Chesapeake Energy Corporation (NYSE: CHK) stock surged over 18.9% on Feb 22nd, 2018 (As of 12:56PM EST; Source: Google finance) post their solid fourth quarter of 2017 performance. For 2018, the group forecasts to grow their total production, adjusted for asset sales, by over 3% yoy and oil volumes would be over 5% compared to 2017 levels.
The group is targeting three top priorities, cutting $2 billion to $3 billion of net debt from their balance sheet, boosting margins and achieving positive free cash flow. They have over $1.3 billion in asset sales that had minimal associated cash flow. The group continued to simplify their capital structure by cutting their secured term debt by over $1.3 billion or 32%. They enhanced their margins, growing overall production by over 3% and oil production by over 2% year-over-year adjusting for asset sales, while importantly reducing their cost structure by more than $500 million on an annual basis or roughly $0.58 per barrel oil equivalent.
They also cut their total leverage by over 50% since year-end 2012. The group achieved nearly a $7 billion reduction to midstream and transportation commitments since 2014. They cut CapEx budget by 83% over the last five years while keeping their adjusted production relatively flat.
Meanwhile, the group recently sold over 4.3 million shares for net proceeds of $74 million from their legacy investment in FTS International. They continue to hold over 22 million additional shares in this publicly traded company. They forecast over $575 million from signed or already closed asset sales and the partial sale of our FTS shares.
The group forecasts the proceeds from their asset divestitures and the FTSI investment would go toward producing their outstanding borrowings under the revolving credit facility for repurchasing high-coupon debt to reduce their annual interest expense. Moreover, they have also hedged over half of their exposure to the LLS oil pricing contract at $3.32 per barrel over WTI and half of their in-basin gas exposure at $0.77 less the NYMEX, a market improvement to 2017 prices for this location.