Good day, everyone, and welcome to the Chesapeake Energy Corporation Q2 2017 Conference Call. Please note that today's conference is being recorded. At this time, I'd like to turn the conference over to Brad Sylvester. Please go ahead, sir.

Good morning and thank you for joining our call today to discuss Chesapeake's financial and operational results for the 2017 second quarter. Hopefully, you've had a chance to review our press release and the updated investor presentation that we posted to our website this morning. During this morning's call, we will be making forward-looking statements which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections and future performance and the assumptions underlying such statements. Please note that there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including the factors identified and discussed in our earnings release today and in other SEC filings. Please recognize that, except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements. We may also refer to some non-GAAP financial measures, which help facilitate comparisons across periods and with peers. For any non-GAAP measures we use, a reconciliation to the nearest corresponding GAAP measure can be found on our website and in our earnings release. With me on the call today are Doug Lawler, Nick Dell'Osso, Frank Patterson, and Jason Pigott. Doug will begin the call, and then turn the call over to Nick for a review of our financial results before we turn the teleconference over for Q&A. So with that, thank you, and I will now turn the teleconference over to Doug.

Thank you, Brad. Good morning and thanks for joining our call this morning. Chesapeake continued to deliver our business as planned in the second quarter. We have several exciting well results that prove the quality and strength of our portfolio and provide confidence in our capital efficiency and operational performance. As a reminder, our 2017 capital program was designed to improve our margins and increase cash flow following a production decline resulting from asset sales and low capital investment in 2015 and 2016. We are reiterating, today, our full year guidance for capital and production, as previously disclosed. I'm pleased to share that the value and capital efficiency of our investments continue to improve through our extended lateral expertise and completion technologies. We're on track to deliver our 2017 oil growth target of 10% and we expect to exceed our goal of 100,000 barrels of oil per day prior to year-end. This production target is a leading indicator of our strategic goal of restoring the company's cash flow. We're pleased to see that oil production coming online, and I'd like to highlight the improvements in our EBITDA per boe, which has more than doubled from a year ago. These are important metrics to monitor as we position the company for growth within cash flow and increased returns on capital. Production in the second quarter averaged over 528,000 barrels of oil equivalent per day, flat compared to our first quarter production. In July, we have already seen a significant uptick in production from the second quarter average to approximately 548,000 barrels of oil equivalent per day. We expect our production will accelerate further beginning in August as we plan to place on production approximately 60 wells in this month alone. In the second half of 2017, we expect to turn-in-line approximately…

Thank you. And we'll go first to Neal Dingmann from SunTrust. Please go ahead.

Morning, gentlemen. Doug, my first question, really, is just about your comments this morning about the potential – upcoming reallocation of capital, specifically besides bringing that rig in the PRB. Could you talk a little bit – I think in the prepared release you mentioned about potentially reducing spending in certain areas altogether. So, just any color you can give on where you might reduce altogether and any of the reallocation you can give us more color on?

Sure, Neal. Thanks for the question. The reduction in our rig activity has been part of our pro-capital program all year. And as we noted, we intended to average 17 rigs for the year. We've been high to that a little bit and we planned on reducing our rig activity in the latter part of the year. So this is really consistent with our plan. Keep in mind, as well, that the flexibility around our program today as we have tremendous optionality to direct our capital towards where we see the best returns based on market conditions and based on the results of our investments. That capital efficiency and flexibility the company has is something that I consider to be one of our competitive strengths. As a result of that competitive strength, we are in excellent position to reduce our capital or increase our capital based on market conditions, and we're prepared to do. With the hedging protection that we have in place for 2017 and our goal of restoring that cash flow after these asset sales and the reduced activity in the past few years, we feel very comfortable and very confident that the extended lateral program, the completion efficiency and the results we're seeing in some of these areas, such as Powder River Bain, this monster well we've seen in the Marcellus and the continued improvements in the Eagle Ford, that we're pumping bigger fracs and seeing good results from it. So we're in great position to perform exactly as planned. It's noted as a reduction in drilling activity, but it's really just – it's the allocation of capital towards where the best investments for our strategy are to be located. And as we look forward to 2018, we are in an excellent position at $50 in oil and $3 gas to be free cash flow neutral, and we're prepared to adjust that program as necessary.

It's a good point. And then, just lastly, by my numbers here, certainly, your cash flow, it's been – is coming down dramatically. But could you talk about, in addition to that, you mentioned asset sales, I think, around $360 million to-date, how you see those sort of shaping up the rest of the year and into 2018? Thanks, Doug.

Certainly. So the asset sales, we're pleased with the progress we've had to-date, but we are not done. We see several other opportunities that we look forward to sharing with you as the year progresses. Keep in mind that we have a stated goal of $2 billion to $3 billion of further debt reduction to reduce the leverage on our balance sheet and to make the company more competitive, and we still are very confident. Keep in mind that this company has a tremendous land position and a tremendous number of assets, high quality assets. We've got a significant resource potential in each of those assets, and that gives us a lot of flexibility as what we choose to divest of. And as we test concepts and test new plays with the extended laterals and the completion technologies, we are narrowing in on value and what we think are proper prices to divest of any additional assets. So, we will continue the divestment program. We've not put a target out for the year, but what you can expect is we'll continue to be divesting of non-core assets and looking to further strengthen our balance sheet with the proceeds.

Thanks, again, for the details, Doug.

Thanks, Neal.

And we'll go next to Brian Singer from Goldman Sachs. Please go ahead, sir. Brian Singer - Goldman Sachs & Co.: Thanks, good morning.

Hi, Brian. Brian Singer - Goldman Sachs & Co.: Wanted to further focus on a couple of the assets you discussed in your comments. First is the Mid-Con, you made – I think you made some comments in your prepared remarks with regards to some higher water cuts and redesign the completions. Can you just give us a – take a little bit of a step back on the various Mid-Con plays that, I think, were areas of focus going back to the analyst meeting last year, and how you see the path forward?

Hey, Brian, this is Frank Patterson. Good morning. How are you? Brian Singer - Goldman Sachs & Co.: Great. Thank you.

So, in the Mid-Con, the Oswego, which we've been – was pushing hard on, that is a play that's really working for us, but we've always said that has a limited running room. It's a relatively small footprint. We're going to continue to push on that and we've seen really good results, over 1,000 barrels a day in most of our wells. In the Meramec, the hydrocarbon content is there. What we're struggling with is, as we frac these wells, we believe we're probably fracking out of zone and down into the Mississippian, which is a high water cut type of a formation. So, we need to redesign our completions. And because the water cut is higher than we – on the high end of our expectations there, we're going to slow down just a little bit, redesign, rework the G&G, rework the engineering, and we'll probably redeploy some capital out of that asset, and then come back to that as we understand how to redesign the completion. Brian Singer - Goldman Sachs & Co.: Great, thanks. And my follow-up is on the Marcellus. You highlighted the very strong well there and your interest in potentially reallocating maybe a – maybe it's a perception of reallocating capital. Can you talk a little bit more to that point, to the degree that we have new pipeline capacity coming online to – that improves local prices in Appalachia, how aggressively should we look to Chesapeake to add capital and what do you think the production impact could be?

Thanks. First, I just really, really have to call out the team on this. They were looking around the organization at the completions that have changed many of our fields and said, hey, what if we do that in the Marcellus? So they did a great job of challenging themselves and coming up with, okay, how could we optimize and make the best Marcellus completion possible? Kudos, also, to the field team for safely and efficiently bringing a well of that magnitude on. That's an incredible achievement. We had to basically redesign the surface facilities. As you can imagine, we're not used to bringing on 60 million a day wells in the Marcellus. So, that's great. As far as the Marcellus as we see it today, we've been producing pretty steady in the 2 bcf to 2.2 bcf a day. That's our capacity as far as being able to get pipe – gas out of the field. We are still looking for more opportunities because this is great rock and we can step on the accelerator. But I think the more important thing about the big well is it tells you how – first, how good the rock is because this is in a developed portion of the field. It's not an outlier. It's kind of in the heart of the field. Secondly, as we push these better completions and longer laterals, it's going to speak to the capital efficiency. We're going to have less capital in the ground for the same amount of gas, which is pretty substantial. And then, the third and probably the most important thing for the future is, this is in the core of the field. But just like in the Haynesville, this completion design – this well design, if we move it out into what we consider the less prospective area, the less core area, we can actually change what the core is in this field, and our footprint of really high quality gas now probably expanded substantially.

I might add, Brian, to Frank's comments that this company is all about capital efficiency. And the benefit of our portfolio as we deploy capital and the expertise that we have from all of the wells we've drilled, all of the completions that we've pumped, it just gives us tremendous flexibility and optionality to direct the capital, whether it be from Mid-Continent to Marcellus to Powder River back to Haynesville. We're just going to continue to improve. And we'll take these learnings and are seeing excellent results, and we're recognizing core expansion based on those technologies. And so, the – what we consider to be one of the strongest attributes of this company with our capital efficiency is this strength and this portfolio and the diversity that it provides to us, it's a significant value lever for the company. Brian Singer - Goldman Sachs & Co.: Hey, I appreciate the comments on the resource and the timing. From a capital allocation perspective, should we expect you to be adding rigs in 2018 in the region, in Northeast PA?

Yeah. Brian, right now, we have about 2.2 bcf a day cap on our capacity. So, what you might see us actually do is, in 2018, we may deploy less capital and allow more capital to be put on other assets until we get additional takeaway capacity. Brian Singer - Goldman Sachs & Co.: Great. Thank you.

And we'll go next to Charles Meade from Johnson Rice. Please go ahead. Charles A. Meade - Johnson Rice & Company L.L.C.: Good morning, Doug, to you and your whole team there.

Good morning, Charles. Charles A. Meade - Johnson Rice & Company L.L.C.: I wanted to pick up, I guess, maybe where Brian left off-and again, those are really impressive results and it's good color you've given on the Marcellus well, but I wonder, keeping with your theme of capital efficiency, can you give us an idea for what the incremental cost of this well was over your typical design? Or maybe if you don't want to give that, a sense of what that incremental capital efficiency was and if it's not where you want it to be, whether it can improve?

Are you sitting down, Charles? Charles A. Meade - Johnson Rice & Company L.L.C.: No, I have a standing desk in my office. I'm teasing. Yes, I'm sitting down.

Okay, Charles, hold on to your sideboards of your desk there. So this well is a little bit more expensive than the wells we've drilled. This is a 10,500 foot lateral with a relatively aggressive frac on it, about $8.5 million. That's the field estimate today. These are early numbers, of course, because we've been only been on for about six days or seven days, but we believe that we can get that cost down as we go forward. Charles A. Meade - Johnson Rice & Company L.L.C.: Well, I tell you what, I'm out of my chair and on the floor, now.

Okay. Jason's team has done a great job. I'd love Jason to put a little color on that as well.

Well, it's funny. The team, again, they were trying to figure out how to get 60 million a day out of one of these wells, and they actually call it the Rambo frac because they needed to attack that formation like Rambo would a POW camp. So they increased the cluster efficiency and packed it with 32 million pounds of Hell on Earth. So we succeeded in setting the captive gas molecules free. Charles A. Meade - Johnson Rice & Company L.L.C.: All right. If I could ask a question about the Haynesville, also, that 40 million a day well outside of the core is certainly remarkable, but to me, what caught my attention more was that refrac of that early well and that rate you got from, frankly, a short lateral. So can you talk about how that came in versus your expectations? And I know, Doug, you mentioned in your prepared remarks you're planning on doing more of that, but can you elaborate a bit on where that fits in your outlook for 2018 and perhaps where it ranks in the stack of capital efficiency or attractiveness?

Yeah. This is Jason, again. We're really pleased with the well. Again, we're just continuing to optimize the Haynesville and focus on those designs. I mean, we started by last year with 55 million pound jobs. That's a little bit bigger than we actually needed. So what's great about these wells is we're pumping less sand than we did at the 5,000 pounds per foot and still getting these really strong reserves – results; so, again, just optimization from the team. It's more than just sand. It's the number of perf clusters that we treat, the distance between the perfs, and all those things come together. And each well is unique, and they're unique even within the fields. So they've really done a great job of trying to customize the jobs for the rock that we have in each of these parts of the company. Charles A. Meade - Johnson Rice & Company L.L.C.: And the refrac, Jason?

Oh, refract. Refrac is good. Again, it's 9 million a day. It's our first one, we – the first one that we've tried a liner on, which gives us a fresh piece of pipe to work with. There's two ways to do these refracs; one is to treat the whole well, and then pump diverters in one giant job versus putting this liner in place. So it's still early, so we don't have EURs pumped; it's about $3 million we expect to do on a regular basis. So compared to a few years ago, we were drilling and completing new wells for $8 million and getting 12 million a day IP that's been (27:10) our first refrac of this type, I think, is a good step forward and opens a lot of potential for us in the future. Charles A. Meade - Johnson Rice & Company L.L.C.: Great. Thanks for the color, guys.

Charles.

And we'll take our last question from David Tameron from Wells Fargo. Please go ahead, sir.

Yeah. Morning, Doug.

Hey.

Eagle Ford, the Upper Eagle Ford that – obviously, a very good well there. Can you talk about how many more you have planned for this year and remind me of your potential kind of locations there longer term?

Hey, David, this is Frank, again. We are going to continue to work the upper Eagle Ford into our program. What we've come to the conclusion is that it probably needs to be a co-development and associated with the lower Eagle Ford, both for efficiency and ultimate – the best completion design. So we are currently reworking that. Kind of the western portion of our field has upper Eagle Ford over it and we are working on what is the best spacing associated with that. As we've seen these bigger completions, we're looking at, should we adjust our spacing assumptions, maybe a little bit further apart, and driving capital efficiency by doing that.

Okay. That's helpful. And then, jumping over to the Powder, it sounds like for the – just reading the press release, right, the rest of the year you're doing some of the Turner, some of the Sussex. I think in the past, you've tested the Parkman and the Niobrara. Can you just talk about – just step back and give us a big picture view on the Powder and kind of where you see the most potential? And when we think about 2018, where do you expect your activity to be focused?

What we've seen so far in the Sussex and the Turner, those are probably the lowest cost producers we have in our inventory. Those are low $30 breakeven prices. You know, we're going to step on the gas on those. We will focus on those. Sussex, we're drilling – we are basically in development mode. It goes up the heart of the field, and we will be bringing a bunch of those wells online here in the next two weeks to three weeks. The Turner has been fantastic. We've basically drilled the edges. We have not drilled the core of the field, yet. We are now moving rigs into more core area. We've learned quite a bit about the GOR across the field, which is it changes slightly, but the pressure has been good, the deliverability has been outstanding. So, we're going to continue to tweak our completions to optimize these. We're drilling longer and longer laterals, now, both in the Sussex and in the Turner. So you're going to see us focus in – the rest of 2017, into 2018 and into 2019 on those two plays. The Niobrara, what we've determined to-date is that completion matters. And so, the bigger completions really change the dynamics of that play. We will continue to work that into our plan. Parkman is good. It's just not a large play on our acreage position. So, we're going to focus on our best economics. We're pretty excited about what we've seen in the Turner, and I'm really, really excited about what we – what I anticipate the Sussex is going to do here in the next few weeks.

Okay. Just one – I'm just going to sneak one more in. So, Mowry, you guys talked about validating the concept, I think is what you put in the slide deck. Can you just give us what you saw from that and what it means – just what you learned from that well?

We have drilled no Mowry wells on our acreage. There have been Mowry vertical penetrations on our acreage, but no horizontal. We knew that formation would be higher pressure and potentially naturally fractured. So what we did was we decided to drill a well where we had access to pipes, so we could maximize the value of what we were investing. So we went kind of to the center of the field, where our gas pipe gathering system is robust, and drilled a 4,100 foot lateral; did not want to take a big bite on this because the Mowry in the area has always been notoriously difficult to drill horizontally, but we got a really good 4,100 foot lateral. We put a very large frac on it. Honestly, I didn't really want to talk about it this early because we're early in the flowback. We're only about 20%-plus of frac fluid back, but the well came on gas almost instantaneously. And it's been a pretty stout gas well. Until we get it unloaded, we just don't know what it's going to do. We've taken two cores in Turner wells. The Mowry is just below the Turner. We've taken two cores this year. Those cores are in our lab and we've analyzed them. They have good saturations of gas and oil. So, the next test we do will probably be up in the oil or wet gas ram to see what we can do as far as getting a high – a longer well, a higher rate well, not knowing what this one's going to do. We don't know what its rate is going to do, but a higher rate well and a better economic flow. So, that's – that is in the testing stage. Powder, the way I would look at Powder in the near term is Sussex, Turner, and probably Niobrara. Mowry is something that will come on the back side of that.

Thanks. That was a great overview. I appreciate it. Thanks.

Okay. We appreciate everyone joining the call today. For any additional questions, please contact Brad. We're excited about the things we're executing upon, but certainly see a lot of potential and opportunity. Just to highlight, again, we're executing as planned with our program, reiterating our guidance on capital production, and the capital efficiency that we continue to improve upon is something that we will be taking advantage of across the strength of our diverse portfolio. So, thank you, all. I hope everyone has a good day.

Ladies and gentlemen, that does conclude our conference for today. Thank you so much for your participation. You may now disconnect.