The third quarter earnings report released Tuesday by Chesapeake Energy showed a drop in the results of its oil and gas production but income still produced a strong quarter for the Oklahoma City company.
Adjusted net income for the third quarter was $155 million or $1.09 a share , better than the second quarter adjusted net income of $92 million and 64 cents a share.
Net cash provided by operating activities was $506 million, down from the $515 million reported in the second quarter. The company’s net income was $70 million or 49 cents a share, below the $391 million and $2.73 per share in the previous quarter.
During the quarter, Chesapeake managed to return more than $200 million to shareholders through base dividend and share buybacks. The new quarterly dividend will be $0.575 per common share to be paid in December 2023.
Cash on hand for the company totaled approximately $713 million at the end of September.
“Our team is operating at the highest and safest levels, and delivered another strong quarter,” said Nick Dell’Osso, Chesapeake’s President and Chief Executive Officer.
“Our focus is clear — to ‘Be LNG Ready’ and opportunistically capitalize on our strong financial position and leading operating performance. We remain confident in our ability to deliver affordable, reliable, lower carbon energy with peer-leading returns to shareholders.”
Operational Results
Third quarter net production was approximately 3,495 mmcfe per day (97% natural gas and 3% total liquids). It was below second quarter production of 3,653 mmcfe per day.
This production was delivered despite the elective deferral of 60% of the planned third quarter Marcellus turn in lines and the extension of elective curtailments. The company used an average of nine rigs to drill 35 wells, down from 53 in the second quarter, and placed 34 wells on production which includes 16 wells in the South Texas Rich Eagle Ford asset.
Chesapeake is currently operating nine rigs and three completion crews including four rigs and two crews in the Marcellus and five rigs and one crew in the Haynesville.
Financial and Shareholder Return Update
During the third quarter of 2023, Chesapeake generated $506 million of operating cash flow, had $713 million of cash on hand, and an undrawn $2.0 billion credit facility at quarter-end.
The company repurchased approximately 1.5 million shares of its common stock for approximately $130 million at an average price of $86.16 per share in the third quarter. Through October 27, 2023, Chesapeake repurchased approximately 3.8 million shares of its common stock for approximately $316 million at an average price of $81.09 per share. Chesapeake has approximately $600 million remaining under its share repurchase program and, in total, has repurchased approximately 16 million shares of its common stock at a cost of approximately $1.4 billion under its current $2 billion authorization.
In the third quarter, the company’s credit rating outlook was moved to positive watch by S&P Global Ratings. Since April 2023, Chesapeake’s issuer default rating has been updated to ‘BB+’ maintaining a positive outlook and ‘Ba1’ with a stable outlook by Fitch Ratings and Moody’s, respectively. The agencies noted increased scale, conservative financial policy, and cash optionality as fundamental to the company’s continued rating improvements.
Sustainability Update
The company continued to advance its commitment to transparency and enhanced disclosures by joining the Oil & Gas Methane Partnership (OGMP) 2.0. OGMP 2.0 is the flagship oil and gas reporting and mitigation program of the United Nations Environment Program (UNEP), the only comprehensive, measurement-based international reporting framework for the sector. The company expects to submit its full implementation plan for OGMP 2.0 in 2024.
The company also announced a unique partnership with Eavor Inc. and the U.S. Air Force to provide Eavor-LoopTM generated geothermal energy to the Joint Base San Antonio Facility in Texas. Chesapeake will aid the project through its expertise in subsurface engineering, surface regulatory and impact mitigation and geologic resource characterization.
Leadership plans an 8 a.m. CT conference call on Wednesday to disccuss the results.