stockholders' equity$14,089 $11,009 
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)
Successor
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Revenues and other:
Natural gas, oil and NGL$2,987 $1,170 
Marketing1,206 627 
Natural gas and oil derivatives(1,029)(910)
Gains (losses) on sales of assets(2)3 
Total revenues and other3,162 890 
Operating expenses:
Production121 80 
Gathering, processing and transportation286 219 
Severance and ad valorem taxes67 41 
Exploration2 2 
Marketing1,200 625 
General and administrative40 30 
Depreciation, depletion and amortization440 228 
Other operating expense, net1 3 
Total operating expenses2,157 1,228 
Income (loss) from operations1,005 (338)
Other income (expense):
Interest expense(52)(17)
Other income4  
Total other income (expense), net(48)(17)
Income (loss) before income taxes957 (355)
Income tax expense (benefit)74 (10)
Net income (loss) available to common stockholders$883 $(345)
Earnings (loss) per common share:
Basic$7.29 $(3.51)
Diluted$6.12 $(3.51)
Weighted average common shares outstanding (in thousands):
Basic121,150 98,221 
Diluted144,390 98,221 

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
Nine Months Ended September 30, 2022Period from February 10, 2021 through
September 30, 2021
Period from January 1, 2021 through February 9, 2021
Revenues and other:
Natural gas, oil and NGL$7,691 $2,615 $398 
Marketing3,296 1,443 239 
Natural gas and oil derivatives(3,668)(1,604)(382)
Gains on sales of assets298 9 5 
Total revenues and other7,617 2,463 260 
Operating expenses:
Production349 194 32 
Gathering, processing and transportation802 541 102 
Severance and ad valorem taxes187 106 18 
Exploration14 4 2 
Marketing3,279 1,440 237 
General and administrative102 69 21 
Separation and other termination costs 11 22 
Depreciation, depletion and amortization1,300 579 72 
Impairments 1  
Other operating expense (income), net32 1 (12)
Total operating expenses6,065 2,946 494 
Income (loss) from operations1,552 (483)(234)
Other income (expense):
Interest expense(120)(47)(11)
Other income29 31 2 
Reorganization items, net  5,569 
Total other income (expense), net(91)(16)5,560 
Income (loss) before income taxes1,461 (499)5,326 
Income tax expense (benefit)105 (10)(57)
Net income (loss) available to common stockholders$1,356 $(489)$5,383 
Earnings (loss) per common share:
Basic$11.03 $(4.99)$550.35 
Diluted$9.35 $(4.99)$534.51 
Weighted average common shares outstanding (in thousands):
Basic122,924 98,040 9,781 
Diluted145,031 98,040 10,071 

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)

Successor
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Net income (loss)$883 $(345)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments  
Other comprehensive income  
Comprehensive income (loss)$883 $(345)

SuccessorPredecessor
Nine Months Ended September 30, 2022Period from February 10, 2021 through
September 30, 2021
Period from January 1, 2021 through February 9, 2021
Net income (loss)$1,356 $(489)$5,383 
Other comprehensive income, net of
  income tax:
Reclassification of losses on settled derivative instruments  3 
Other comprehensive income  3 
Comprehensive income (loss)$1,356 $(489)$5,386 
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
Nine Months Ended September 30, 2022Period from February 10, 2021 through
September 30, 2021
Period from January 1, 2021 through February 9, 2021
Cash flows from operating activities:
Net income (loss)$1,356 $(489)$5,383 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization1,300 579 72 
Deferred income tax expense (benefit)19  (57)
Derivative losses, net3,668 1,604 382 
Cash payments on derivative settlements, net(2,845)(437)(17)
Share-based compensation16 5 3 
Gains on sales of assets(298)(9)(5)
Impairments 1  
Non-cash reorganization items, net  (6,680)
Exploration10 1 2 
Other19 10 45 
Changes in assets and liabilities(170)(19)851 
Net cash provided by (used in) operating activities3,075 1,246 (21)
Cash flows from investing activities:
Capital expenditures(1,299)(404)(66)
Business combination, net(1,967)  
Proceeds from divestitures of property and equipment409 9  
Net cash used in investing activities(2,857)(395)(66)
Cash flows from financing activities:
Proceeds from Exit Credit Facility - Tranche A Loans7,255 30  
Payments on Exit Credit Facility - Tranche A Loans(6,805)(80)(479)
Payments on DIP Facility borrowings  (1,179)
Proceeds from issuance of senior notes, net  1,000 
Proceeds from issuance of common stock  600 
Proceeds from warrant exercise3 2  
Debt issuance and other financing costs (3)(8)
Cash paid to repurchase and retire common stock(667)  
Cash paid for common stock dividends(788)(67) 
Other (1) 
Net cash used in financing activities(1,002)(119)(66)
Net increase (decrease) in cash, cash equivalents and restricted cash(784)732 (153)
Cash, cash equivalents and restricted cash, beginning of period914 126 279 
Cash, cash equivalents and restricted cash, end of period$130 $858 $126 
The accompanying notes are an integral part of these condensed consolidated financial statements.
11

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
(Unaudited)
SuccessorPredecessor
Nine Months Ended September 30, 2022Period from February 10, 2021 through
September 30, 2021
Period from January 1, 2021 through February 9, 2021
Cash and cash equivalents$74 $849 $40 
Restricted cash56 9 86 
Total cash, cash equivalents and restricted cash$130 $858 $126 

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:

SuccessorPredecessor
Nine Months Ended September 30, 2022Period from February 10, 2021 through
September 30, 2021
Period from January 1, 2021 through February 9, 2021
Supplemental cash flow information:
Cash paid for reorganization items, net$ $65 $66 
Interest paid, net of capitalized interest$107 $33 $13 
Income taxes paid, net of refunds received$181 $(3)$ 
Supplemental disclosure of significant
  non-cash investing and financing activities:
Change in accrued drilling and completion costs$193 $25 $(5)
Put option premium on equity backstop agreement$ $ $60 
Common stock issued for business combination$764 $ $ 
Operating lease obligations recognized$25 $ $ 

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)

Preferred StockCommon Stock
SharesAmountSharesAmountAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal Stockholders' Equity
Balance as of December 31, 2021 (Successor) $ 117,917,349 $1 $4,845 $825 $ $5,671 
Issuance of common stock for Marcellus Acquisition— — 9,442,185 — 764 — — 764 
Share-based compensation— — 23,169 — 5 — — 5 
Issuance of common stock for warrant exercise— — 669,669 — 1 — — 1 
Repurchase and retirement of common stock— — (1,000,000)— — (83)— (83)
Net loss— — — — — (764)— (764)
Dividends on common stock— — — — — (211)— (211)
Balance as of March 31, 2022 (Successor) $ 127,052,372 $1 $5,615 $(233)$ $5,383 
Share-based compensation— — 146,054 — 3 — — 3 
Issuance of common stock for warrant exercise— — 166,606 — 1 — — 1 
Issuance of reserved common stock and warrants— — 36,951 — — — —  
Repurchase and retirement of common stock— — (5,811,727)— — (515)— (515)
Net income— — — — — 1,237 — 1,237 
Dividends on common stock— — — — — (301)— (301)
Balance as of June 30, 2022 (Successor) $ 121,590,256 $1 $5,619 $188 $ $5,808 
Share-based compensation— — 991 — 7 — — 7 
Issuance of common stock for warrant exercise— — 493,016 — 1 — — 1 
Repurchase and retirement of common stock— — (749,600)— — (69)— (69)
Net income— — — — — 883 — 883 
Dividends on common stock— — — — — (283)— (283)
Balance as of September 30, 2022 (Successor) $ 121,334,663 $1 $5,627 $719 $ $6,347 
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)

Preferred StockCommon Stock
SharesAmountSharesAmountAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal Stockholders' Equity
Balance as of December 31, 2020 (Predecessor)5,563,358 $1,631 9,780,547 $ $16,937 $(23,954)$45 $(5,341)
Share-based compensation— — 67 — 3 — — 3 
Hedging activity— — — — — — 3 3 
Net income— — — — — 5,383 — 5,383 
Cancellation of Predecessor Equity(5,563,358)(1,631)(9,780,614)— (16,940)18,571 (48)(48)
Issuance of Successor common stock— — 97,907,081 1 3,330 — — 3,331 
Issuance of Successor Class A warrants— — — — 93 — — 93 
Issuance of Successor Class B warrants— — — — 94 — — 94 
Issuance of Successor Class C warrants— — — — 68 — — 68 
Balance as of February 9, 2021 (Predecessor) $ 97,907,081 $1 $3,585 $ $ $3,586 
Balance as of February 10, 2021 (Successor) $ 97,907,081 $1 $3,585 $ $ $3,586 
Net income— — — — — 295 — 295 
Balance as of March 31, 2021 (Successor) $ 97,907,081 $1 $3,585 $295 $ $3,881 
Share-based compensation— — 921 — 3 — — 3 
Issuance of common stock for warrant exercise— — 46,035 — 2 — — 2 
Net loss— — — — — (439)— (439)
Dividends on common stock— — — — — (34)— (34)
Balance as of June 30, 2021 (Successor) $ 97,954,037 $1 $3,590 $(178)$ $