Good day, and welcome to the Chesapeake Energy Corporation First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brad Sylvester. Please go ahead.

Thank you, Andrea, and good morning, everyone. Thank you for joining our call today to discuss Chesapeake’s first quarter 2022 financial and operating results. Hopefully, you had a chance to review our press release and the updated investor presentation that we posted to our website yesterday. 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 press release yesterday 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 measure we use, a reconciliation to the nearest corresponding GAAP measure can be found on our website. With me on the call this morning are Nick Dell’Osso, Mohit Singh and Josh Viets. Nick will give a brief overview of our results, and then we will open up the teleconference to Q&A. So with that, thank you again, and I will now turn the teleconference over to Nick. Nick Dell’Osso: Thanks, Brad, and good morning, everybody. Thanks for joining the call. We’ll get to Q&A shortly, but first I want to spend a couple minutes talking about where the industry sits today and how we’re seeing the year unfold. We’re off to a really strong start. In the Marcellus, we closed on Chief and we’re busy integrating these…

[Operator Instructions] And our first question will come from Doug Leggate of Bank of America. Please go ahead.

Thanks. Good morning everyone. Good morning, Nick. Nick Dell’Osso: Good morning, Doug.

Thanks for taking my question. I think you’d be delighted to know, I’m not going ask you about variable dividends. So it’s, I would like to ask you to be the elaborate on your comments around U.S. gas crisis, what I’ll kind of trying to figure out how sustainable or long end of the curve as the dislocation between Europe and the U.S. is pretty obvious, but $8 gas is pretty surprising as well. And I’d love to get your perspective on that. Because you sound like you’re basically forgive me talking that down the song. That’s my first question. And my second question, if I may is, I guess we can’t ignore what happened yesterday with Cambridge [ph]. Presumably we’ve had some discussions I’m just curious where you think the gap is between what you’ve done as a strategy so far. I guess asset sales Eagle Ford is probably part of the discussion, and just offering perspective, we can at this point to the extent that you can and I’ll leave it there. Thank you. Nick Dell’Osso: Sure. Let’s talk about gas prices first, was your first question. We – you said we’ve talked them down a little bit. I think all we’ve pointed to with gas prices is that the prompt month prices are so far above breakevens for supply in the U.S. that we just don’t expect that to be a persistent price environment. The long end of the curve now has come up quite a bit. And for a couple years, we’ll be above four bucks on the curve. There’s ample resources in this country to drive prices below $4 on the long end of the curve. And we think if you have really adequate infrastructure to deliver gas to all of the markets where it’s…

I appreciate the answers Nick. Thanks so much.

The next question comes from Matt Portillo of TPH. Please go ahead.

Good morning all. Thanks for taking my questions. Nick, maybe to touch on a comment you made to start the call given the discounted value, be in your share price and the strong free cash flow guide this year. Just curious, I guess, as we look at the guidance number at call 27 free cash flow, less the dividends, it still leaves about a $1.5 billion of free cash for you to deploy. I was curious if you might be able to comment a bit on how you think about debt reduction versus accelerating the buyback program in light of the improved outlook. Nick Dell’Osso: Sure. It’s a great question, Matt. So, we do have a lot of incremental free cash flow as you’ve noted. We’re pretty eager to get going on the buyback. We’ve been constrained with our disclosure requirements around the Chief asset, we haven’t been cleared of MNPI. We will be very soon. And once we are, we expect to get going and get going and earnest. We’ve been able to do a little bit during the quarter with some privately negotiated transactions and that’s been helpful. But we’re, like I said, eager to do quite a bit more. On the debt reduction side, we have a little bit outstanding on our revolver today, following the Chief transaction, we’ll probably let that go back to zero. That’ll happen in the normal course as we go through the year. But we don’t really have a priority for debt reduction beyond that. And I would call that, just it’ll just happen as it happens. There’s no urgency necessarily to achieving that by any certain date.

Perfect. And then as my follow up question, just curious, if you might be able to provide a little context in color on how you’re thinking about marketing your gap in the Haynesville we’ve seen a little bit of congestion causing a basis to widen out a bit. There’s a lot of projects in the queue that might ultimately evacuate gas further south and opening up the door for stronger realizations, as well as possibly tying in more volumes down the road into LNG opportunities. So just at a higher level, curious on your marketing strategy around the Haynesville moving forward and what we might expect from a news flow perspective over the next 12 months or so. Nick Dell’Osso: Yes. Great question. So one of the things we’re happy about today is there’s all these projects that are being proposed and there’s, all of the new LNG facilities that’ll be built over the next several years. And at the moment, we’re a bit of a free agent when it comes to where we deliver our gas. We have very little Ft in the Haynesville. And so we have a lot of flexibility about how we think about where we’re going to send that gas and what we’re going to commit to. So, we talk about this a lot. I’ll actually let Mohit talk to you a bit more about how we’re thinking about it, but we’re excited about out what this represents.

Yes, Matt, that’s a good question. Good morning. This is Mohit, what I would say in addition to what Nick said is obviously this is a rapidly evolving space. Something that we are closely monitoring. The thing that gets us most excited is that if you look at the demand growth for natural gas in the U.S., roughly three fourth of that is going to come from the Gulf Coast market and our competitive positioning because of the proximity to the Gulf Coast and to the LNG complex that resides there in will build is a competitive – or advantage that differentiates us. The other thing that we are very excited about Nick referenced this earlier is a 100% of our gas that’s coming from the Haynesville is RSG certified. And at some point we think that would be another differentiator because as you think of end users and off takers that are looking to secure LNG supplies, having it be responsibly sourced will again also be a competitive advantage. So, we are very happy about where we sit. We are actively engaged in several different conversations. Don’t want to front run that, but more news to come on that front hopefully.

Thank you.

Next question comes from Nicholas Pope of Seaport Research. Please go ahead.

Good morning, everyone. Nick Dell’Osso: Morning, Nick.

So I was hoping you guys could go into little depth. This is obviously the first, quarter we’ve seen with the Chief acquisitions and trying to understand a little bit of the guidance. I think you all said it was $800 million, $900 million wired production. It doesn’t seem like the guide for 2Q kind of fully reflects that volume uptick. So, I’m hoping you could explain kind of, I guess what the goal is right now with Marcellus in terms of kind of maintaining production where you think the maintenance level is with the new assets and kind of where things are kind of post acquisition on those volumes relative to kind of where acquisition volumes initially were expected.

Yes, good morning, Nick. This is Josh. I’ll let me just add a little bit of color to that, I think with the Chief acquisition we’re course just in the very beginnings of integrating that asset. And I do, I really feel like we’re off to, a great start with that. We are, as we – if we look at our till schedule, we’re a little bit back and load in the quarter. So, for our gas assets, I think we’ll have, 40 pills to 45 pills but 20 of those come in June, so, definitely you will see a little bit of lumpiness to the production there. So that may be something just to be thinking about in the model. Maybe just a couple other things I point out, we do have some plan, third party maintenance occurring within the quarter as well. So that’s going to bring down volumes just a little bit. And then maybe one of the more material movers and this really occurred right. As we brought the assets into the portfolio there was a pad that produces about 80 million cubic feet a day. So, roughly 13,000 barrels a day of a net oil equivalent. We shut that pad in for a time ops reasons and really it was just centered around we didn’t feel like we could manage the risk safely on the site with drilling and producing. And so that was a choice that we made, but that’s all volume that’s going to come back into the system.

Got it. So it sounds like this is fairly transient, because I think you guys were growing production in Marcellus and it just does not, it’s not 800 plus fourth quarter, which is where my math, the simple math was on kind of Marcellus, but it sounds like this is more transient in terms of where production levels are.

Yes. That’s what we’re going to expect for the year. I mean, growing the asset obviously is challenging to do just with the lack of export out of the basin. But we do expect to see a little bit of lumpiness between quarters, as we move the two of the year.

Got it. That’s all I had. I’ll hop off for now. Thanks for the clarification.

The next question comes from Scott Hanold of RBC. Please go ahead.

Yes, thanks all. Hey, just sort of on, the back of kind of the conversation around the gas macro, and I know you’ve all talked about your hedging program in the past underpinning your capital program, but if you do have a view that, some of these prompt months, and some of the forward months, maybe a little bit ahead of themselves, does that incentivize you to hedge a little bit more? Would you be opportunistic with hedging at all? Do you still just plan being a little bit more pragmatic with it? Nick Dell’Osso: I’ll start this one and then Mohit may have something else to add, we’re pretty little hedged for 2022. So we haven’t been motivated to add a lot more here. We’ve been happy to see the bit that we have unhedged rise and it’s been obviously a big tailwind to our cash flows. For 2023, you can see the way we lay it down in our slide now, we put a bullet on there that tells you what we’ve added since the last disclosure. And what we’re doing now is a bunch of very wide collars. And so, we really feel good about those collars. Some of the collars that we’ve done have been as wide for the full year of four by 10 which is, pretty awesome spread to have access to a floor of four and a ceiling of 10. So go ahead Mohit.

Yes, I think the only thing I would add is, traditionally a lot of these hedges that we had locked in at emergence, they were done through swaps, but the skews on these collars have been so attractive that almost, I would say on an exclusive basis going forward, what we are doing is trying to prefer these collars. And as you can quickly figure out, I mean, it still gives you an exposure to the upside, but still protecting your downside, which is what we are trying to do. But pretty happy with what we’ve been tactically able to layer in with regards to the hedges.

Got it, appreciate that. And my follow up, you mentioned in regards to the buybacks that some of those were privately negotiated, and obviously there’s some I guess in, overhang in some of the ownership, in Chesapeake, do you all see that as an opportunity to continue to utilize the buybacks to potentially do some more private negotiated deals. Can you just give us a little bit of color behind that and what you know, and can say? Nick Dell’Osso: Sure. We won’t comment on who we’ve negotiated with directly. But we intended when we put the buyback in place to be ready, if any of those large holders wanted to sell to make sure that there was no disruption in the trading dynamics of our stock in the market, if there’s a large chunk that wanted to sell. One of the things that’s been really interesting about the perceived overhang of the shareholders in our stock is that they’re reasonably happy shareholders from, what we hear from them and patient. And so we’re generating great returns, the cash return elements, the pending buyback that can be accelerated now all of these things, point to a tremendous amount of upside in the stock. And so I call it a perceived overhang, because I think a number of these shareholders could be there for a while, but we’re totally ready when any of them want to sell to be prepared to be a buyer. So, we’re – I think your sentiment is directionally correct. We’re just not seeing demand for that today in any big size.

Yes. So just out to curiosity, I mean, obviously you said they’re happy shareholders see a lot of upside optionality in the stock and, I think a lot of people think that too, but like what do you think then is hanging up, Chesapeake stock relative to its peers? Like what do you think as a management team is something you need to address to get Chesapeake stock to move further higher? Nick Dell’Osso: Well, it’s something that we talk about in almost every day, Scott. I mean, I do think that perceived overhang is a challenge for some investors. I think they’re, if we had a little bit more turnover in the shareholder base that would probably help. But again, I think of it as a perceived problem. And, when I say our shareholders are happy I think, I’m sure that they would all share our view that the stock is undervalued today. So, we’re all focused on how to drive this stock price higher and have it better represent the underlying value of the assets that we own. We think the buybacks going to go a long way towards that. We will be actively buying our stock and if some of them want to sell then great, they can sell it to us. And if they want to hold, then we’ll buy from others in the market. So, we’re eager to execute on that because at this point that cash can go a long way towards retiring the share count, which is going to make all of our per share metrics that we talked about earlier that much better and should really continue to highlight the value in the stock that should drive the share price higher. So, we’re going to continue to execute on our plan. We’re going to continue to push for the buyback and we’re pretty optimistic about what that will do for our share price.

Thank you.

The next question comes from Charles Meade of Johnson Rice. Please go ahead.

Good morning, Nick and Mohit and the rest of the Chesapeake crew up there. Nick Dell’Osso: Good morning, Charles.

I think I just have one question. And it’s about the Chief assets up in the Marcellus, when I look at that map of, what Chief brings the table next to your map, that moves your center gravity or extends you kind of Northwest into more, I guess, central Bradford County. So as you’ve spent some time with these assets, are you seeing anything different than what you expected as you move Northwest, kind of away from where your historic core has been?

Yes, good morning, Charles. This is Josh. Let me answer that for you. I don’t not, no, I don’t think so. The [indiscernible] a little bit, but this is extremely strong reservoirs with unbelievable deliverability, which result in great returns. We do think there’s some opportunities to make the asset better and a couple things that, we’re specifically looking at that’ll maybe point to is, we think there’s some room to improve completion designs. Simply by, cutting back a little bit on the amount of water. We think there’s some opportunities to potentially, widen spacing a little bit, and specifically around existing producers, those are things that we’ve proven within our own assets and are transferable, and even a little bit more tactical than that. It’s just simply, how we choose to steer a well and land it within a particular zone. And really it’s about maximizing the contacted reservoir within that lateral. And as we’ve looked at, some of the Wells in the Chief data set relative how we operate, we’re convinced we’ll improve performance there.

Got it. So, Josh, just so I understand this is how Chesapeake would do things differently from Chief, or is this how you do things differently just as you move to the Northwest kind of on your existing, your existing designs.

Yes. I mean, really it’s about, us using the history and I think the technical expertise that we have to expand it in, into that acreage rather than it’s something unique about the rock that we’re developing there.

Great. Thank you.

The next question comes from Josh Silverstein of Wolfe Research. Please go ahead.

Yes. Hey, good morning guys. I was curious, just talking about the ability for you guys to try to contract on the LNG side. It’s obviously been a growing focus and you guys do have a lot of capacity down in your Haynesville play to be able to supply directly to some of these facilities. You just give us an update at your potential to sign off take agreements and whether you might be able to, or thinking about potentially, taking equities stake, one of these facilities. Nick Dell’Osso: Yes. I’ll start this one. And then Mohit will probably have something add here too again, but we’re really excited about the opportunity to do something like that, Josh exactly where we land on that spectrum of signing off, take agreements, taking position and facilities. There’s a lot of work for us to do to determine which facilities we want to partner with and how we want to gain that exposure. What we’re really focused on is creating diversification of price. At the end of the day, these prices anything you do in the LNG world’s going to be a very long term contract. And so while there is a big delta between U.S. gas prices in European or Asian gas prices today over the tenor of that contract, you’d expect there to be plenty of volatility in that spread. Sometimes good, sometimes less good, sometimes maybe not good. And so it’s really about a diversification strategy and, we’ll continue to think about the right way to approach that. And we’re seeing a lot of opportunities to do it with a number of different counterparties, and we’re going to take our time to work through it, but we’re excited about that potential.

Hey, Josh. Good morning. The only thing I would add is the, from a diversification angle, if the deal is linked to Henry Hub, that’s not as attractive to us. I mean, what we are trying to diversify away into is some sort of a LNG index deal. So whether it’s TTF, and the arguments or the discussions we are having internally is what’s the right amount. So we – as you know, we sell it into – sell our production into different basis. And the way we view the LNG complex is that that’s another basis that we want exposure to. So from a diversification point of view, I would encourage you to think of maybe 10%, 15%, 20% of our production, if we can link it to some sort of an LNG index price, whether it’s through some of these agreements or whether it’s synthetic kind of a dent bag deal, then that’s what we are driving towards.

Great. That that’s helpful. And then you guys have been a lot of oil management since reemerging, you a little bit over a year ago, you still have the East Texas asset in the portfolio and just wanted to see what activity you’re doing there this year. And are you looking for something to kind of figure out whether or not it remains in the portfolio? Nick Dell’Osso: Yes, Josh, we don’t have anything material in East Texas. Sometimes there’s some rights that show up on an acreage map depending on what you’re looking at, but we don’t have anything material that we maintain in East Texas.

Yes. Thanks guys.

The next question comes from Noel Parks of Tuohy Brothers. Please go ahead.

Hi, good morning. Nick Dell’Osso: Morning, Noel.

I had a couple questions. One, I was just curious that based on some of what I’ve been hearing from other producers, I wonder if you would comment on as far as services quality and what you’re seeing in this field, how things have been as far as the quality of the equipment its maintenance, reliability and so forth. I’m just trying to think back to the last time we had a boom on the service side. And I just had heard a few anecdotes here and there of problems or slowness with maintenance, repairs and so forth. And of course, what we’d expect from supply chain and parts. So, if you could just talk about that and is there any particular basins where that’s more on the table? That’d be great.

Yes, good morning, Noel, this is Josh. I don’t know if I would say there’s any particular basin that this is a bigger problem than others. I mean, I think, just much like the broader economy, I think labor is tight. And when in an industry like ours, where we’ve seen growth with rigs being added, over the last year, clearly that’s stretch in that service organization. You see rigs coming out of stack, potentially, and being restarted. And so generally across the industry, that’s going to lead to some inefficiencies as that equipment gets warmed up, so to speak, and crews get some experience operating it. I wouldn’t say we are seeing any more or less of that. I think it’s just a general industry trend that we have kind of carrying throughout the industry. And I think anytime you’re in a construct – as a constructive commodity price environment that we’re in with activities ramping up, those struggles are going to persist. So it’s really, I think, I would say it’s present everywhere, as an operator, of course, what we do is, we try to manage our strategic partnerships very closely such that we’re constantly on top of our service quality, safety obviously is a huge focus and a concern of ours. And then of course that ultimately all translates into overall cost performance. So, we think some of our longer term strategic partnerships are shielding us from some of that. But generally it is, just an industry challenge as a result of the tight labor markets that we find ourselves in.

Great. And just drilling down a little bit on that. Could you talk about, how things stand with sand availability across the basements for you, what that looked like?

Sand as a commodity for us is not really an issue. We feel really good about our – the sources, which we supply the basins that we operate in, of course, we’re advantaged in Texas. We own our own mine at the Brazos [ph] mine just outside of college station, so that provides us with some security there. I think, the biggest issue that we fight not to the point that it’s created any problems for us, but it’s just an ongoing challenge that we face day-in and day-out. It’s just sand logistics is probably, the bigger issue that varies by basin. A lot of it’s just the distance from a mine to a location, you interesting in the Marcellus it’s been with railcars we’ve had union strikes there, which created some problems for us, something we maybe wouldn’t have expected out of our control, but glad to say it didn’t necessarily disrupt any operations materially. In places like the Haynesville and our assets in Texas, it’s just about availability of truck drivers. And so really it’s just about partnering with those logistic managers to ensure that we’re attracting and retaining drivers to ensure they can service our operations.

Okay. Thanks a lot.

The next question comes from John Daniel of Daniel Energy Partners. Please go ahead.

Hey guys, thanks for putting me in. Just a couple operations questions. First, can you update us on the experience you guys are having with the new generation electric frac fleet?

So today with – this is Josh. Today within our frac fleets, we’re running roughly five frac fleets. One of which is an electric frac fleet up in the Marcellus. That’s definitely, there’s been some learning curves there. We were one of the first adopters of that up in the Marcellus, really, I felt like we’ve kind of hit a stride there, and seen some efficiencies, theoretically those electric frac pumps should be more efficient, but you’re course relying upon the quality of the gas and the generation that’s being used on site to manage it. But definitely I would say at the learning curve, we definitely see opportunities to expand that into the future. But just like most equipment within the service sector equipment’s tight, and for more e-fleets to end the market, they have to be built, which requires capital to be deployed. So, we’re in constant communications with our suppliers. And talking about additional opportunities to expand that segment of the business.

Josh, do you ever see a scenario where you could be a 100% electric or are there operational reasons why that doesn’t make sense?

It is definitely possible. I would never rule that out. Of course, we constantly monitor that market. We need the capacity to be developed. So, I think the simple answer is, yes, it could be at some point in time.

Okay. Just one final quick one for me. Assuming no one in the world cared about capital discipline anymore, and you decided you wanted to ramp activity from here. How quickly could you do that? Nick Dell’Osso: Yes, I’ll take that one, John. That’s a big assumption and we’re in a world where people do care a lot about capital discipline and we think that’s right and appropriate, but, I think if you said you wanted to get a new rig and start going after a growth wedge, I think you’re at least six months from that rig showing up at least. So it’s going take a while.

Got it. Thank you guys very much for letting me in, and congrats on. A great help. Nick Dell’Osso: Thanks, John.

This concludes our question-and-answer session. I would like to turn the conference back over to Nick Dell’Osso for any closing remarks. Nick Dell’Osso: Well, thanks again for joining our call. Behind our exceptional employees, I believe Chesapeake continues to deliver what the market demands today for a premium valuation. We’re focused on our portfolio of high return assets with scale to matter. We’re generating significant free cash flow and have one of the industry’s strongest frameworks to return cash to shareholders. And we’re committed to ESG excellence into answering the call for reliable, affordable, and lower carbon energy the world desperately needs today. We’re eager to provide a deeper dive into the depth of our portfolio and what we believe it will deliver for our shareholder at our Analyst Day, which we intend to host later this year. And in the meantime, we look forward to continuing to update you on our progress. Thanks again, and have a great day.

The conference has now concluded. Thank you for attending today’s presentation. And you may now disconnect.