Chesapeake Energy Corporation

Good day and welcome to the Chesapeake Energy fourth quarter and full year 2023 results 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 your question, please press star then two. Please note today's event is being recorded. I'd now like to turn the conference over to Chris Ayers, Vice President, Investor Relations, and Treasurer. Please go ahead.

Thank you, Rocco. Good morning, everyone, and thank you for joining our call today to discuss Chesapeake's fourth quarter and full year 2023 financial and operating results. Hopefully, you've 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 and other SEC filings. Please also recognize that, as except required by 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 with 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 today on the call are Nick Delasso, Mohit Singh, and Josh Veets. Nick will give a brief overview of our results, and then we'll open up the teleconference to Q&A. So with that, thank you again, and I'll now turn the conference over to Nick.

Good morning, and thank you for joining our call. We continue to execute on our strategic pillars in 2023, proving we're a company built to deliver sustainable value to shareholders through cycles. The Marcellus team had another strong year, with well-cost improving 17% since Q1. We increased our footage drilled per day by 40%, and drilled nine of the ten longest laterals in our history in the basin. In the Haynesville, we delivered strong production performance throughout the year, benefiting from improved gathering system hydraulics while our drilling performance continues to outpace our peers in the most difficult drilling environment in the lower 48. Importantly, we accomplished these operational milestones while improving our total recordable incident rate by 40% to an industry-leading 0.14 injury rate. Additional highlights for the year include returning approximately $840 million to shareholders via dividends and buybacks, advancing our path to be LNG-ready by securing HOAs up to 3 million tons per annum, linked to JKM, and recently signing an LNG sales and purchase agreement with Delphin and Gunvor for long-term liquefaction offtake, completing our Eagleford exit for a total consideration of greater than $3.5 billion, and receiving credit upgrades from all three agencies and exiting the year with a cash balance of approximately $1.1 billion. Turning our attention to 2024, we started the year by announcing our shareholder value-driven merger with Southwestern. Our combined company will accelerate America's energy reach by accessing more markets, effectively mitigating price volatility, and ultimately increasing the revenue per unit of the product we sell. We are very encouraged about the growth and long-term demand for natural gas, the affordable, reliable, lower-carbon energy the world needs. Today, the market is clearly oversupplied. In addition, we see capital supply cycles that can take 12 to 18 months to evolve while demand fluctuates quarterly. While we will benefit from a strong hedge position, we are responding accordingly with our 2024 capital and operational plan. First, we are reducing capital by nearly 20% and production approximately 15% from the preliminary outlook we provided last quarter. Under our revised capital program, we plan to limit our turn-in line count to 30 to 40 wells, with the majority having already occurred in January and February, drop two frack crews, leaving one frack crew in each basin, and drop two rigs, resulting in four rigs in the Haynesville beginning in March and three rigs in the Marcellus beginning mid-year. We believe limiting turn-in lines and building ducts is the prudent response to today's market. Doing so will shorten our cycle of supply to appropriately and effectively meet market demand. This results in shorter cycle, capital-efficient decisions that will ultimately offer incremental capacity of up to one BCF per day by the fourth quarter, ensuring we have ample supply to provide customers when demand recovers. Ultimately, our plan is designed to maintain productive capacity, which positions us to quickly return to over three BCF per day with minimal incremental capital investment. We will be prudent in our approach, bringing production back online efficiently as consumer demand warrants. Overall, our 2024 program demonstrates Chesapeake's continued focus on capital discipline, operational efficiency, and free cash flow generation. while building the capacity to consistently deliver for consumers and shareholders through all demand cycles. Simply put, Chesapeake is built for the volatility we are experiencing today, and our strategy is positioning the company to thrive as the market rebalances into 2025. We have the portfolio, balance sheet, and demonstrated operational track record to continue driving capital efficiencies, maximizing returns, and reducing risk. I look forward to updating you on our progress throughout the year. We're now pleased to address your questions.