Chesapeake Energy Corporation

Good day and welcome to the Chesapeake Energy 2021 Fourth Quarter and Full Year Results Teleconference. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Brad Sylvester. Please go ahead.

Thank you, Sarah. Good morning, everyone, and thank you for joining our call today to discuss Chesapeake's fourth quarter and 2021 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 consists 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 today are Nick DiLasso, Mohit Singh, and Josh Beetz. 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.

Good morning. Thank you for joining our call this morning. We're eager to address your questions. However, before doing so, I want to quickly highlight a few items. First, I'd like to welcome a couple of new members of our executive management team. We have with us Mohit Singh, who's joined from BPX, and Josh Vietz, who's joined from Conoco. They're both proven leaders with diverse skill sets that strengthen an already deep and strong team here at Chesapeake. Additionally, they bring an external perspective from leading organizations that we found valuable immediately as they joined. Many of you have met them already. And for the rest of you, I look forward to you being able to spend time with them in the coming weeks. I recognize that you're likely most interested to discuss our 2022 outlook. However, I think it's important to highlight how we've clarified the strategy of Chesapeake and what we believe will drive attractive returns for shareholders for several years to come. First, we've strengthened our portfolio around great assets with significant inventory of high return drilling locations and have done so while protecting our very strong balance sheet. We've established a capital allocation program with the implicit discipline of significant return to shareholders annually. Finally, we've prioritized our commitment to deliver reliable, affordable, and lower carbon energy solutions to the market through our continued focus on ESG programs. The events unfolding in Eastern Europe this morning highlight the crucial role our industry can play in the energy security of the globe. Being in a position to do so with as low a carbon footprint as we can is more important than ever. Our results in transactions pursued in 2021 are great evidence of the early success of this strategy and set us up to continue to deliver sustainable results in future periods. A couple of the most significant highlights from the full year 2021 are that we delivered on our capital program. We generated over $1.2 billion in adjusted free cash flow on a $735 million CapEx program. We established what we believe is one of the most compelling frameworks in the industry to return cash to shareholders through our aggressive dividend and buyback programs. We'll be paying out over $1.76 per share, consisting of our first variable dividend of $1.33 per common share, as well as our base dividend of 43.75 cents per common share in March. We announced a $1 billion common stock and repurchase program, which we expect will be executed by year end 23. We closed on the Vine acquisition. The integration has begun and continues to go quite well. We remain on target to close the chief acquisition and the Powder River Basin sale later this quarter. These transactions position us to focus on operational excellence in 2022, a hallmark strength of Chesapeake. Turning to 2022, we're squarely focused on continuing to demonstrate the sustainable cash flow generating capabilities of the company and returning differential cash to our shareholders. In the year ahead, we will maintain our disciplined approach to capital allocation across our three high return assets, efficiently generate free cash flow as we anticipate $1.9 to $2.1 billion of cash generated in 2022, which is a 60% increase year over year. This illustrates what we mean by our acquisition non-negotiables. The transactions must make us better, not just bigger. We'll return significant cash to shareholders. We're projected to pay between $900 and $1.1 billion in total cash dividends. And additionally, we expect material progress on our $1 billion authorized share repurchase. If you assume we execute on half of our repurchase program this year, our combined yield for dividends and repurchases would reach about 18%. I firmly believe the magnitude of our program to return cash to shareholders consistently over time is a critical competitive advantage for our company. We're encouraged with where we sit today, and we look forward to executing our business in the year ahead. I now welcome your questions.