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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 June 30, 2023
    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. 001-13726
chesapeakelogocolora42.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 July 31, 2023, there were 132,356,423 shares of our $0.01 par value common stock outstanding.


CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
 



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.
“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.
“Current Period” means the six months ended June 30, 2023.
“Current Quarter” means the three months ended June 30, 2023.
“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.
“Effective Date” means February 9, 2021.
“ESG” means environmental, social and governance.
“Exit Credit Facility” means the reserve-based revolving credit facility available upon emergence from bankruptcy.
“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.
“LNG” means liquefied natural gas.
“LTIP” means the Chesapeake Energy Corporation 2021 Long-Term Incentive Plan.
“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.
“Prior Period” means the six months ended June 30, 2022.
“Prior Quarter” means the three months ended June 30, 2022.
“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.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator, the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“Vine Acquisition” means Chesapeake’s acquisition of Vine Energy Inc. 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.


Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Financial Statements
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, except per share data)June 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$903 $130 
Restricted cash72 62 
Accounts receivable, net671 1,438 
Short-term derivative assets417 34 
Assets held for sale 819 
Other current assets157 215 
Total current assets2,220 2,698 
Property and equipment:
Natural gas and oil properties, successful efforts method
Proved natural gas and oil properties11,201 11,096 
Unproved properties2,000 2,022 
Other property and equipment501 500 
Total property and equipment13,702 13,618 
Less: accumulated depreciation, depletion and amortization(3,049)(2,431)
Total property and equipment, net10,653 11,187 
Long-term derivative assets78 47 
Deferred income tax assets952 1,351 
Other long-term assets526 185 
Total assets$14,429 $15,468 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$642 $603 
Accrued interest39 42 
Short-term derivative liabilities26 432 
Other current liabilities944 1,627 
Total current liabilities1,651 2,704 
Long-term debt, net2,036 3,093 
Long-term derivative liabilities29 174 
Asset retirement obligations, net of current portion277 323 
Other long-term liabilities40 50 
Total liabilities4,033 6,344 
Contingencies and commitments (Note 5)
Stockholders' equity:
Common stock, $0.01 par value, 450,000,000 shares authorized: 132,684,741 and 134,715,094 shares issued
1 1 
Additional paid-in capital5,726 5,724 
Retained earnings4,669 3,399 
Total stockholders' equity10,396 9,124 
Total liabilities and stockholders' equity$14,429 $15,468 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in millions, except per share data)Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2022
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Revenues and other:
Natural gas, oil and NGL$649 $2,790 $2,102 $4,704 
Marketing611 1,223 1,263 2,090 
Natural gas and oil derivatives159 (514)1,089 (2,639)
Gains on sales of assets472 21 807 300 
Total revenues and other1,891 3,520 5,261 4,455 
Operating expenses:
Production89 118 220 228 
Gathering, processing and transportation207 274 471 516 
Severance and ad valorem taxes40 57 109 120 
Exploration8 7 15 12 
Marketing611 1,228 1,262 2,079 
General and administrative31 36 66 62 
Separation and other termination costs3  3  
Depreciation, depletion and amortization376 451 766 860 
Other operating expense, net9 8 12 31 
Total operating expenses1,374 2,179 2,924 3,908 
Income from operations517 1,341 2,337 547 
Other income (expense):
Interest expense(22)(36)(59)(68)
Other income23 9 33 25 
Total other income (expense)1 (27)(26)(43)
Income before income taxes518 1,314 2,311 504 
Income tax expense127 77 531 31 
Net income available to common stockholders$391 $1,237 $1,780 $473 
Earnings per common share:
Basic$2.93 $9.75 $13.27 $3.82 
Diluted$2.73 $8.27 $12.36 $3.25 
Weighted average common shares outstanding (in thousands):
Basic133,514 126,814 134,125 123,826 
Diluted143,267 149,532 144,007 145,534 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

($ in millions)Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Cash flows from operating activities:
Net income$1,780 $473 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization766 860 
Deferred income tax expense399  
Derivative (gains) losses, net(1,089)2,639 
Cash payments on derivative settlements, net(49)(1,611)
Share-based compensation16 10 
Gains on sales of assets(807)(300)
Exploration8 10 
Other21 5 
Changes in assets and liabilities359 (324)
Net cash provided by operating activities1,404 1,762 
Cash flows from investing activities:
Capital expenditures(1,027)(759)
Business combination, net (2,006)
Contributions to investments(88) 
Proceeds from divestitures of property and equipment1,963 403 
Net cash provided by (used in) investing activities848 (2,362)
Cash flows from financing activities:
Proceeds from New Credit Facility1,125  
Payments on New Credit Facility(2,175) 
Proceeds from Exit Credit Facility 4,550 
Payments on Exit Credit Facility (3,775)
Funds held for transition services97  
Proceeds from warrant exercise 3 
Cash paid to repurchase and retire common stock(181)(558)
Cash paid for common stock dividends(335)(508)
Net cash used in financing activities(1,469)(288)
Net increase (decrease) in cash, cash equivalents and restricted cash783 (888)
Cash, cash equivalents and restricted cash, beginning of period192 914 
Cash, cash equivalents and restricted cash, end of period$975 $26 
Cash and cash equivalents$903 $17 
Restricted cash72 9 
Total cash, cash equivalents and restricted cash$975 $26 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
(Unaudited)

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

($ in millions)Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Supplemental cash flow information:
Interest paid, net of capitalized interest$68 $69 
Income taxes paid (refunds) received, net$(60)$113 
Supplemental disclosure of significant
  non-cash investing and financing activities:
Change in accrued drilling and completion costs$31 $106 
Common stock issued for business combination$ $764 
Operating lease obligations recognized$65 $25 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

Common Stock
($ in millions)SharesAmountAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Total Stockholders' Equity
Balance as of December 31, 2022134,715,094 $1 $5,724 $3,399 $9,124 
Share-based compensation92,048 — 5 — 5 
Issuance of common stock for warrant exercise4,654 — — — — 
Repurchase and retirement of common stock(792,543)— — (60)(60)
Net income— — — 1,389 1,389 
Dividends on common stock— — — (175)(175)
Balance as of March 31, 2023134,019,253 $1 $5,729 $4,553 $10,283 
Share-based compensation109,012 — 7 — 7 
Issuance of common stock for warrant exercise878 — — — — 
Repurchase and retirement of common stock(1,444,402)— (10)(115)(125)
Net income— — — 391 391 
Dividends on common stock— — — (160)(160)
Balance as of June 30, 2023132,684,741 $1 $5,726 $4,669 $10,396 
Balance as of December 31, 2021117,917,349 $1 $4,845 $825 $5,671 
Issuance of common stock for Marcellus Acquisition9,442,185 — 764 — 764 
Share-based compensation23,169 — 5 — 5 
Issuance of common stock for warrant exercise669,669 — 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, 2022127,052,372 $1 $5,615 $(233)$5,383 
Share-based compensation146,054 — 3 — 3 
Issuance of common stock for warrant exercise166,606 — 1 — 1 
Issuance of reserved common stock and warrants36,951 — — — — 
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, 2022121,590,256 $1 $5,619 $188 $5,808 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Basis of Presentation and Summary of Significant Accounting Policies
Description of Company
Chesapeake Energy Corporation (“Chesapeake,” “we,” “our,” “us” or the “Company”) is a natural gas and oil exploration and production company engaged in the acquisition, exploration and development of properties for the production of natural gas, oil and NGL from underground reservoirs. Our operations are located onshore in the United States.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Chesapeake were prepared in accordance with GAAP and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted.
This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to our financial position as of June 30, 2023 and December 31, 2022, and our results of operations for the three months ended June 30, 2023 (“Current Quarter”), the six months ended June 30, 2023 (“Current Period”), the three months ended June 30, 2022 (“Prior Quarter”) and the six months ended June 30, 2022 (“Prior Period”). Our annual report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. For the time periods covered by this Form 10-Q, we did not have any changes or items impacting other comprehensive income.
Segments
Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for which separate operational financial information is available and is regularly evaluated by the chief operating decision maker for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only one reportable operating segment due to the similar nature of the exploration and production business across Chesapeake and its consolidated subsidiaries and the fact that our marketing activities are ancillary to our operations.
Restricted Cash
As of June 30, 2023, we had restricted cash of $72 million. Our restricted cash represents funds legally restricted for payment of certain convenience class unsecured claims following our emergence from bankruptcy, as well as for future payment of certain royalties.
Assets Held for Sale
We may market certain non-core natural gas and oil assets or other properties for sale. At the end of each reporting period, we evaluate if these assets should be classified as held for sale. The held for sale criteria includes the following: management commits to a plan to sell, the asset is available for immediate sale, an active program to locate a buyer exists, the sale of the asset is probable and expected to be completed within a year, the asset is actively being marketed for sale and that it is unlikely that significant changes to the plan will be made. If each of the criteria are met, then the assets and associated liabilities are classified as held for sale. Additionally, once assets are classified as held for sale, we cease depreciation on those related assets. See Note 2 for further discussion.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

2.Natural Gas and Oil Property Transactions

Marcellus Acquisition

On March 9, 2022, we closed the Marcellus Acquisition for total consideration of approximately $2.77 billion, consisting of approximately $2 billion in cash, including working capital adjustments and approximately 9.4 million shares of our common stock, to acquire high quality producing assets and a deep inventory of premium drilling locations in the prolific Marcellus Shale in Northeast Pennsylvania. The Marcellus Acquisition was indebtedness free, effective as of January 1, 2022, and was subject to customary purchase price adjustments. We funded the cash portion of the consideration with cash on hand and $914 million of borrowings under the Company’s Exit Credit Facility. During the Prior Period, we recognized approximately $33 million of costs related to the Marcellus Acquisition, which included integration costs, consulting fees, financial advisory fees, legal fees and change in control expense in accordance with Chief’s existing employment agreements. These acquisition-related costs are included within other operating expense, net within our condensed consolidated statements of operations.

Marcellus Acquisition Purchase Price Allocation

We have accounted for the Marcellus Acquisition as a business combination, using the acquisition method. The following table represents the allocation of the total purchase price to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date. We finalized the acquisition accounting for this transaction during 2022.
Purchase Price Allocation
Consideration:
Cash
$2,000 
Fair value of Chesapeake’s common stock issued in the merger (a)
764 
Working capital adjustments6 
Total consideration
$2,770 
Fair Value of Liabilities Assumed:
Current liabilities
$459 
Other long-term liabilities
129 
Amounts attributable to liabilities assumed
$588 
Fair Value of Assets Acquired:
Cash, cash equivalents and restricted cash$39 
Other current assets
218 
Proved natural gas and oil properties2,309 
Unproved properties
788 
Other property and equipment
1 
Other long-term assets
3 
Amounts attributable to assets acquired
$3,358 
Total identifiable net assets
$2,770 
____________________________________________
(a)The fair value of our common stock is a Level 1 input, as our stock price is a quoted price in an active market as of the acquisition date.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Natural Gas and Oil Properties
For the Marcellus Acquisition, we applied applicable guidance, under which an acquirer should recognize the identifiable assets acquired and the liabilities assumed on the acquisition date at fair value. The fair value estimate of proved and unproved natural gas and oil properties as of the acquisition date was based on estimated natural gas and oil reserves and related future net cash flows discounted using a weighted average cost of capital, including estimates of future production rates and future development costs. We utilized NYMEX strip pricing adjusted for inflation to value the reserves. We then applied various discount rates depending on the classification of reserves and other risk characteristics. Management utilized the assistance of a third-party valuation expert to estimate the value of the natural gas and oil properties acquired. Additionally, the fair value estimate of proved and unproved natural gas and oil properties was corroborated by utilizing a market approach, which considers recent comparable transactions for similar assets.
The inputs used to value natural gas and oil properties require significant judgment and estimates made by management and represent Level 3 inputs.
Marcellus Acquisition Revenues and Expenses Subsequent to Acquisition
For the period from March 10, 2022 to June 30, 2022, we included in our condensed consolidated statements of operations natural gas, oil and NGL revenues of $473 million, net losses on natural gas and oil derivatives of $312 million, and direct operating expenses of $178 million, including depreciation, depletion and amortization related to the Marcellus Acquisition businesses.
Pro Forma Financial Information
As the Marcellus Acquisition closed on March 9, 2022, the condensed consolidated statements of operations for the Prior Quarter and Current Period include all activity related to the acquired properties. The following unaudited pro forma financial information is based on our historical consolidated financial statements adjusted to reflect as if the Marcellus Acquisition occurred on January 1, 2022. The information below reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the estimated tax impact of the pro forma adjustments.
Six Months Ended June 30, 2022
Revenues$4,455 
Net income available to common stockholders$369 
Earnings per common share:
Basic$2.90 
Diluted$2.48 

Eagle Ford Divestitures
In January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for approximately $1.425 billion, subject to customary closing adjustments. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of $60 million per year for the next three years, with $45 million to be paid in the fourth year following the transaction close date. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $56 million of the deferred consideration is reflected within other current assets and approximately $128 million is reflected within other long-term assets on the condensed consolidated balance sheets as of June 30, 2023. The divestiture, which closed on March 20, 2023 (with an effective date of October 1, 2022), resulted in a gain of approximately $337 million, inclusive of post-closing adjustments, based on the difference between the carrying value of the assets and consideration received. As of December 31, 2022, approximately $811 million of property and equipment, net, and $8 million of other assets were classified as assets held for sale on the condensed consolidated balance sheets. Additionally, approximately $65 million of derivative liabilities, $57 million of asset retirement obligations and $22 million of other liabilities were classified as held for sale and included within other current liabilities on the condensed consolidated balance sheets as of December 31, 2022.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
In February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Upstream Holdings Limited (“INEOS Energy”) for approximately $1.4 billion, subject to customary closing adjustments. Approximately $225 million of the purchase price was recorded as deferred consideration and treated as a non-interest-bearing note to be paid in installments of approximately $56 million per year for the next four years. The deferred consideration is recorded at fair value with an imputed rate of interest as a Level 2 input, and approximately $53 million of the deferred consideration is reflected within other current assets and approximately $139 million is reflected within other long-term assets on the condensed consolidated balance sheets as of June 30, 2023. The divestiture, which closed on April 28, 2023 (with an effective date of October 1, 2022), resulted in a gain of approximately $470 million, based on the difference between the carrying value of the assets and consideration received. Included within the liabilities assumed by INEOS Energy was approximately $53 million of asset retirement obligations. As part of the transition services agreement related to this divestiture, we have continued to collect and disburse cash on behalf of the parties in the divested properties. On our condensed consolidated balance sheets as of June 30, 2023, cash and cash equivalents includes approximately $97 million representing the net of cash inflows and outflows associated with these properties, with the corresponding liabilities reflected in accounts payable and other current liabilities.
Powder River Divestiture
In January 2022, Chesapeake signed an agreement to sell its Powder River Basin assets in Wyoming to Continental Resources, Inc. for approximately $450 million, subject to customary closing adjustments. The divestiture, which closed on March 25, 2022, resulted in the recognition of a gain of approximately $293 million, which included $13 million of post-close adjustments, based on the difference between the carrying value of the assets and the cash received.
3.Earnings Per Share
Basic earnings per common share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated in the same manner but includes the impact of potentially dilutive securities. Potentially dilutive securities consists of issuable shares related to warrants, unvested restricted stock units (“RSUs”), and unvested performance share units (“PSUs”).
The reconciliations between basic and diluted earnings per share are as follows:
Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2022
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Numerator
Net income available to common stockholders, basic and diluted$391 $1,237 $1,780 $473 
Denominator (in thousands)
Weighted average common shares outstanding, basic133,514 126,814 134,125 123,826 
Effect of potentially dilutive securities
Warrants9,497 22,322 9,529 21,295 
Restricted stock units208 349 306 368 
Performance share units48 47 47 45 
Weighted average common shares outstanding, diluted143,267 149,532 144,007 145,534 
Earnings per common share:
Basic$2.93 $9.75 $13.27 $3.82 
Diluted$2.73 $8.27 $12.36 $3.25 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
During the Current Quarter and Current Period, the diluted earnings per share calculation excludes the effect of 789,458 reserved shares of common stock and 1,489,337 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met for such shares to be considered dilutive shares.
During the Prior Quarter and Prior Period, the diluted earnings per share calculation excludes the effect of 1,191,877 reserved shares of common stock and 2,248,726 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases, as all necessary conditions had not been met for such shares to be considered dilutive shares during the Prior Quarter and Prior Period.
4.Debt
Our long-term debt consisted of the following as of June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
Carrying Amount
Fair Value(a)
Carrying Amount
Fair Value(a)
New Credit Facility$ $ $1,050 $1,050 
5.50% senior notes due 2026
500 487 500 485 
5.875% senior notes due 2029
500 475 500 475 
6.75% senior notes due 2029
950 943 950 917 
Premiums on senior notes92 — 100 — 
Debt issuance costs(6)— (7)— 
Total long-term debt, net$2,036 $1,905 $3,093 $2,927 
____________________________________________
(a)The carrying value of borrowings under our New Credit Facility approximate fair value as the interest rates are based on prevailing market rates; therefore, they are a Level 1 fair value measurement. For all other debt, a market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value.
New Credit Facility. In December 2022, we entered into a senior secured reserve-based credit agreement (the “New Credit Agreement”) with the lenders and issuing banks party thereto (the “Lenders”), and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacity, the “Administrative Agent”), providing for a reserve-based credit facility (the “New Credit Facility”) with an initial borrowing base of $3.5 billion and aggregate commitments of $2.0 billion. The New Credit Facility matures in December 2027. The New Credit Facility provides for a $200 million sublimit available for the issuance of letters of credit and a $50 million sublimit available for swingline loans.

Initially, the obligations under the New Credit Facility are guaranteed by certain of Chesapeake’s subsidiaries (the “Guarantors”), and the New Credit Facility is secured by substantially all of the assets owned by the Company and the Guarantors (subject to customary exceptions), including mortgages on not less than 85% of the total PV-9 of the borrowing base properties evaluated in the most recent reserve report (where PV-9 is the net present value, discounted at 9% per annum, of the estimated future net revenues). The borrowing base will be redetermined semi-annually in or around April and October of each year, with one interim “wildcard” redetermination available to each of the Company and the Administrative Agent, the latter at the direction of the Required Lenders (as defined in the New Credit Agreement), between scheduled redeterminations. Our borrowing base was reaffirmed in April 2023, and the next scheduled redetermination will be in or around October 2023. The New Credit Agreement contains restrictive covenants that limit Chesapeake and its subsidiaries’ ability to, among other things but subject to exceptions customary to reserve-based credit facilities: (i) incur additional indebtedness, (ii) make investments, (iii) enter into mergers; (iv) make or declare dividends; (v) repurchase or redeem certain indebtedness; (vi) enter into certain hedges; (vii) incur liens; (viii) sell assets; and (ix) engage in certain transactions with affiliates. The New Credit Agreement requires Chesapeake to maintain compliance with the following financial ratios (“Financial Covenants”): (A) a current ratio, which is the ratio of Chesapeake’s and its restricted subsidiaries’ consolidated current assets (including unused commitments under the New Credit Facility but excluding certain non-cash assets) to their consolidated current liabilities (excluding the current portion of long-term debt and certain non-cash
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
liabilities), of not less than 1.00 to 1.00; (B) a net leverage ratio, which is the ratio of total indebtedness (less unrestricted cash up to a specified threshold) to Consolidated EBITDAX (as defined in the Credit Agreement) for the prior four fiscal quarters, of not greater than 3.50 to 1.00 and (C) a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the proved reserves to Chesapeake’s and its restricted subsidiaries’ total indebtedness of not less than 1.50 to 1.00 (“PV-9 Coverage Ratio”).

Borrowings under the New Credit Agreement may be alternate base rate loans or term SOFR loans, at our election. Interest is payable quarterly for alternate base rate loans and at the end of the applicable interest period for term SOFR loans. Term SOFR loans bear interest at term SOFR plus an applicable rate ranging from 175 to 275 basis points per annum, depending on the percentage of the commitments utilized, plus an additional 10 basis points per annum credit spread adjustment. Alternate base rate loans bear interest at a rate per annum equal to the greatest of: (i) the prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted term SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 75 to 175 basis points per annum, depending on the percentage of the commitments utilized. Chesapeake also pays a commitment fee on unused commitment amounts under the Credit Facility ranging from 37.5 to 50 basis points per annum, depending on the percentage of the commitments utilized.

The New Credit Facility is subject to customary events of default, remedies, and cure rights for credit facilities of this nature. The Company has no additional secured debt outstanding as of June 30, 2023.

5.Contingencies and Commitments
Contingencies
Business Operations and Litigation and Regulatory Proceedings
We are involved in, and expect to continue to be involved in, various lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions.
Our total accrued liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates, and our final liabilities may ultimately be materially different.
The majority of the Company’s pre-petition legal proceedings were settled during the Chapter 11 Cases or will be resolved in connection with the claims reconciliation process before the Bankruptcy Court, together with actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. Any allowed claim related to such litigation will be treated in accordance with the Plan. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases. Many of these proceedings were in early stages, and many of them sought damages and penalties, the amount of which is indeterminate.
Environmental Contingencies
The nature of the natural gas and oil business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property.


Other Matters
Based on management’s current assessment, we are of the opinion that no pending or threatened lawsuit or dispute relating to our business operations is likely to have a material adverse effect on our future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates.
Commitments
Gathering, Processing and Transportation Agreements
We have contractual commitments with midstream service companies and pipeline carriers for future gathering, processing and transportation of natural gas, oil and NGL to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to gathering, processing and transportation agreements are not recorded as obligations in the accompanying condensed consolidated balance sheets; however, they are reflected in our estimates of proved reserves.
The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:
June 30, 2023
Remainder of 2023$161 
2024352 
2025323 
2026303 
2027276 
2028-20361,321 
Total$2,736 
During the Current Quarter, certain gathering, processing and transportation agreements were transferred to the buyer of a portion of our Eagle Ford assets. In addition, we have long-term agreements for certain natural gas gathering and related services within specified acreage dedication areas in exchange for cost-of-service based fees redetermined annually, or tiered fees based on volumes delivered relative to scheduled volumes. Future gathering fees may vary with the applicable agreement.
Other Commitments
As part of our normal course of business, we enter into various agreements providing, or otherwise arranging for, financial or performance assurances to third parties on behalf of our wholly owned guarantor subsidiaries. These agreements may include future payment obligations or commitments regarding operational performance that effectively guarantee our subsidiaries’ future performance.
In connection with acquisitions and divestitures, our purchase and sale agreements generally provide indemnification to the counterparty for liabilities incurred as a result of a breach of a representation or warranty by the indemnifying party and/or other specified matters. These indemnifications generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or cannot be quantified at the time of entering into or consummating a particular transaction. For divestitures of natural gas and oil properties, our purchase and sale agreements may require the return of a portion of the proceeds we receive as a result of uncured title or environmental defects.
While executing our strategic priorities, we have incurred certain cash charges, including contract termination charges, financing extinguishment costs and charges for unused natural gas transportation and gathering capacity.


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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
6.Other Current Liabilities
Other current liabilities as of June 30, 2023 and December 31, 2022 are detailed below:
June 30, 2023December 31, 2022
Revenues and royalties due others$362 $734 
Accrued drilling and production costs243 253 
Accrued hedging costs 109 
Accrued compensation and benefits43 72 
Taxes payable132 84 
Operating leases85 86 
Joint interest prepayments received13 34 
Current liabilities held for sale(a)
 144 
Other66 111 
Total other current liabilities$944 $1,627 
_________________________________________
(a)Current liabilities held for sale are associated with the divestiture transactions related to our Eagle Ford assets. See Note 2 for additional information.

7.Revenue
The following table shows revenue disaggregated by operating area and product type:
Three Months Ended June 30, 2023
Natural GasOilNGLTotal
Marcellus$250 $ $ $250 
Haynesville256   256 
Eagle Ford18 104 21 143 
Natural gas, oil and NGL revenue$524 $104 $21 $649 
Marketing revenue$188 $382 $41 $611 

Three Months Ended June 30, 2022
Natural GasOilNGLTotal
Marcellus$1,152 $ $ $1,152 
Haynesville988   988 
Eagle Ford85 503 62 650 
Natural gas, oil and NGL revenue$2,225 $503 $62 $2,790 
Marketing revenue$637 $508 $78 $1,223 
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Six Months Ended June 30, 2023
Natural GasOilNGLTotal
Marcellus$867 $ $ $867 
Haynesville658   658 
Eagle Ford41 477 59 577 
Natural gas, oil and NGL revenue$1,566 $477 $59 $2,102 
Marketing revenue$516 $669 $78 $1,263 
Six Months Ended June 30, 2022
Natural GasOilNGLTotal
Marcellus$1,761 $ $ $1,761 
Haynesville1,640   1,640 
Eagle Ford132 953 119 1,204 
Powder River Basin20 66 13 99 
Natural gas, oil and NGL revenue$3,553 $1,019 $132 $4,704 
Marketing revenue$1,045 $903 $142 $2,090 
Accounts Receivable
Our accounts receivable are primarily from purchasers of natural gas, oil and NGL and from exploration and production companies that own interests in properties we operate. This industry concentration could affect our overall exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our counterparties, and we generally require letters of credit or parent guarantees for receivables from parties deemed to have sub-standard credit, unless the credit risk can otherwise be mitigated. We utilize an allowance method in accounting for bad debt based on historical trends in addition to specifically identifying receivables that we believe may be uncollectible.
Accounts receivable as of June 30, 2023 and December 31, 2022 are detailed below:
June 30, 2023December 31, 2022
Natural gas, oil and NGL sales$425 $1,171 
Joint interest233 246 
Other16 24 
Allowance for doubtful accounts(3)(3)
Total accounts receivable, net$671 $1,438 
8.Income Taxes
We estimate our annual effective tax rate (“AETR”) for continuing operations in recording our interim quarterly income tax provision for the various jurisdictions in which we operate. The tax effects of statutory rate changes, significant unusual or infrequently occurring items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of our estimated AETR as such items are recognized as discrete items in the quarter in which they occur. Our estimated AETR during the Current Period was 23.0% as a result of projecting current and deferred federal and state income taxes and a partial valuation allowance against our anticipated net deferred tax asset position at December 31, 2023. Our estimated AETR during the Prior Period was 6.2% as a result of projecting current federal and state income taxes and maintaining a full valuation allowance against our net deferred tax asset position.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of December 31, 2022, we were in a net deferred tax asset position and anticipate being in a net deferred tax asset position as of December 31, 2023. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that some of our deferred tax assets will not be realized. As such, a partial valuation allowance was recorded against our net deferred tax asset position for federal and state purposes as of June 30, 2023 and December 31, 2022.
On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022, which includes provisions for a 15% corporate alternative minimum tax on book income for companies whose average book income exceeds $1 billion for any three consecutive years preceding the tax year and a 1% excise tax on stock buybacks. These changes are generally in effect for tax years beginning after December 31, 2022. We do not currently project that we will be subject to the alternative minimum tax on book income for the 2023 tax period, and the impact of the 1% excise tax was immaterial during the Current Period.

9.Equity
Dividends
In May 2021, we initiated a new annual dividend on our shares of common stock, expected to be paid quarterly. The table below presents the dividends paid during the Current Period and Prior Period:
BaseVariableRate Per ShareTotal
2023:
First Quarter$0.55 $0.74 $1.29 $175 
Second Quarter$0.55 $0.63 $1.18 $160 
2022:
First Quarter$0.4375 $1.33 $1.7675 $210 
Second Quarter$0.50 $1.84 $2.34 $298 
On August 1, 2023, we announced a 4.5% increase to our base dividend rate and declared a base quarterly dividend payable of $0.575 per share, which will be paid on September 6, 2023 to stockholders of record at the close of business on August 17, 2023.
Share Repurchase Program
As of December 2, 2021, the Company was authorized to purchase up to $1.0 billion of the Company’s common stock and/or warrants under a share repurchase program, and in March 2022, we commenced our share repurchase program. In June 2022, our Board of Directors authorized an expansion of the share repurchase program by $1.0 billion, bringing the total authorized share repurchase amount to $2.0 billion for stock and/or warrants. The share repurchase program will expire on December 31, 2023. The table below presents the shares purchased under our share repurchase program:
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Shares Purchased (thousands)Dollar Value of Shares PurchasedAverage Price Per Share
2022
First Quarter1,000$83 $82.98 
Second Quarter5,812$515 $88.67 
Third Quarter750$69 $92.14 
Fourth Quarter4,105$406 $98.90 
2023
First Quarter793$60 $74.95 
Second Quarter(a)
1,444$115 $78.77 
Total to date13,904$1,248 
_____________________________________
(a)On May 26, 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $50 million of shares of our common stock. Under the terms of the ASR agreement, we received an initial delivery of 515,265 shares representing approximately 80% of the expected total to be repurchased. Upon final settlement of the ASR agreement on July 31, 2023, we received an additional 108,556 shares of common stock.
During July 2023, we repurchased an additional 331,044 shares of common stock for an aggregate price of $28 million, inclusive of the final settlement of the ASR agreement noted above. The repurchased shares of common stock were retired and recorded as a reduction to common stock and retained earnings. All share repurchases made after January 1, 2023 are subject to a 1% excise tax on share repurchases, as enacted under the Inflation Reduction Act of 2022. We are able to net this 1% excise tax on share repurchases against the issuance of shares of our common stock. The impact of this 1% excise tax was immaterial during the Current Period.

Warrants
Class A WarrantsClass B Warrants
Class C Warrants(a)
Outstanding as of December 31, 20224,495,004 4,404,564 4,006,229 
Converted into common stock(b)
(3,000)(1,000)(170)
Outstanding as of March 31, 20234,492,004 4,403,564 4,006,059 
Converted into common stock(b)
 (500)(467)
Outstanding as of June 30, 20234,492,004 4,403,064 4,005,592 
_________________________________________
(a)As of June 30, 2023, we had 1,489,337 of reserved Class C Warrants.
(b)During the Current Period, we issued 5,532 shares of common stock as a result of Warrant exercises.

10.Share-Based Compensation
On the Effective Date, the Board of Directors adopted the 2021 Long-Term Incentive Plan (the “LTIP”) with a share reserve equal to 6,800,000 shares of common stock. The LTIP provides for the grant of RSUs, restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors.
Restricted Stock Units. During the Current Period, we granted RSUs to employees and non-employee directors under the LTIP, which will vest over a three-year period and one-year period, respectively. The fair value of RSUs is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in unvested RSUs is presented below:
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Unvested Restricted Stock UnitsWeighted Average Grant Date Fair Value Per Share
(in thousands)
Unvested as of December 31, 2022957 $68.91 
Granted439 $72.19 
Vested(310)$59.96 
Forfeited(76)$66.14 
Unvested as of June 30, 20231,010 $73.29 
The aggregate intrinsic value of RSUs that vested during the Current Period was approximately $23 million based on the stock price at the time of vesting.
As of June 30, 2023, there was approximately $63 million of total unrecognized compensation expense related to unvested RSUs. The expense is expected to be recognized over a weighted average period of approximately 2.52 years.
Performance Share Units. During the Current Period, we granted PSUs to senior management under the LTIP, which will generally vest over a three-year period and will be settled in shares. The performance criteria include total shareholder return (“TSR”) and relative TSR (“rTSR”) and could result in a total payout between 0% - 200% of the target units. The fair value of the PSUs was measured on the grant date using a Monte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria.

The following table presents the assumptions used in the valuation of the PSUs granted in 2023.
AssumptionTSR, rTSR
Risk-free interest rate3.85 %
Volatility64.4 %
A summary of the changes in unvested PSUs is presented below:
Unvested Performance Share UnitsWeighted Average Grant Date Fair Value Per Share
(in thousands)
Unvested as of December 31, 2022276 $88.28 
Granted131 $78.78 
Vested $ 
Forfeited $ 
Unvested as of June 30, 2023407 $85.23 
As of June 30, 2023, there was approximately $21 million of total unrecognized compensation expense related to unvested PSUs. The expense is expected to be recognized over a weighted average period of approximately 2.07 years.



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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
RSU and PSU Compensation.
We recognized the following compensation costs, net of actual forfeitures, related to RSUs and PSUs for the periods presented:
Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2022
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
General and administrative expenses$8 $6 $14 $9 
Natural gas and oil properties2 1 3 2 
Production expense1 1 2 1 
Total RSU and PSU compensation$11 $8 $19 $12 
Related income tax benefit$3 $ $4 $ 

11.Derivative and Hedging Activities
We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. These commodity derivative financial instruments include financial price swaps, basis protection swaps, collars, three-way collars and options. All of our natural gas and oil derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty. We do not intend to hold or issue derivative financial instruments for speculative trading purposes and have elected not to designate any of our derivative instruments for hedge accounting treatment.
As of December 31, 2022, approximately $65 million of derivative liabilities (notional volume of 9.6 Bcf of natural gas and notional volume of 4.8 MMBbls of oil) were classified as liabilities held for sale. These derivative instruments were novated to WildFire Energy I LLC upon completion of the sale of a portion of our Eagle Ford assets on March 20, 2023. See Note 2 for more details.

The estimated fair values of our natural gas and oil derivative instrument assets (liabilities) as of June 30, 2023 and December 31, 2022 are provided below: 
June 30, 2023December 31, 2022
Notional VolumeFair ValueNotional VolumeFair Value
Natural gas (Bcf):
Fixed-price swaps357 $(20)382 $(494)
Collars637 414 721 49 
Three-way collars2 1 4 (2)
Call options  18 (22)
Basis protection swaps536 45 652 (32)
Total natural gas1,532 440 1,777 (501)
Oil (MMBbls):
Fixed-price swaps  1 (32)
Collars  2 7 
Basis protection swaps  6 1 
Total oil  9 (24)
Total estimated fair value$440 $(525)
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 on a gross basis and after same-counterparty netting:
Gross Fair Value(a)
Amounts Netted in the Condensed Consolidated Balance SheetsNet Fair Value Presented in the Condensed Consolidated Balance Sheets
As of June 30, 2023
Commodity Contracts:
Short-term derivative asset$487 $(70)$417 
Long-term derivative asset120 (42)78 
Short-term derivative liability(96)70 (26)
Long-term derivative liability(71)42 (29)
Total derivatives$440 $ $440 
As of December 31, 2022
Commodity Contracts:
Short-term derivative asset$200 $(166)$34 
Long-term derivative asset87 (40)47 
Short-term derivative liability(598)166 (432)
Long-term derivative liability(214)40 (174)
Total derivatives$(525)$ $(525)
___________________________________________
(a)These financial assets (liabilities) are measured at fair value on a recurring basis utilizing significant other observable inputs; see further discussion on fair value measurements below.
Fair Value
The fair value of our derivatives is based on third-party pricing models, which utilize inputs that are either readily available in the public market, such as natural gas, oil and NGL forward curves and discount rates, or can be corroborated from active markets or broker quotes, and, as such, are classified as Level 2. These values are compared to the values given by our counterparties for reasonableness. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives.
Credit Risk Considerations
Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we enter into derivative contracts only with counterparties that are highly rated or deemed by us to have acceptable credit strength and deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of June 30, 2023, our derivative instruments were spread among 13 counterparties.
Hedging Arrangements
Certain of our hedging arrangements are with counterparties that were also lenders (or affiliates of lenders) under our New Credit Facility. The contracts entered into with these counterparties are secured by the same collateral that secures the New Credit Facility. The counterparties’ obligations must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us exceed defined thresholds. As of June 30, 2023, we did not have any cash or letters of credit posted as collateral for our commodity derivatives.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

12.Investments
Momentum Sustainable Ventures LLC. During the fourth quarter of 2022, Chesapeake entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project (“CCUS”), which will gather natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon capture portion of the project anticipates capturing and permanently sequestering up to 2.0 million tons per annum of CO2. The natural gas gathering pipeline in-service is projected for the fourth quarter of 2024, and the carbon sequestration portion of the project is subject to regulatory approvals. We have a 35% interest in the project and have approximately $245 million remaining in our commitment to the project through the end of 2024. We have accounted for this investment as an equity method investment, and its carrying value as of June 30, 2023 and December 31, 2022 was $105 million and $18 million, respectively.
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ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, liquidity, results of operations and certain other factors that may affect our future results. The following discussion should be read together with the condensed consolidated financial statements included in Item 1 of Part I of this report and the consolidated financial statements included in Item 8 of our 2022 Form 10-K.
We are an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce natural gas, oil and NGL from underground reservoirs. We own a large portfolio of onshore U.S. unconventional natural gas and liquids assets, including interests in approximately 5,400 natural gas and oil wells as of June 30, 2023. Our natural gas resource plays are the Marcellus Shale in the northern Appalachian Basin in Pennsylvania (“Marcellus”) and the Haynesville/Bossier Shales in northwestern Louisiana (“Haynesville”). Our liquids-rich resource play is in the Eagle Ford Shale in South Texas (“Eagle Ford”). In August 2022, we announced that we viewed the assets in Eagle Ford as non-core to our future capital allocation strategy. In January 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion and closed the transaction on March 20, 2023. Additionally, in February 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion and closed the transaction on April 28, 2023 (both Eagle Ford divestiture transactions have an effective date of October 1, 2022).
Our strategy is to create shareholder value through the responsible development of our significant resource plays while continuing to be a leading provider of affordable, reliable, low carbon energy to the United States. We continue to focus on improving margins through operating efficiencies and financial discipline and improving our ESG performance. To accomplish these goals, we intend to allocate our human resources and capital expenditures to projects we believe offer the highest cash return on capital invested, to deploy leading drilling and completion technology throughout our portfolio, and to take advantage of acquisition and divestiture opportunities to strengthen our portfolio. We also intend to continue to dedicate capital to projects that reduce the environmental impact of our natural gas and oil producing activities. We continue to seek opportunities to reduce cash costs (production, gathering, processing and transportation and general and administrative), through operational efficiencies and improving our production volumes from existing wells.
Leading a responsible energy future is foundational to Chesapeake's success. Our core values and culture demand we continuously evaluate the environmental impact of our operations and work diligently to improve our ESG performance across all facets of our Company. Our path to answering the call for affordable, reliable, low carbon energy begins with our goal to achieve net zero greenhouse gas emissions (Scope 1 and 2) by 2035. To meet this challenge, we have set meaningful goals including:
Eliminate routine flaring from all new wells completed from 2021 forward, and enterprise-wide by 2025;
Reduce our methane intensity to 0.02% by 2025 (achieved 0.05% in 2022); and
Reduce our GHG intensity to 3.0 metric tons CO2 equivalent per thousand barrel of oil equivalent by 2025 (achieved 4.0 in 2022).
In July 2021, we announced our plan to receive independent certification of our natural gas production under the MiQ methane standard and EO100™ Standard for Responsible Energy Development. By the end of 2022, we had received certifications for all our operated gas assets in Haynesville and Marcellus as responsibly sourced gas (production associated with assets from the Vine Acquisition remains certified under Project Canary), and we intend to maintain annual certifications. The MiQ certification provides a verified approach to tracking our progress towards our commitment to reduce our methane intensity, as well as supporting our overall objective of achieving net-zero Scope 1 and 2 greenhouse gas emissions by 2035.
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Recent Developments
Acquisition
On March 9, 2022, we closed our Marcellus Acquisition pursuant to definitive agreements with Chief, Radler and Tug Hill, Inc. dated January 24, 2022. This transaction strengthened Chesapeake’s competitive position, meaningfully increasing our operating cash flows and adding high quality producing assets and a deep inventory of premium drilling locations, while preserving the strength of our balance sheet.
Divestitures
On March 25, 2022, we closed the sale of our Powder River Basin assets in Wyoming to Continental Resources, Inc. for $450 million in cash, subject to post-closing adjustments, which resulted in the recognition of a gain of approximately $293 million.
On January 17, 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for $1.425 billion, subject to post-closing adjustments. This transaction closed on March 20, 2023 (with an effective date of October 1, 2022) and resulted in the recognition of a gain of approximately $337 million.
On February 17, 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for $1.4 billion, subject to post-closing adjustments. This transaction closed on April 28, 2023 (with an effective date of October 1, 2022) and resulted in the recognition of a gain of approximately $470 million.
Investments - Momentum Sustainable Ventures LLC
During the fourth quarter of 2022, we entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture and sequestration project, which will gather natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon capture portion of the project anticipates capturing and permanently sequestering up to 2.0 million tons per annum of CO2. The natural gas gathering pipeline in-service is projected for the fourth quarter of 2024, and the carbon sequestration portion of the project is subject to regulatory approvals. Through the end of the Current Period, we have made total capital contributions of $105 million to the project.
Repurchases of Equity Securities and Dividends
In June 2022, our Board of Directors authorized an increase in the size of our share repurchase program from $1.0 billion to up to $2.0 billion in aggregate value of our common stock and/or warrants. Since March 2022, through the end of July 2023, we repurchased approximately 14.2 million shares of our common stock pursuant to the share repurchase program and had approximately $725 million available under the share repurchase program, as of July 31, 2023. In addition, we paid dividends of approximately $335 million, in aggregate, on our common stock during the Current Period.
Economic and Market Conditions
In late February 2022, Russia launched a military invasion against Ukraine. The Russian invasion has caused, and could intensify, volatility in natural gas, oil and NGL prices, and may have an impact on global growth prospects, which could in turn affect demand for natural gas and oil. This overall uncertainty resulted in stronger commodity prices during much of 2022. Toward the end of 2022, markets began to stabilize, and this, coupled with a milder winter and increased inventory levels, has resulted in an observed decline in pricing in 2023. Our 2023 estimated cash flow is partially protected from commodity price volatility due to our current hedge positions that cover approximately 65% of our projected natural gas volumes for the remainder of 2023. We believe our cost structure and liquidity position will enable us to successfully navigate continued price volatility.

In addition to the weakening of commodity prices in 2023, the industry has experienced inflationary pressures, including increased demand for oilfield service equipment, rising fuel costs, and labor shortages, which have resulted in observed increases to our operating and capital costs that were not fixed. Uncertainty regarding a potential economic downturn or recession in certain regions, or globally, may introduce new pressures or accelerate or intensify the pressures currently facing the industry. While there has been some moderation in cost pressures in
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certain areas during the Current Quarter, we continue to monitor these situations and assess their impact on our business, including our business partners and customers. For additional discussion regarding risks associated with price volatility and economic deterioration, see Part I, Item 1A “Risk Factors” in our 2022 Form 10-K.

Liquidity and Capital Resources
Liquidity Overview
Our primary sources of capital resources and liquidity are internally generated cash flows from operations and borrowings under our credit agreements, and our primary uses of cash are for the development of our natural gas and oil properties, acquisitions of additional natural gas properties and return of value to stockholders through dividends and equity repurchases. We believe our cash flow from operations, proceeds from our recent Eagle Ford divestitures, cash on hand and borrowing capacity under the New Credit Facility, as discussed below, will provide sufficient liquidity during the next 12 months and the foreseeable future. As of June 30, 2023, we had $2.9 billion of liquidity available, including $903 million of cash on hand and $2.0 billion of aggregate unused borrowing capacity available under the New Credit Facility. As of June 30, 2023, we had no outstanding borrowings under our New Credit Facility. See Note 4 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of our debt obligations, including the carrying and fair value of our senior notes.
Dividends
We paid dividends of $335 million on our common stock during the Current Period. See Note 9 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
On August 1, 2023, we announced a 4.5% increase to our base dividend rate and declared a base quarterly dividend payable of $0.575 per share, which will be paid on September 6, 2023 to stockholders of record at the close of business on August 17, 2023.
The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of the Board and will depend on the Company’s financial results, cash requirements, future prospects and other relevant factors. The Company’s ability to pay dividends to its stockholders is restricted by (i) Oklahoma corporate law, (ii) its Certificate of Incorporation, (iii) the terms and provisions of the credit agreement governing its New Credit Facility and (iv) the terms and provisions of the indentures governing its 5.50% Senior Notes due 2026, 5.875% Senior Notes due 2029 and 6.75% Senior Notes due 2029.
Derivative and Hedging Activities
Our results of operations and cash flows are impacted by changes in market prices for natural gas, oil and NGL. We enter into various derivative instruments to mitigate a portion of our exposure to commodity price declines, but these transactions may also limit our cash flows in periods of rising commodity prices. Our natural gas, oil and NGL derivative activities, when combined with our sales of natural gas, oil and NGL, allow us to better predict the total revenue we expect to receive. See Item 3. Quantitative and Qualitative Disclosures About Market Risk included in Part I of this report for further discussion on the impact of commodity price risk on our financial position.

Contractual Obligations and Off-Balance Sheet Arrangements
As of June 30, 2023, our material contractual obligations include repayment of senior notes, derivative obligations, asset retirement obligations, lease obligations, capital commitments relating to our investments, undrawn letters of credit and various other commitments we enter into in the ordinary course of business that could result in future cash obligations. In addition, we have contractual commitments with midstream companies and pipeline carriers for future gathering, processing and transportation of natural gas, oil and NGL to move certain of our production to market. The estimated gross undiscounted future commitments under these agreements were approximately $2.7 billion as of June 30, 2023. As discussed above, we believe our existing sources of liquidity will be sufficient to fund our near and long-term contractual obligations. See Notes 4, 5, 11 and 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.

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New Credit Facility
On December 9, 2022, the Company, as borrower, entered into a senior secured reserve-based credit agreement providing for the New Credit Facility, which features an initial borrowing base of $3.5 billion and aggregate commitments of $2.0 billion. Subject to certain exceptions, the borrowing base will be redetermined semi-annually in or around April and October of each year. The New Credit Facility provides for a $200 million sublimit available for the issuance of letters of credit and a $50 million sublimit available for swingline loans. Borrowings under the credit agreement may be alternate base rate loans or term SOFR loans, at the Company’s election. The New Credit Facility contains certain features that, upon receipt and maintenance of investment grade ratings from S&P, Moody’s and/or Fitch and the satisfaction of certain other conditions, result in the removal or relaxation of specified negative and financial covenants, among other favorable adjustments. See Note 4 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
Capital Expenditures
For the year ending December 31, 2023, we currently expect to bring or have online approximately 145 to 165 gross wells across 10 to 12 rigs and plan to invest between approximately $1.765 – $1.835 billion in capital expenditures. We expect that approximately 85% of our 2023 capital expenditures will be directed toward our natural gas assets. We currently plan to fund our 2023 capital program through cash on hand, expected cash flow from our operations and borrowings under our New Credit Facility. We may alter or change our plans with respect to our capital program and expected capital expenditures based on developments in our business, our financial position, our industry, or any of the markets in which we operate.
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Sources and (Uses) of Cash and Cash Equivalents
The following table presents the sources and uses of our cash and cash equivalents for the periods presented:
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Cash provided by operating activities$1,404 $1,762 
Proceeds from divestitures of property and equipment1,963 403 
Proceeds from Exit Credit Facility, net— 775 
Funds held for transition services97 — 
Proceeds from warrant exercise— 
Capital expenditures(1,027)(759)
Business combination, net— (2,006)
Contributions to investments(88)— 
Payments on New Credit Facility, net(1,050)— 
Cash paid to repurchase and retire common stock(181)(558)
Cash paid for common stock dividends(335)(508)
Net increase (decrease) in cash, cash equivalents and restricted cash$783 $(888)
Cash Flow from Operating Activities
Cash provided by operating activities was $1,404 million and $1,762 million during the Current Period and Prior Period, respectively. The decrease during the Current Period is primarily due to lower prices for the natural gas, oil and NGL we sold as well as decreased sales volumes related to our Eagle Ford divestitures. Cash flows from operations are largely affected by the same factors that affect our net income, excluding various non-cash items, such as depreciation, depletion and amortization, certain impairments, gains or losses on sales of assets, deferred income taxes and mark-to-market changes in our open derivative instruments. See further discussion below under Results of Operations.
Proceeds from Divestitures of Property and Equipment
During the Current Period, we sold a portion of our Eagle Ford assets to WildFire Energy I LLC and also sold a portion of our remaining Eagle Ford assets to INEOS Energy (each transaction with an effective date of October 1, 2022). During the Prior Period, we sold our Powder River Basin assets to Continental Resources, Inc. See Note 2 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
Proceeds from Exit Credit Facility, net
During the Prior Period, we borrowed a net $775 million on the Exit Credit Facility, which was primarily used to fund a portion of the Marcellus Acquisition.
Funds Held for Transition Services
During the Current Period, we held $97 million of funds relating to transition services associated with our Eagle Ford divestitures.
Capital Expenditures
Our capital expenditures increased during the Current Period compared to the Prior Period, primarily as a result of increased drilling and completion activity across all operating areas, as well as inflation-related cost increases for goods and services.

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Business Combination
During the Prior Period, we closed the Marcellus Acquisition for approximately $2 billion and 9.4 million shares of our common stock. See Note 2 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
Contributions to Investments
During the Current Period, contributions to investments primarily consisted of $88 million, which we contributed to our investment with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture project. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
Payments on New Credit Facility, net
During the Current Period, we made net repayments of $1,050 million on the New Credit Facility, utilizing a portion of the divestiture proceeds from the Eagle Ford divestitures and also from internally generated cash provided by operating activities.
Cash Paid to Repurchase and Retire Common Stock
In March 2022, we commenced our share repurchase program. During the Current Period, we repurchased 2.2 million shares for an aggregate price of $181 million, which included shares for which cash settlement occurred in early July 2023. During the Prior Period, we repurchased 6.8 million shares of common stock for an aggregate price of $598 million, which included shares for which cash settlement occurred in early July 2022. The repurchased shares of common stock were retired and recorded as a reduction to common stock and retained earnings.
Cash Paid for Common Stock Dividends
As part of our dividend program, we paid common stock dividends of $335 million and $508 million during the Current Period and Prior Period, respectively. See Note 9 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.


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Table of Contents
Results of Operations
Natural Gas, Oil and NGL Production and Average Sales Prices
Three Months Ended June 30, 2023
Natural GasOilNGLTotal
MMcf per day