Chesapeake Energy Corporation

Good morning and welcome to the Chesapeake Energy Corporation third quarter 2023 earnings conference call. 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 from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Ayers. Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Anthony. Good morning, everyone, and thank you for joining our call today to discuss Chesapeake's third quarter 2023 financial and operating results. Hopefully, you've had a chance to review our press release and the updated investor presentations 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 beliefs, goals, expectations, forecast projections, future performance, and the assumptions underlying such statements. Please note 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, as except 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 measures which help facilitate comparisons across periods and peers. For any non-GAAP measure, we use a reconciliation to the nearest corresponding GAAP measure, which can be found on our website. With me on the call today are Nick DeLosso, Mohit Singh, and Josh Vietz. 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. Now we'll turn over to Nick.

Good morning. Thank you for joining the call. I'll start off by discussing a few of our third quarter highlights, and then I'll get right to your questions. We delivered another strong quarter, advancing our strategy to deliver sustainable value to shareholders through cycles. As you've seen from our third quarter results, we came in on the low end of capital and high end of production, despite the 60% deferral of planned third quarter turn in lines and the extension of elective curtailments in the Marcellus. In the Marcellus this quarter, our rig fleet set a new company record, averaging 1,367 feet per day, marking a 16% improvement over the prior quarter. Overall, we drilled four of the top 10 fastest Marcellus wells in our company's history. That's a pretty significant accomplishment given our long and successful history in the basin. Importantly, our decreased cycle times have also been accompanied by achieving a lower cost per foot, which means we will now be able to drill another well per rig year at a lower cost compared to what we projected at the beginning of the year. This is a great example of efficiency offsetting inflation. In the Haynesville, we delivered another robust quarter of base production with strong wedge volumes. Additionally, our sustained efforts to de-bottleneck our midstream has resulted in lower line pressures and higher production. We've realized a 15% quarter-over-quarter reduction in interrupted volumes attributable to midstream disruptions. The combination of our improved base production and effort to optimize gas flow assurance has led us to increasing our Q4 production guidance by 35 million cubic feet a day, or approximately 2.5%. Our strong operational performance serves as the backbone to our commitment to deliver superior capital returns for shareholders. We continue to execute our peer-leading return program in the quarter, repurchasing $130 million in shares and delivering our base dividend. Through the third quarter, we have returned approximately $725 million to shareholders through our buyback and dividend programs. We also announced another important step on our path to be LNG ready with today's LNG supply announcement with VTOL. Similar to our past agreement with Gunvor, under today's heads of agreement with VTOL, Chesapeake will supply up to 1 million tons per annum of LNG to VTOL with the purchase price indexed to JKM. As we continue exploring these types of agreements, we see an appreciation of the premium ROC returns and runway of our Advantage portfolio and the strength of our financial position. Our approach to executing our LNG strategy has been consistent and benefits from production that is physically linked to LNG markets, access to international prices, and downside protection through cancellation optionality. Our portfolio balance sheet and approach represents a clear competitive advantage among our gas peers, and we continue to complete LNG agreements as we see export capacity come online over the next few years. Before opening the call for questions, I'd like to touch on our trajectory headed into 2024. We expect to maintain our current rig count of five rigs in the Haynesville and four rigs in the Marcellus for the first part of the year. Should gas prices firm up in line with the current 2025 strip, we believe there may be an opportunity to add an additional rig in the Haynesville during the second half of the year, which would positively impact volumes in 2025. As you look to model our business in 2024, a fair starting point is to assume our annual production should be in line with our fourth quarter run rate of 3.2 BCF a day in the Marcellus and Haynesville. Our CapEx for the full year should approximate $1.6 billion, assuming an additional Haynesville rig in the second half of the year. We're now pleased to address your questions. Operator, if you want to assemble the queue.